Woori Financial Group Inc.
Annual Report 2020

Plain-text annual report

ANNUAL REPORT 2020 Woori Bank Woori Card Woori Financial Capital Woori Investment Bank Woori Asset Trust Woori Asset Management Woori Savings Bank Woori Credit Information Woori Fund Service Woori Private Equity Asset Management Woori GlobalAsset Management Woori Finance Information System Woori Finance Research Institute THE FIRST CHOICE IN FINANCE Woori Financial Group, which has proclaimed ‘The First Choice in Finance’ as its new slogan for the year 2021, is striving to be the most trusted and admired corporate group in the financial sector. The Group has been contributing to the efforts toward recovery from the COVID-19 pandemic and its ensuing challenges since late 2019 by offering financial and non-financial assistance to various parts of society, while maintaining one of the best levels of financial soundness in the industry. While managing performance in its primary businesses in the financial sector, environmentally conscious efforts have also been put forth to help create an eco-friendly society. Accordingly, the Group has been spearheading the efforts to tackle climate change since the proclamation of “2050 Carbon Neutral Financial Group” in 2020. Woori Financial Group, which is faithfully fulfilling role and responsibility as a reliable and competent financial group, is committed to growing together with local communities and creating a better tomorrow with its customers. WOORI FINANCIAL GROUP ANNUAL REPORT 2020 Web, Page Video link This report has been published as an interactive PDF and online website, allowing readers to move quickly and easily to pages in the report, and including shortcuts to related web pages and video clips. INTRO 004 006 008 010 SYNERGY GROWTH DIGITAL INNOVATION ESG REINFORCEMENT RESPONSE TO COVID-19 WOORI OVERVIEW 012 014 016 018 020 023 027 028 Message from the CEO Board of Directors Financial Highlights Group Vision & Strategy Corporate Governance 2020 News Highlights Business Portfolio Synergy Promotion 030 Digital Innovation 032 Global Business 035 038 040 ESG Management Risk Management Social Responsibility BUSINESS OPERATIONS 046 Woori Bank 072 Woori Card 074 076 Woori Financial Capital Woori Investment Bank 078 Woori Asset Trust 080 082 084 086 087 089 091 092 Woori Asset Management Woori Savings Bank Woori Credit Information Woori Fund Service Woori Private Equity Asset Management Woori Global Asset Management Woori Finance Information System Woori Finance Research Institute FINANCIAL REVIEW 094 124 184 Management’s Discussion and Analysis Separate Financial Statements Consolidated Financial Statements 353 Global Network WOORI FINANCIAL GROUP ANNUAL REPORT 2020 INTRO WOORI OVERVIEW BUSINESS OPERATIONS FINANCIAL REVIEW First Choice of Tomorrow SYNERGY GROWTH Woori Financial Group has been expanding the areas of synergy creation by adding subsidiaries since its establishment in January 2019. In order to continually build its capacity as a financial group, it is encouraging collaboration among its subsidiaries, promoting new business areas for synergy creation, offering advanced financial services and endeavoring to maximize profit. The Synergy Council, in which the Group and all its thirteen subsidiaries participate, plans new businesses and carries out joint marketing campaigns to maximize synergy and generating additional profits, in addition to seeking measures to reduce costs. more infomation Business Portfolio p.027 Synergy Promotion p.028 Newly added in 2020 Woori Savings Bank Video link This video introducing a new vision of Woori Financial Group 004 Strengthen the Woori Financial Capital group's business portfolio and expand its growth base by adding non-banking subsidiaries New Group Vision INNOVATE TODAY, CREATE TOMORROW Business Portfolio Added to direct subsidiaries in 2019 005 WOORI FINANCIAL GROUP ANNUAL REPORT 2020 INTRO WOORI OVERVIEW BUSINESS OPERATIONS FINANCIAL REVIEW First Choice in Digital Finance DIGITAL INNOVATION To achieve digital innovation as quickly as possible, Woori Financial Group has established a digital system in relation to its vision, organization and tasks by setting a digital control tower and set forth 3 goals, 10 implementation tasks and 40 innovation tasks to realize the vision. Based on the digital transformation policy established in 2020, Woori Financial Group will make a giant leap to become the No. 1 digital financial group in Digital Slogan Digital First, Change Everything the world in 2021. more infomation Digital Innovation p.030 Digital Banking(Woori Bank) p.053 Digital Vision DIGITAL FOR BETTER LIFE Number of People Using Woori’s Digital Platform (as of December 31, 2020) 5.03 million * The sum of digital platform users of Woori WON Banking and Corporate Woori WON Banking 006 007 WOORI FINANCIAL GROUP ANNUAL REPORT 2020 INTRO WOORI OVERVIEW BUSINESS OPERATIONS FINANCIAL REVIEW First Choice for ESG Management ESG REINFORCEMENT The recent trend seen across the world is the increasing emphasis placed on non-financial performance of companies centering on sustainability, such as environmental protection activities, CSR management and transparent management. Along with this, ESG management has become crucial, which is evidenced by the fact that institutional investors are considering ESG when making investment decisions. In consideration of this new paradigm, Woori Financial Group has established an ESG strategy to pursue sustainable growth and set up an ESG management system to integrate the ESG framework into its corporate culture. more infomation ESG Management p.035 Nov. 2019 Jan. 2020 Dec. 2020 Jan. 2021 Joined the UNEP FI Signed the PRB Declared to end coal finance Declared support for the CDP and TCFD Woori Financial Group ESG Management Principles Principle 1 : Alignment Principle 2 : Impact & Target setting Principle 3 : Customer We will align our business strategy to be We will continuously increase our positive We will work responsibly with our clients consistent with and contribute to individu- impacts while reducing the negative im- and our customers to encourage sus- als' needs and society's goals, as expressed pacts on, and managing the risks to, people tainable practices and enable economic in the Sustainable Development Goals, the and environment resulting from our activi- activities that create shared prosperity for Paris Climate Agreement and relevant na- ties, products and services. To this end, we current and future generations. tional and regional frameworks. will set and publish targets where we can have the most significant impacts. Principle 4 : Stakeholders Principle 5 : Governance & Culture We will proactively and responsibly consult, We will implement our commitment to engage and partner with relevant stake- these Principles through effective gover- Principle 6 : Transparency & Accountability We will periodically review our individual and collective implementation of these Principles and be transparent about and ac- countable for positive and negative impacts holders to achieve society's goals. nance and a culture of responsible banking. and our contribution to society's goals. Woori Financial Group’s ESG Goals and Tasks GOALS Derive strategic tasks for the Group Execute mid- and long-term strategic tasks Complete the internalization of sustainable finance within the Group Support affiliates in building their ESG capacity Prepare a performance moni- toring system for the Group Sophisticate the ESG management activities of the Group 2021 1H 2021 2H 2022~ TASKS Select the mid- and long-term strategic directions and tasks for ESG management Examine the Compile and give feedback performance of strategic tasks by each affiliate on the outcomes of strategic tasks Create the foundation for internalization of the sustainable finance classification system Pursue internalization of the sustainable finance classification system Comprehensively manage the sustainable finance performance of the Group Prepare measures for ESG capacity building Reflect and evaluate the Evaluate the ESG management implementation of ESG tasks as a KPI level of the Group and derive support measures 008 009 WOORI FINANCIAL GROUP ANNUAL REPORT 2020 INTRO WOORI OVERVIEW BUSINESS OPERATIONS FINANCIAL REVIEW First Choice for Society RESPONSE TO COVID-19 The effects of a stagnant local economy and unprecedented challenges brought upon by COVID-19 are being felt in every corner of our society. Recognizing the hardships faced by all, Woori Financial Group has been assisting small- and medium-sized enterprises (SMEs) and small offices/home offices (SOHOs) financially and engaging in a wide range of activities to share the burden with local communities, as a way to fulfill its corporate social responsibility. more infomation (www.woorifg.com) Exemption of overdue fees Support for vulnerable groups Donations Financial Support RESPONSE TO COVID-19 Extension of maturity date for borrowers Change of repayment method Emergency loans for living expenses Fund-raising activities Non- Financial Support Relief supplies Support for SOHOs and other small business owners Rapid Response to COVID-19 Fulfillment of Corporate Social Responsibility Woori Financial Group conducted a thorough analysis of the Upon the outbreak of COVID-19, Woori Financial Group estab- potential economic and social impacts of COVID-19, based lished the Emergency Management Committee to conduct on which the Emergency Management Committee was objective analysis and ensure preparedness for the potential launched to guide business management, while serving as a economic impacts of what would later become a global health control tower to ensure a systematic response to overcome crisis. Based on the judgment that the novel coronavirus was the crisis. The Emergency Management Committee is re- not only a health threat but a threat to people’s livelihoods, the vamping its system to add momentum to the national efforts, Group prepared support measures in both financial and non-fi- Financial Support SMEs and SOHOs Non-Financial Support SMEs and SOHOs • Woori Bank: Operation of Woori SOHO Support Center at five locations • Woori Financial Group: Carried out the Good Consumption Campaign and 5.65 million cases of providing financial consulting to SOHOs (KRW 10 billion) to revitalize the local economy • Woori Card: Card loan interest rate cuts of up to 50% and payment reductions amounting to KRW 2.5 billion through a change of payment method • Woori Card: Held a “guerilla market” to assist floriculture farms facing finan- cial hardships due to plummeting sales, Held the Winicon Bazaar to support innovative enterprises faced with difficulties in developing sales channels in addition to pursuing crisis response at the Group level and nancial areas in a timely manner and spearheaded various • Woori Card: 6-month payment deferrals for credit sales, financing and • Woori Investment Bank: Offered discounts on rent for enterprises hit by supporting its customers. Also, in light of the dramatic chang- efforts to overcome the national crisis, thereby gaining recogni- capital sale accounts amounting to a total of KRW 9 billion COVID-19 es in the global financial markets, efforts are being made to tion for fulfilling its corporate social responsibility. examine investments in domestic and foreign funds and to carry out an FX contingency plan, if necessary. Woori Finan- cial Group is dedicating every effort to achieve its business objectives amid the global crisis and, at the same time, coop- erating with the government in its policy implementation and making multifaceted efforts to support its customers. 010 • Woori Investment Bank: Extension of the maturity date for loans taken out by enterprises affected by COVID-19 (loans amounting to KRW 5 billion) • Woori Asset Trust: Donated 2,500 face masks to the Soraepogu Mer- chants’ Association • Woori Financial Capital: Payment deferrals amounting to KRW 122.5 Community billion (based on the outstanding principal balance) Retail Customers • Woori Financial Group: Provided online educational support to 2,000 un- derprivileged children (laptops, assistant teachers, etc.) • Woori Financial Group: Donated infection prevention kits (masks, hand • Woori Bank: COVID-19 Household Loan Pre-Workout Program offering sanitizers, etc.) to welfare facilities for children and seniors payment deferrals • Woori Card: Emergency loans for living expenses amounting to KRW 195 million (up to KRW 3 million per applicant, an interest rate discount of up to 50%) • Woori Investment Bank: Exemption of overdue fees for digital finance customers (386,970 cases, KRW 190 million in total) • Woori Financial Capital: Donated to help families hit by COVID-19 and families at risk in the regions designated as Special Disaster Zone • Woori Bank: Provided Woori Town Hope Box consisting of food and per- sonal hygiene supplies to 1,800 marginalized seniors in the Daegu area • Woori Card: Provided food and other relief supplies to low-income households in the Daegu and Gyeongbuk areas. • Woori Investment Bank: Raised funds on Wibee Cloud, a crowdfunding platform, to be donated toward COVID-19 restoration efforts • Woori Credit Information: Donated 10,000 face masks and 120 hand sanitizers to Jung-gu Office in Seoul • Woori Asset Trust: Lowered administrative agency fees, etc. for 9 clients that amounted to KRW 635 million in total 011 Message from the CEO Innovate Today, Create Tomorrow On behalf of everyone at Woori Financial Group, allow me to extend my sincerest gratitude to all shareholders and customers for their unwavering support. In 2020, we launched an emergency management committee almost immediately following the outbreak of COVID-19 in the face of confusion and crisis in order to overcome the ensuing crises with prudence and foresight, while prioritizing the safety of customers and our staffs. We also made meaningful achievements that bolstered Woori Financial Group’s status and prestige despite the challenges brought upon by the pandemic. In the first half of the year, we obtained approval of the internal ratings-based approach, through which the capital adequacy ratio was raised, based on which we welcomed Woori Financial Capital and Woori Savings Bank as new members of our Group near the end of last year. Regrettably, however, there were certain aspects of our financial performance that fell short of the expectations of our shareholders. In recognition of this, we wish to designate ‘Strengthening the Group’s Competitiveness Based on Innovation and Efficiency’ as the management objective for the year 2021, which marks the third anniversary of Woori Financial Group, and revolutionize all areas across the Group including financial performance. First, we will strengthen the competitiveness of Woori bank and other key subsidiaries in their core business areas and, at the same time, seek ways to expand our non-banking port- folio to pave the foundation for growth. In addition, with the belief that our very survival depends on ensuring successful digital trans- formation, every member of our organization will dedicate efforts toward digital innovation for Woori Financial Group to emerge as the No.1 financial group in the digital age and spear- head innovation, even among the BigTech companies, through the MyData Project. In 2021, ESG management will also be a crucial strategy for Woori Financial Group. At the beginning of this year, we rennewed our value system with our first and foremost val- ue summed up as ‘Woori thinks of its customers and the community first.’ With 2021 as the first year of ESG management, we will integrate the ESG agendas, includ- ing climate change response, into our management practices, and contribute to the creation of sustainable society by taking an active part in the implementation of the 2050 Carbon Neutral and Korean New Deal policies, as a leading financial group in Korea. Dear valued shareholders and customers, At Woori Financial Group, we declared a new vision of ‘Innovate Today, Create Tomorrow’ in 2021, marking the third anniversary of the Group. All the executives and employees of the Group will be committed to drive forth innovation each day and return the best value possible under the slogan, ‘The First Choice in Finance.’ I ask that you look forward to the future of Woori Financial Group, as we prepare to make giant strides. I wish all shareholders and customers health and happiness. Thank you. Son, Tae Seung Chairman & CEO, Woori Financial Group 012 013 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Board of Directors Son, Tae Seung Lee, Won Duk Standing director (Chairman & CEO) Standing director (Senior Deputy President) • (Current) Chairman & CEO, Woori Financial Group • (Current) Senior Deputy President, Woori Financial Group • President & CEO, Woori Bank • Head. Global Business Unit, Woori Bank • LLM, Seoul National University • LLB, Sungkyunkwan University • 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 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 • B.A. in Business Administration, Taipei National University Tian, Zhiping Outside director Chang, Dong Woo Outside director • (Current) Vice President, Beijing FUPU DAOHE InvestmentManagement Ltd. • (Current) CEO, IMM Investment Corp. • Vice President, ICBC Middle East Ltd. & ICBC Londong Ltd. • Representative Partner, IMM Investment Corp. • Director & Vice President, Industrial and Commercial Bank of China, • ABAS Leader-AKT, Samil Accounting Corp. 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 • Audit Department, Younghwa Accounting Corp. • LLB, Hanyang University Ro, Sung Tae Outside director Park, Sang Yong Outside director • (Current) Chairman, Samsung Dream Scholarship Foundation • (Current) Auditor, Yonsei Foundation • President, Hanwha Life Economic Research Institute • President, Korea Economic Research Institute • M.A. and Ph.D. in Economics, Harvard University • B.A. in Economics, Seoul National University • (Current) Professor Emeritus, Yonsei University • Civilian Chair, Public Fund Oversight Committee • Dean, School of Business and Graduate School of Business, Yonsei University • M.A. and Ph.D. in Business Administration, New York University • B.A. in Business Administration, Yonsei University 014 Kim, Hong Tae Non-standing director • (Current) General Manager, Department of Planning and Coordination, KDIC (Korea Deposit Insurance Corporation) • General Manager, Department of Risk Management, KDIC • Head, Office of Creative Management, KDIC • Deputy General Manager, Department of HR and Administration, KDIC • Hana Bank • B.A. in International Economics, Seoul National University 015 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Financial Highlights Net Income (Unit: KRW in billions) Interest Income (Unit: KRW in billions) Cost-to-Income Ratio (Unit: %) Credit Cost Ratio (Unit: %) NPL Ratio (Unit: %) Bank Group Bank Group Bank Group Bank Group Bank Group 2,033 1,512 1,307 1,699* 5,221 5,651 5,999 49.9% 50.8% 52.0% 55.0% 0.34% 0.28% 0.85% 0.13% 0.15% 0.54% 0.45% 0.42% 0.16%* (Excl. one off items) 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 * Excluding major FY20 one off items (for illustration purpose) - Pre-emptive provisioning of KRW 323 billion related to COVID-19 and KRW 218 billion related to WM products * Consolidated basis * Consolidated basis * Cost to Income Ratio = SG&A Expense / (Interest Income + Non Interest Income), Consolidated basis Excluding ERP Expense : 179bn(FY16), 304bn(FY17 ), 225bn(FY18 ), 156bn(FY19), 202bn(FY20) * Excluding major FY20 one-off items (for illustration purpose) - Pre emptive provisioning of W323bn related to COVID-19 Net Operating Revenue (Unit: KRW in billions) NIM & Core Deposit (Unit: %. Unit: KRW in trillions) Loan Portfolio (Unit: KRW in trillions) Assets (Unit: KRW in trillions) Liabilities (Unit: KRW in trillions) Bank Group 6,473 6,713 6,821 2017 2018 2019 2020 *Consolidated basis (Excluding 4 newly acquired subsidiaries in FY19, 20) ● NIM ■ Core Deposit ■ Large Corp. ■ SME ■ Retail ■ Public & Others ■ Loans in Won ■ Total Assets (Including AUM) ■ Deposit ■ Total Liabilities Bank Bank Group 264 1.47% 1.52% 71 75 1.33% 103 222 36.0 76.3 234 243 36.5 81.3 33.3 87.5 106.6 113.5 119.8 35.7 95.8 130.4 3.2 2.7 2.4 2.5 Bank Group Bank Group 525.9 473.8 356 389 200 211 221.7 249.3 318 336 296 235 249 265 372.4 291.4 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 Fees and Commission (Unit: KRW in billions) Profitability (ROA & ROE) (Unit: %) Prime Asset Ratio (Unit: %, KRW in trillions) Capital Adequacy (Unit: %) Bank Group Bank Group Bank Bank Group ● ROA ● ROE ● Prime Asset Ratio ■ Prime Asset ● BIS Ratio ● Tier1 Ratio ● CET1 Ratio 1,070 1,070 1,014 7.42% 0.49% 9.69% 0.63% 9.29% 0.52% 7.62%* 5.87% 0.50%* 0.34% 84.4% 81.3% 71.9 77.8 87.5% 93.9 15.4% 13.2% 11.0% 17.3% 15.0% 13.1% 11.9% 9.9% 8.4% 13.8% 11.8% 10.0% 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 * Consolidated basis 016 * Excluding major FY20 one off items (for illustration purpose) - Pre emptive provisioning of W323bn related to COVID and 218bn related to WM products * Consolidated basis 017 82.185.2%821.44%5,8941,8726,9401,103INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Group Vision & Strategy In consideration of the changes in the internal and external envi- Based on the judgment that, for vulnerable groups and small busi- 2021 Plans Fifth, ‘Strengthen Risk Management and Internal Control.’ ronments, Woori Financial Group has defined new values based on ness owners, the novel coronavirus was not only a health threat but a which it will be envisioning its future 50 and 100 years from now. threat to their livelihoods, the Group made every effort to offer finan- 2020 Performance cial and non-financial support in a timely manner and gained recogni- tion for fulfilling its corporate social responsibility. With the approval of the internal ratings-based approach, the capital adequacy ratio was Woori Financial Group has set forth a management goal to While market uncertainty has been swelling over the past several ‘Strengthen the Group’s Competitiveness Based on Innovation and years, but in 2020 has been particularly difficult to predict. With this Efficiency’ for the year 2021, with the aim of laying the groundwork in mind, potential risks will be thoroughly monitored in advance, and for revolutionary changes based on the following six main manage- the invested assets of the Group will be carefully examined in depth. In 2020, Woori Financial Group formed an emergency management raised and a powerful engine for the roadmap to growth was created. committee in early on in the face of an unprecedented global crisis Based on this, it expanded its network of domestic and overseas brought upon by COVID-19 to systematically deal with the ensuing subsidiaries and incorporated a capital lending company and savings First, ‘Broaden the Foundation for Growth.’ ment strategies: Also, all the subsidiaries of the Group will be equipped with impecca- ble internal control systems to comply with the amendments to the Consumer Protection Act, which will come into effect in 2021. challenges, with the safety of customers and staff as its No.1 priority. bank into the Group in the latter half of 2020, which ultimately helped reinvigorate business operations at home and abroad in 2021. Compared to the competition, Woori Financial Group has more busi- ness portfolios to develop, which signifies its comparatively higher growth potential. By expanding business portfolios in a diversified Sixth, ‘Pursue Global Business Operations and Assume a Lead- ership Role.’ manner, the Group plans to continually strengthen the driving force Woori Financial Group has been expanding its global network in full VISION behind its growth. Second, ‘Emerge as the No.1 leader in digital technology.’ swing since years ago, with the belief that a company’s competitive- ness will be determined in the global market in the near future. The Group has achieved quantitative growth to a level enabling stable local operations in the Southeast Asian market, and it will seek to Concentrating its resources and expertise as a market leader in innovating for tomorrow to deliver better value to customers SLOGAN The First Choice in Finance In the past, the key elements of the financial industry were people implement innovative strategies to broaden channels and boost prof- and paper records, but with digital technology taking the place of itability using digital technology in other overseas markets by turning the latter, it has become one of the most high-tech industries today. the COVID-19 crisis into an opportunity. Based on the fact that digital platforms are now the No.1 customer touchpoints of financial firms, Woori Financial Group will innovate its platforms through digital transformation using cutting-edge technol- ogy such as AI and big data and emerge as the No.1 financial group in digital technology. As Woori Financial Group commemorates the third anniversary of its establishment in 2021, Woori Financial Holdings and all the affiliates will strive for innovation with the vision of ‘Innovate Today, Create Tomorrow,’ with the 30,000-something members of the organization moving forward in unison. Third, ‘Enhance Management Efficiency.’ Concentrating its resources and expertise as a market leader in innovating for tomorrow to deliver better value to customers As the Group celebrates the third anniversary of its establishment CORE VALUES CUSTOMERS TRUST EXPERTISE INNOVATION Woori thinks of its customers and the community first Woori builds customer trust based on principles Woori has the expertise to lead the market Woori shapes the future through innovation this year, it will boost synergy among major business areas including CIB and asset management and carry out a thorough analysis of the human and material resources of the holding company and all the affiliates for optimization purposes. Fourth, ‘Improve Brand and ESG Management.’ In response to the increasing implementation of ESG frameworks, Woori Financial Group will spearhead the efforts to create envi- ronmental and social value in finance in line with the 2050 Carbon Neutral Strategy and the Korean New Deal policies and contribute to creating a sustainable society. 018 019 INNOVATE TODAY, CREATE TOMORROW INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Corporate Governance Governance Policy of Woori Financial Group Woori Financial Group, which “innovates today create tomorrow,” is Outside directors cannot serve longer than six years at Woori Finan- Outside directors from diverse backgrounds, such as a university Woori Financial Group will include outside directors who are from cial Group or nine years at two or more subsidiaries of the Group. professor, researcher and CEO of a financial firm, play complementa- diverse backgrounds and have different experiences in its BOD to committed to achieving sustainable growth to protect the interests To reinforce the independence of outside directors, related guidelines of shareholders, financial consumers and other stakeholders and have been prepared, and all the criteria set forth must be satisfied for maintaining a stable, efficient and transparent governance structure. outside directors to be deemed independent. The guidelines for inde- To this end, the principles of governance applied by the Group are as pendence are as follows: ry roles by offering different professional expertise. In consideration make rational and balanced decisions and proactively respond to the of the nature of a financial holding company, efforts are made to market and financial environment, while striving for efficient opera- appoint outside directors with comprehensive knowledge across vari- tion of the BOD. ous fields. In fact, the outside directors of Woori Financial Group have expertise in two or more areas. Also, outside directors of different na- tionalities have been appointed to run the company with a more glob- For disclosures, visit http://www.woorifg.com follows: First, a stable and sound governance structure is maintained through checks and balances of members; • The outside director has not worked as an executive, employee, or al view, considering the fact that Woori Financial Group’s net income non-standing director at the Group or its affiliate within the past five from its overseas operations accounts for more than 10% of the total Second, an efficient governance structure is established based on years; the members’ expertise and diverse perspectives; • An immediate family member of the outside director has not been net income. (four Korean outside directors and one outside director from China and Taiwan each, as of the end of March 2021) Third, a transparent governance structure is maintained by disclosing an executive of the Group or its affiliate within the past three years; In addition, the following standards to improve diversity and exper- various operating standards, procedures and results. • The outside director is not an advisor or consultant to the Group or to the executive management of the Group; Ensuring the Independence of the BOD • The outside director is not in an employee-employer relationship tise have been established in order for the BOD to make important decisions in consideration of the interests of all stakeholders, includ- ing shareholders and financial consumers: To ensure stable and sound operations of the Board of Directors with an external agency that audits the Group; (BOD) and committees, Woori Financial Group complies with the Act • The outside director is not an executive or employee of a corpora- Respecting Diversity on Corporate Governance of Financial Companies, the key provisions tion with which the Group signed an advisory agreement or techni- • Gender: Female candidates accounting for at least 20% of the out- of which have been reflected in the internal regulations. The Group is cal partnership agreement; side director candidate pool to improve the gender diversity of the also dedicated to ensuring independence for the BOD to fulfill its role of supervising the executive management in recognition of its impor- tance. In accordance with Article 35 of the Articles of Association, outside directors make up the majority of the BOD and in accordance with Article 44, the Chairperson of the Board is appointed from among outside directors. Since its establishment in 2019, Woori Fi- nancial Group’s BOD has been chaired by an outside director. (Outside directors accounting for 67% of the Board members, as of the end of March 2021) According to the internal regulations on corporate governance, the Officer Candidate Recommendation Committee, Audit Committee, • The outside director is not an executive or employee of a corpo- BOD ration with which the Group signed a transaction agreement, the • Nationality: Discover candidates from diverse backgrounds in terms value of which accounts for more than 10% of the total sales of the of culture, living environment and lifestyle to create a governance Group in recent business years; structure that meets global standards • The outside director is not an executive or employee of a corpora- • Experience: Avoid concentration of outside directors from similar tion whose transactions with the Group in the past three business backgrounds and regions, while taking into consideration the nature years account for more than 10% of the total assets or operating of the financial sector income of the corporation; • Other factors: Promote diversity from the perspective of inclusion, • The outside director is deemed to have no interests in any of the while eliminating discrimination on the basis of race, religion, eth- matters decided by the BOD. nicity, etc. Risk Management Committee, Compensation Committee and Inter- For disclosures, visit http://www.woorifg.com Faithful Operation of the BOD It is possible to run the BOD efficiently only if the outside directors with expertise in their respective fields regularly attend the Board and committee meetings. Expertise and diligence are key factors in the ap- pointment criteria for outside directors and are also considered when evaluating the activities of outside directors. In 2020, the BOD was convened fourteen times, with an average attendance rate of 98%. For disclosures, visit http://www.woorifg.com Transparent Governance The operating standards, procedures and results related to gover- nance are fully disclosed for transparency. The matters disclosed as prescribed in the internal regulations con- cerning governance in order to achieve transparency and objectivity are as follows: First, an annual report on the operation of the BOD, governance and remuneration system is published on the website of Woori Financial Group and the Korea Federation of Banks 20 days before the ordi- nary meeting of shareholders each year; Second, the Articles of Association, internal regulations on gover- nance, regulations for the committees within the BOD, and other regulations concerning governance are available on the website of nal Control Management Committee are chaired by outside directors, and outside directors make up the majority of these committees. It is also stipulated that outside directors must form two-thirds of the Of- ficer Candidate Recommendation Committee, which is responsible Diversity and Expertise of the BOD for recommending candidates for the positions of President & CEO, outside directors and auditors, and the Audit Committee, supervising business management. As of the end of March 2021, the two Com- mittees consist entirely of outside directors. When it comes to the procedure and standards for appointing out- side directors, Woori Financial Group does not allow any discrimina- tion on the basis of sex, race, ethnicity, country of birth or nationality, age, experience, cultural background, religion, etc. To ensure efficient operation of the Board, outside directors are selected from a diverse group of professionals. (One economic expert, three financial ex- perts, one business management expert and one accounting expert, as of the end of March 2021) Strengthening Expertise • Essential areas of expertise: Finance, economics, business man- Woori Financial Group for stakeholders to better understand the gov- agement, law and accounting ernance structure and operating system of the Group; • Specific areas of expertise: Areas concerned in the sustainable Third, the key matters pertaining to governance, such as the appoint- growth of the Group, including digital, ESG, global, risk manage- ment and dismissal of executives and nominations of outside direc- ment, consumer protection, etc. tor candidates, are published on website of Woori Financial Group for stakeholders to obtain the information at any time. For disclosures, visit http://www.woorifg.com 020 021 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Composition of the BOD and Its Committees The BOD of Woori Financial Group, as of the end of March 2021, is com- management strategies and to reinforce its ESG system. The key roles prised of nine members (six outside directors, one non-standing director of the ESG Management Committee are setting forth ESG management and two standing directors). Within the BOD, there are seven commit- policies and the direction of related strategies and making decisions 01 tees. Woori Financial Group has launched the ESG Management Com- concerning ESG management. mittee in March 2021 to firmly establish a system for executing its ESG * Please refer to the attachment for details on BOD composition. Committee Members Key Roles Chung, Chan Hyoung (Chairman) Ro, Sung Tae Chang, Dong Woo Outside director Outside director Outside director • Supervising the work performed by directors and the executive management • Selecting and requesting the dismissal of independent auditors Addition of Woori Financial Capital and Woori Savings Bank into the Group Outside director Outside director Outside director Non-standing director Outside director Outside director Outside director Outside director Outside director Outside director Non-standing director Outside director Outside director Outside director Outside director Outside director Outside director Standing director Outside director Outside director Outside director Outside director Outside director Outside director Outside director Non-standing director Standing director Standing director • Establishing basic policies and strategies for risk management • Determining the level of tolerable risk • Approving the risk capital limit and loss limit • Establishing and amending risk management standards • Evaluating the design and operation of the performance compensation system • Independently establishing and implementing compensation policies • Determining recipients of performance compensation in the management • Evaluating the performance of executives and providing compensation • Filing and disclosing annual reports and reporting on the operation of the performance-based compensation system • Recommending candidates for the positions of Chairman & CEO, outside directors and members of the Audit Committee • Recommending candidates for the position of CEO for the subsidiaries • Establishing an internal control system and the operating standards • Checking the operation of the Group’s internal control system Audit Committee Risk Management Committee Compensation Committee Officer Candidate Recommendation Committee Group CEO Candidate Recommendation Committee Internal Control Management Committee ESG Management Committee 022 Park, Sang Yong (Chairman) Dennis Chan Tian, Zhiping Kim, Hong Tae Chung, Chan Hyoung (Chairman) Ro, Sung Tae Park, Sang Yong Dennis Chan Tian, Zhiping Chang, Dong Woo Kim, Hong Tae Chang, Dong Woo (Chairman) Ro, Sung Tae Park, Sang Yong Chung, Chan Hyoung Dennis Chan Tian, Zhiping Son, Tae Seung (Chairman) Ro, Sung Tae Park, Sang Yong Chung, Chan Hyoung Dennis Chan Tian, Zhiping Chang, Dong Woo Park, Sang Yong (Chairman) Kim, Hong Tae Son, Tae Seung Lee, Won Duk Ro, Sung Tae (Chairman) Park, Sang Yong Chung, Chan Hyoung Dennis Chan Tian, Zhiping Chang, Dong Woo Kim, Hong Tae Son, Tae Seung Lee, Won Duk 2020 News Highlights Woori Financial Group signed a Stock Purchase Agreement (SPA) to acquire Aju Capital (incl. Aju Savings Bank) on October 26, 2020 and added Aju Capital and Aju Savings Bank as a subsidiary and a sub-subsidiary, respectively, on December 2020. On January 13, 2021, the companies were renamed as Woori Financial Capital and Woori Savings Bank, respectively, with the latter added as a subsidiary on March 12. Accordingly, Woori Financial Group now has thirteen subsidiaries and gained two companies specializing in consumer financing at the same time. Woori Financial Cap- ital, with a competitive advantage in the car financing business, recorded KRW 7.8 trillion in total assets, KRW 96.7 billion in net income and 12.4% in ROE in 2020. The incorporation into Woori Fi- nancial Group helped the company gain stability in the capital-raising process, while lowering relat- ed interest rates, and it is expected to grow at an accelerated rate through cooperation with other affiliates, including Woori Bank. Woori Savings Bank, generating more than KRW 10.0 billion in net income annually, is also expected to contribute to boosting income for the Group. Woori Financial Capital and Woori Savings Bank will improve convenience in financing for customers by providing loans to SMEs and vulnerable groups, together with Woori Bank and other affiliates, while playing a pivotal role in consumer financing for the Group. By creating synergy with existing subsidiaries, they will bolster the competitiveness and value of Woori Financial Group. 02 The Beginning of the Digital Tower Era: Declaration of the Digital Vision and Launch of the Digital Innovation Committee Woori Financial Group has begun pursuing digital innovation in full swing, with the name of the office building, Woori Financial Namsan Tower, changed to Woori Financial Digital Tower, and the Digital and IT Department of Woori Financial Holdings and the Digital Development Unit of Woori FIS moving into the building. Woori Financial Digital Tower has become the undisputed digital control tower of the Group, as the home of not only the Digital Financial Group of Woori Bank but now the digital departments of various affiliates as well. A work environment opti- mized for digital collaborations has been created to produce synergy within the Group using digital technology. Woori FIS, a subsidiary specializing in IT, has some 240 developers working in the same space, allowing subsidiaries to co- plan digital development projects and reducing the time it takes to take action based on the plan. The new digital vision of Woori Financial Group has been declared as ‘Digital for Better Life,’ signifying the Group’s intent to concentrate all its capabilities and resources in digital transformation. Meanwhile, the new management slogan has been announced as ‘Digital First, Change Everything.’ All members of the BOD • Matters concerning the establishment of ESG management policies To strive for digital innovation, Woori Financial Group has launched the Digital and the direction of strategies • Matters concerning important decisions related to ESG management Innovation Committee, thereby securing top-down leadership, and involved the Blue Team, comprised of young and innovative members of the organization, in the committee to create a bottom-up innovation system to better deal with the rapidly changing digital trends. Digital Innovation Forum with Blue Team 023 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 03 Woori Bank Named Global Bank of the Year 2020 by The Banker Woori Bank was honored as the Global Bank of the Year 2020 by The Banker, a global financial magazine, as the first among Korean banks. It was also selected as the Bank of the Year in Asia and the Bank of the Year in Korea, taking home three prestigious awards. The Banker is a monthly publication for the banking and finance industry operating under The Financial Times headquartered in the UK. They create of a list of best banks at the global level as well as by region and country based on a rigorous screening process. It has been reported that Woori Bank received favorable reviews for having provided timely fi- nancial support in response to COVID-19, engaging in various social contribution activities and pursuing digital transformation through partnerships with other industries to prepare for the post-COVID-19 era. Woori Bank was thus honored with the title of Global Bank of the Year partly in recognition of its COVID-19 response. It is also worth noting that the bank was chosen as the Bank of the Year in Korea for three consecutive years from 2016 to 2018 and as the Bank of the Year in Asia in 2017, but this was the first time for Woori Bank to be named the Global Bank of the Year among Korean banks. 04 Woori Bank, the First in the Financial Sector to Launch an Electronic Document System at All Branches On March 9, 2020, Woori Bank applied the electronic document system (Phase II) to document processing at all of its branches across the country, thereby eliminating the need for paper doc- uments. The system, which was applied only to the depository and household loan services in the first phase, began to be used for all other operations including corporate loan and for- eign exchange services. Instead of filling out paper documents, customers are now requested to use the tablet PC provided at each counter, and the screen and content of the document are shared on the staff’s monitor for processing purposes. This is the first time a financial institution in Korea has digitized all doc- uments for customers. From the bank’s perspective, digitizing paper documents enhances work efficiency and lowers admin- istrative costs. By applying the electronic document system across all business processes, it will be possible to save about 20 minutes when closing the accounts at the end of the day. Meanwhile, using electronic documents for deposits and loans will help cut related costs. From the customer perspective, it eliminates the need to fill out redundant or unnecessary forms and lowers the risk of incomplete sales in which the customer is not provided a full explanation of a financial instrument. Prior to the application, Woori Bank had repeatedly tested the system to prevent inconveniences for customers. Once the staff and cus- tomers get used to the electronic document system, banking services will become faster and more convenient for both sides. 024 05 The Quintessential Card Surpasses the 8 Million Mark in the Shortest Time The Quintessential Card series launched by Woori Card surpassed the 8 mil- lion mark, as of November 24, 2020. The series has set the record of achiev- ing this feat in the shortest time in the industry in just 2 years and 8 months after its launch, and this is equivalent to the opening of at least 250,000 new accounts each month (8.27 million accounts, as of the end of December 2020). The secret to the popularity of the Quintessential Card series is said to be the benefits experienced by customers, with customized services provid- ed in reflection of the rapidly changing consumption patterns, and the trendy design of the card plate that has led to high customer satisfaction. Woori Card launched the series with the Quintessential Card POINT in April 2018, followed by 24 credit card products and 10 check card products. Recently, the Quintessential Card UNTACT AIR, exclusively available on mobile devices, was launched in line with the contactless consumption trend. Woori Card has bolstered its brand power with the success of the Quintessential Card series, dubbed as a “sellable product,” which is highly sought-after by con- sumers on various channels including its branch locations. At the same time, it has boosted sales of other financial products, including Woori Card Minus Loan and car loans, thereby contributing to an increase in revenue. 06 Woori Investment Bank Successfully Increases Capital by KRW 100 Billion 07 Woori Asset Trust Creating Synergy by Entering the REITs Market Woori Asset Trust obtained the preliminary license to operate as the Real Estate Investment Trusts (REITs) Asset Management Company (AMC) in December 2020 and is expected to obtain the official license in the first half of 2021. The REITs refers to an indirect real estate in- vestment product in which funds collected from multiple investors are invested in prime real estate properties to generate income, which is in In November 2020, Woori Investment Bank completed paid-in capital turn used to pay dividends to the investors. The REITs AMC, therefore, increase of KRW 100 billion in an effort to pursue sustainable growth is a company that establishes REITs and entrusted with asset man- and business expansion. As the one and merchant bank in Korea, agement from the REITs. Woori Investment Bank successfully obtained subscriptions primarily from existing shareholders who subscribed to 91.35% of the 200 mil- lion new stocks issued. With the stocks listed on the stock exchange, it paved the foundation for increases in loans and investments, through which it will seek to improve profitability and boost the value of the company through IR. With the recent paid-in capital increase creating a ripe environment for business expansion, Woori Investment Bank is poised to achieve quantitative growth at an accelerated rate. As of 2020 3Q, the company has recorded KRW 418 billion in total capital and achieved about a 24% increase through the paid-in cap- ital increase, and this is expected to drive forth growth. While Woori Investment Bank is not a securities firm, it is capable of engaging in related businesses concerning fixed-income investments, commercial papers, privately placed bonds and short-term bonds, which is why it will be able to create synergy with Woori Bank. Woori Investment Bank generated KRW 62.2 billion in net income in 2020, a 13% YoY increase, and it is diversifying its asset management portfolio to include not only short-term credit but also mid- and long-term loans and investments in marketable securities. The REITs market in Korea has grown from KRW 6.9 trillion AUM in 2009 to KRW 61.4 trillion in 2020, which is an 8.8-fold increase over eleven years, and it is fast-becoming an attractive investment area. Once Woori Asset Trust is licensed as the REITs AMC, it will be able to produce various synergistic effects with the affiliates of Woori Fi- nancial Holdings. Of particular note, it will be possible to diversify the business structure in connection with REITs, Woori Financial Holdings and the affiliates of the Group. Above all, what is noteworthy is the possibility of developing Anchor REITs using the enormous financial firepower of the Group and its network. Woori Asset Trust plans to solidify its business base centering on safe, traditional assets, such as office and retail properties, and target the REITs market in housing and urban regeneration in order to raise brand awareness as quickly as possible and gain a greater chunk of the market. 025 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 08 Woori Asset Management Establishes ESG Investment Processes and Operates the Industry’s Largest Fixed-Income ESG Fund Woori Asset Management has renamed its publicly offered fund as “Woori High Plus Short-term High Graded ESG Bond Sec Feeder Inv Trust 1 (Bond Fund)” and incorporated the ESG management strategy into its investment management strategy. While pursuing profitability by maintaining the original management strategy, it will be considering ESG in the KRW 400 billion investment decision-making stage so as to reduce non-financial risks and ensure stability and sustainability simultaneously. Woori Asset Management has gained confidence from its customers, attested by the fact that it has been chosen as the MMF management company by the National Health Insurance Service seven times in a row. In November 2020, it became the first in the industry to launch a fund product in connection with the Shanghai Stock Exchange Science and Technology Innovation Board (SSE STAR), which is described as the Shanghai equivalent of NASDAQ, and launched a TDF in connection with BlackRock. Further, it has taken a strategic approach in setting up ESG investment processes in response to the growing interest in environmen- tally conscious and sustainable management among domestic companies. Recently, Woori Asset Manage- ment officially began ESG investment, managing the largest fixed-income ESG fund valued at KRW 400 billion, the largest of its kind in the industry, with plans to assume a leadership position in ESG fixed-income invest- ment funds. Following the appointment of Choi Young-gwon, known as an ESG investment expert, as CEO, the Business Portfolio Woori Financial Group is reinforcing its competitiveness as a finan- expected to achieve accelerated based on the Group’s risk manage- cial group engaging in businesses across the financial sector and en- ment capabilities and collaborations with other affiliates including deavoring to expand its business portfolio to include M&A and more. Woori Bank. Meanwhile, Woori Savings Bank, which had initially been Since the establishment of the holding company in 2019, the Group’s incorporated as a sub-subsidiary, was incorporated as a subsidiary of portfolio has been expanded to include asset management compa- nies, Real Estate Trust company, capital lending and savings bank operations, and it will continue its efforts in expanding the non-bank- ing business portfolio in areas of securities, insurance, VC and NPL investments to emerge as a leading financial group with the optimal business portfolio. Woori Financial Group through cash acquisition on March 12, 2021 and was granted an equal position as other subsidiaries, thereby cre- ating the foundation for the affiliates to create synergy. On April 15, 2021, the shares (12.65%) held by Aju Corporation, the second biggest shareholder of Woori Financial Capital, were acquired to increase the percentage of shares to 86.89%. 2021 Plans In 2021, Woori Financial Group will continue on with its strategy to company newly established the Responsible Investment Research Team and has been working closely with 2020 Performance external ESG evaluation agencies, with emphasis on the importance of responsible investment. 09 Woori Fund Services Reaches KRW 142 Trillion in AUM 10 Woori FIS Sets a New Record with the Uninter- rupted Operations Campaign, Clean Road 90 Woori Fund Services reached KRW 142 trillion in assets under man- Woori FIS’ Clean Road 90 campaign is aimed at preventing interrup- agement (AUM) based on the closing balance on March 18, 2021. tions in system operation to ensure smooth financial transactions Woori Fund Services, entrusted with the affairs of funds by Woori during peak demand such as on holidays. It set a new record for the In December 2020, Woori Financial Capital (formerly, Aju Capital) and expand its non-banking business portfolio, including M&As, to secure Woori Savings Bank (formerly, Aju Savings Bank) were incorporated mid- and long-term growth engines and complete its business portfo- into the Group as a subsidiary and a sub-subsidiary, respectively, for lio lineup. By expanding into various non-banking businesses through consumer financing services. Woori Financial Capital, with a com- securities, VC and NPL investment companies, the Group plans to petitive advantage in the auto financing business, recorded KRW 7.8 power sustainable growth after the end of the COVID-19 pandemic trillion in total assets, KRW 96.7 billion in net income and 12.4% in ROE and grapple with prolonged low interest rates. Furthermore, it will seek in 2020, while Woori Savings Bank, generating more than KRW 10.0 measures to incorporate non-banking businesses into the portfolio billion in net income annually, is also expected to greatly contribute to from various perspectives and manage and nurture the newly incor- boosting income for the Group and improving shareholder value. Fur- porated asset management companies, trust and capital companies thermore, two companies, which are experiencing stability in raising and savings bank operations, with the aim of drastically improving its Asset Management in March 2020, has successfully positioned itself longest uninterrupted system operation at 140 days on December 30, capital and lower interest rates as part of Woori Financial Group, are competitiveness and solidifying the synergistic system. as a major transfer agent in just a decade after its inception. Since 2020, which was a major leap from its previous record of 53 days set commencing services as a transfer agent for Woori Global Asset Man- in 2019. Clean Road 90 is a campaign initiated to run an uninterrupted agement in September 2020, its AUM has been on a steady rise. It also computer system for a 90-day cycle, based on an IT operating system acquired an investment pool from a private pension fund in December with high integrity, for the purpose of ensuring stability in IT services. 2020 and continued business activities in asset management, private Woori FIS achieved stabilization of the next-generation system of Woori equity management and REITs. The AUM (closing balance), which has Bank through the recent campaign, with the number of interruptions been steadily increasing from KRW 62.8 trillion in 2016 to KRW 71.3 dropping by 57% in 2019 and 77% in 2020 compared to 2017 before trillion in 2017, KRW 75.9 trillion in 2018, KRW 92.2 trillion in 2019 and the system was introduced. Woori FIS, providing IT services to Woori KRW 134.5 trillion in 2020, jumped by more than 5.7% to KRW 142.3 Bank, Woori Card and other affiliates, has been checking and controlling trillion in 2021 (as of March 18, 2021). Meanwhile, the AUM (closing factors causing system interruptions in order to drastically improve the balance) in the first half of 2021 is projected to increase by more than quality of the computer system. As a result, the system was able to 11.5% and reach over KRW 150 trillion. Woori Fund Services over- handle the massive loads occurring during holidays, such as the Lunar hauled its risk management system in March 2020 and improved fund New Year and Chuseok, caused by a surge in transactions. Expansion of Business Portfolio 2019 Woori Global Asset Management Woori Asset Trust Woori Asset Management 2020 Woori Financial Capital Woori Savings Bank compliance. In August, it set up a management instruction forwarding system to manage the entire process in which the asset management company delivers management instructions to the transfer agent, with the aim of achieving technical innovation and stringent risk manage- ment. Using its knowhow in serving as a transfer agent for a major asset management company, it has been handling the newly obtained AUM with ease and is poised to achieve further growth in the future. 026 Number of system interruptions in 2020 compared to 2017 decreased by 77% Woori Bank Woori Card Woori Investment Bank Woori Credit Information Woori Fund Service Woori Private Equity Asset Management Woori FIS Woori Finance Research Institute 027 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Synergy Promotion Woori Financial Group has been expanding the areas of synergy cre- 2020 Performance 2021 Plans ation by incorporating additional subsidiaries since its establishment in January 2019. In order to continually build its capacity as a financial group, it is encouraging collaboration among its subsidiaries, pro- moting new business areas for synergy creation, offering advanced financial services and endeavoring to maximize profit. The Synergy Council, in which the Group and all its thirteen subsidiaries participate, In 2020, marking the second anniversary of the founding of the holding In 2021, Woori Financial Group will attempt to level-up the perfor- achieving stable operations of the newly incorporated subsidiaries as company, Woori Financial Group made full-fledged efforts toward syn- mance across all areas of synergy creation in an effort to achieve syn- soon as possible and innovating the group control system. Further- ergy creation based on the synergy operating system it had created. ergy transformation. To this end, Woori Financial Group will promote more, when acquiring additional companies, such as a securities firm, The thirteen subsidiaries discovered and pursued a total of nineteen collaboration between the four business areas (retail, asset manage- through M&A, collaboration among the subsidiaries will be strength- businesses for synergy creation and produced tangible results based ment/pension, CIB and global business operations) and business ened, with Woori Financial Group playing a central role, in an effort to on cross-selling and joint marketing. The synergy creation projects are units and between the newly incorporated subsidiaries and other sub- achieve continuous growth by increasing market shares in the banking plans new businesses and carries out joint marketing campaigns to systematically managed by the Synergy Council, consisting of execu- sidiaries of the Group. Also, it will strive for mega-growth of synergy and non-banking sectors. maximize synergy and generating additional profits, in addition to tives in charge of related projects; the Synergy Working Level Council, of the Group, based on three strategies: expanding joint businesses, seeking measures to reduce costs. WOORI FINANCIAL GROUP Woori Bank Woori Card Woori Investment Bank Woori Asset Trust Woori Asset Management Woori Credit Information Woori Fund Service Woori Private Equity Asset Management Woori Global Asset Management Woori Finance Information System Woori Finance Research Institute Woori Financial Capital consisting of department heads at the forefront of project implemen- tation, and unit meetings held in the presence of working-level staff of each project. The Group Synergy Creation Section and the Group Synergy Idea Contest helped draw attention to synergy creation and encouraged members of the organization to discover and pursue new businesses in their day-to-day activities. By developing profit-generating models through the Group synergy systems, the following core project were pursued: First, efforts were made to boost the executives’ and employees’ inter- est and participation in projects to create synergy with other business units. The unit projects derived from the oversight organization were further subdivided to be implemented by each business unit. Of the projects discovered by business units, those requiring oversight at the Expansion of Business Portfolio first-level subsidiary 13 second-level subsidiary 14 Woori Financial Group (as of Apr. 30. 2021) Group level were carried out as Group-wide projects. 100% 100% 86.9% 58.7% 51.0% 73.0% 100% 100% 100% 100% 100% 100% 100% Woori Bank Woori Card Woori Financial Capital Woori Investment Bank Woori Asset Trust Woori Asset Manage- ment Woori Savings Bank Woori Credit Information Woori Fund Service Woori Private Equity Asset Manage- ment Woori Global Asset Manage- ment Woori FIS Woori Finance Research Institute Second, the competitiveness of the non-banking business units was reinforced by managing the performance of newly incorporated sub- sidiaries and supporting their growth. Joint projects and marketing campaigns were discovered for Woori Financial Capital, Woori Savings Bank and other subsidiaries. Of particular note, the synergy created with the newly incorporated subsidiaries was maximized by promoting their collaboration with Woori Bank. Third, tangible results were produced by establishing strategies and pursuing businesses for synergy creation among Woori Bank, Woori Card and Woori Investment Bank. The driving force behind joint proj- ects was boosted by facilitating communication among the subsid- iaries and coordinating the projects in such a way that would protect PT Bank Woori Saudara Indonesia 79.88% Woori Finance Myanmar their respective interests. AO Woori Bank (Russia) 100% WB Finance Co., Ltd (Cambodia) Banco Woori Bank do Brazil S.A. 100% Woori Bank Europe Gmbh (Germany) 100% 100% 100% Korea BTL Infrastructure Fund 99.88% Woori Global Markets Asia Limited (Hong Kong) 100% Woori America Bank 100% Woori Bank Vietnam Limited 100% Woori Bank China Limited 100% Woori Wealth Development Bank (Philippines) 51% Tutu Finance- WCI Myanmar Woori- Hanwha Eureka Private Equity Fund 100% 0.80% Woori Savings Bank Date of incorporation as a (sub-) subsidiary Percentage of shares acquired Dec. 10. 2020 74.04% 86.89% Mar. 12. 2021 100% Aju Capital Woori Financial Capital Aju Savings Bank Woori Savings Bank 028 029 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Digital Innovation With the prolonged low interest rates, entry of BigTech companies into the finance industry and growth of digital finance among other factors, it has become essential to strive for digital transformation. To achieve digital innovation as quickly as possible, Woori Financial Group has established a digital system in relation to its vision, orga- nization and tasks by setting a digital control tower and set forth 3 goals, 10 implementation tasks and 40 innovation tasks to realize the vision. Based on the digital transformation policy established in 2020, Woori Financial Group will make a giant leap to become the No.1 digi- tal financial group in the world in 2021. 2020 Performance Accelerated Digital Transformation of the Group Woori Financial Group has established the Digital Innovation Commit- tee to play the role of a digital control tower for the Group, followed by the selection of 40 innovation tasks to achieve swift and powerful dig- ital transformation. First of all, digitization of the business processes using Robotics Process Automation (RPA) has produced the effect of boosting the work speed and cutting costs, while zero-contact busi- ness operations were promoted by carrying out loan processes for small business owners and offering a number of products exclusively on mobile platforms and the web. In order to accelerate the digital transformation of offline channels, a system was introduced to allow customers to fill out documents on mobile devices and a mobile ap- pointment booking service was introduced. An Out-Door Sales (ODS) system was set up to improve sales capacity as well. Leading New Businesses and Strengthening the Digital Capacity 2021 Plans Woori Financial Group will strive to become the No.1 digital financial Secondly, Woori Financial Group will lead the future of the finance Woori Bank and Woori Card obtained official approval for the credit group in 2021, based on the digital transformation policy set forth in industry through Coopetition (cooperation + competition). As part of information management business (MyData) from the Financial Ser- 2020. vices Commission. Through this business, they will provide person- alized MyData services, allowing users to make various decisions in their day-to-day lives based on their personal data. Moreover, internal controls were reinforced using RegTech, a way of using information technology to enhance regulatory processes, and open banking ser- vices were improved so that customers could access the accounts of other banks in a faster and more convenient way. Also, the Group is building cloud infrastructure for all the affiliates in order to switch to a cloud environment characterized by speed and flexibility. Woori Financial Group reorganized DinnoLab, a startup cooperation program that has been in operation since 2016, as a joint program of the Group in June 2020. Through this program, the Group has dis- covered 54 startups, with which the subsidiaries of the Group have In recognition of the imminent transition to a platform-based payment and settlement market, the Group plans to create and launch an inte- grated payment platform. It will be provided as an open service to ex- pand the payment and settlement ecosystem centering on the Group’s platform and, at the same time, common services from the Group will be provided on the platform to improve customer convenience. While increasing seamless services by connecting the digital channels of subsidiaries, the digital synergy created by the subsidiaries will be fur- ther boosted through an integrated membership program, integrated these efforts, it is discovering innovative startups through DinnoLab and Global Hackathons, through which it is internalizing innovative technologies and services as well as a culture of innovation. By part- nering with credible media outlets and platforms, it will secure online promotion and marketing channels and create content related to start- ups to spearhead the creation of a startup ecosystem. Woori Financial Group will also find partners in other industries, including distribution and communications, to broaden customer touchpoints, while ex- panding its external network by discovering ways to cooperate with TechFin companies that are setting new trends in finance. products and integrated marketing. The Group also plans to pursue Last but not least, Woori Financial Group will sharpen its digital com- the MyData program in full swing. By jointly creating a MyData ecosys- petency. In addition to building an integrated education and training tem within the group, it will create an inter-subsidiary cooperation sys- platform to foster digital experts, the Group will operate digital indus- tem and introduce a platform that provides information on products try-university cooperation programs consisting of practical training collaborated on 16 projects, and this helped the Group successfully offered by the Group. internalize new digital technologies such as FinTech, AI and big data. Furthermore, Woori A-D Venture, an in-house venture incubation pro- gram, was incepted as part of the effort to drive forth innovation within the Group. and hands-on experiences. By propagating the agile culture across all areas of the Group, it will pursue digital transformation with speed and success. Digital Structure of Woori Financial Group Reinforcement of the Digital Platforms Digital Transformation Woori Financial Group reinforced the digital platforms serving as non- face-to-face customer touchpoints. First of all, Woori WON Banking, Woori Card App and Woori Pay App for retail customers were upgrad- ed. In addition to simplifying the product subscription procedures, the product recommendation page was designed to provide information the most suitable products in consideration of the customer’s transac- tion patterns, age and other factors. The Group also launched Woori WON Together, a one-stop service allowing users to manage their assets with Woori Bank, Woori Card, Woori Investment Bank, etc., sub- scribe to products offered by other subsidiaries and apply for issuance of a new card. Woori Financial Group began servicing Corporate Woori WON Banking Customers to increase the contact points for corporate customers. The app providing financial service tailored to the needs of corporate customers offers a customizable main page, non-face-to- face loan services and up to 500 simultaneous transfers. 030 • Established the Digital Innovation Committee and selected innovation projects • Pursued digitization of work processes based on robotics process automation (RPA) • Pursued digitization of face-to-face channels and reinforced non-face-to-face channels 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 Working Group (Organizer) - Head of IT&Digital Unit 031 Woori Financial GroupInnovation Team (Blue Team)IT&Digital UnitStrategy Planning DivisionWoori BankDigital Banking Business GroupManagement & Finance Planning GroupWoori CardDigital GroupManagement Planning DivisionWoori Investment BankManagement Support DivisionWoori FISIT&Digital UnitManagement Planning DivisionINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Global Business In the midst of internal and external challenges in 2020, Woori Bank In line with the spread of contactless practices across the world due 2020 Performance strengthened the integrity of its network in the Southeast Asian to COVID-19, Woori Bank renewed the global mobile banking services market that is highly profitable with a strong growth potential and in Vietnam and other overseas locations, developed new products increased its capital. By implementing region-specific business strat- exclusively for mobile platforms and launched services in partnership egies and taking advantage of its outstanding non-face-to-face chan- with FinTech companies. By introducing the tablet branch system, nels, the company paved the foundation for sustainable growth with it successfully built the infrastructure for Out-Door Sales (ODS). To respect to its global business operations. grapple with increased risks, the company sought to ensure asset By adding business channels in promising regions, such as Vietnam and Indonesia, Woori Bank expanded its global network to include 447 branches worldwide. Through the merger of the subsidiary in Cambo- dia and relocation of business establishments, it improved its network efficiency and broadened its retail business channels. It further height- ened its growth potential by increasing capital in the Vietnamese and Cambodian markets that have been achieving accelerated growth. soundness and upgraded its internal control system through related consulting on AML and so on. Expansion of the Global Network Woori Bank became the first commercial bank in Korea to open an overseas branch, launching operations in Tokyo in November 1968. After taking the first step toward the global stage, it has been relent- lessly endeavoring to gain a stronger foothold in the global financial markets. In 2014, it became the first Korean bank to acquire a bank listed on an overseas stock exchange and launched PT Bank Woori Saudara in Indonesia. Shortly after in 2016, it acquired a savings bank in the Philippines and has been creating synergy with its partner, VICSAL Group, ever since. Following the acquisition of WB Finance, a savings bank in Cambodia, in June 2018, Woori Bank gained a greater Total assets Operating income USD 33.7 billion (19% YoY increase) USD 570 million NPL ratio 0.94% Woori Bank Europe Gmbh (Germany) London Poland Overseas subsidiaries Overseas branches Representative offices Group Global Network 473 (23 countries) 032 AO Woori Bank (Russia) Woori Bank China Limited Tutu Finance-WCI Myanmar Woori Finance Myanmar WB Finance Co., Ltd. (Cambodia) Woori Bank Vietnam Limited Woori Global Markets Asia Limited (Hong Kong) SEOUL Tokyo Hong Kong Mumbai Bahrain Dubai Gurgaon Dhaka Chennai Yangon Kuala Lumpur Singapore Woori Wealth Development Bank (Philippines) PT Bank Woori Saudara Indonesia Sydney 12 Overseas subsidiaries (421) 14 Overseas branches 8 5 Overseas sub-branches Representative offices Los Angeles New York Woori America Bank and F/X, was implemented. Strengthening Global Digital Business Infrastructure Woori Bank is sharpening its competitive edge using non-face-to-face channels in an effort to respond to the changes in the global financial environment and set new trends. It renewed its mobile banking services in Vietnam and other overseas locations, began offering a wide range of products on mobile platforms, such as a mid-range interest rate loan, and introduced the tablet branch system in Indonesia for ODS. By forming partnerships with local FinTech companies among others, Woori Bank was able to launch products exclusively available on mobile platforms, such as the easy money transfer service in partnership with ZellePay in the United States and non-facial revolving credit facility prod- ucts receivables in partnership with FIN2B in Vietnam, and expanded its local business operations using digital technology. Banco Woori Bank do Brazil S.A. 033 business coverage across the country, and in November, it founded Woori Bank Europe in Germany, thereby creating a base to advance into other regions in Europe. In 2020, Woori Bank opened three branches overseas, Hoam Kiem Branch in Vietnam, Dallas Branch in the United States and Asabrise- marang cash-office in Indonesia, resulting in a global network of 447 branches. It is pursuing organic growth based on key areas in Bangla- desh and Myanmar as well. Through a merger between Woori Cambo- dia Finance and WB Finance, the local subsidiaries in Cambodia, Woori Bank successfully laid the groundwork to emerge as a leading financial institution in the country. Securing Sustainable Growth Engines for Global Business Operations In order to secure sustainable growth engines for global business op- erations, Woori Bank pursued substantial growth centering on capital increase and high-yield assets. It pursued localized business operations, with capital increases in the fast-growing Vietnam and Cambodia and an expansion of the product lineup for retail customers in emerging markets according to the local economic and financial environments, through which it gained stronger market dominance. In advanced countries, on the other hand, a two-way strategy to strengthen competitiveness in corporate finance, such as IB INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ESG Management Building Relationships with Global Banks 2021 Plans The recent trend seen across the world is the increasing empha- Proclamation of the ESG Management Principles Woori Bank has been forming friendly ties and strengthening cooper- Implementing Growth Strategies at Each Branch ation with prominent banks around the world. Through these efforts, it has been able to secure credit lines to provide financial support to Korean enterprises expanding into overseas markets as well as local blue-chip companies. Through a wide range of trade finance tech- niques, such as bills bought and Banker’s usance and other L/C trans- actions as well as payment guarantees, Woori Bank is contributing to Woori Bank plans to pursue change and growth in its global business operations by pursuing structural improvement in 2021. It will group overseas branches according to the region-specific business environ- ment and establish growth strategies tailored to each group. sis placed on non-financial performance of companies centering on sustainability, such as environmental protection activities, CSR management and transparent management. Along with this, ESG management has become crucial, which is evidenced by the fact that institutional investors are considering ESG when making investment In January 2021, the ‘Woori Financial Group ESG Management Princi- ples’, the key points of which are to practice ESG management at the Group level and to lead the financial industry in fulfilling social responsi- bility, were established and proclaimed. The declaration consists of the Top 6 ESG Management Principles, which concern pursuing manage- decisions. In consideration of this new paradigm, Woori Financial ment activities in connection with the relevant global initiatives, specif- Group has established an ESG strategy to pursue sustainable growth ically the UN SDGs and the Paris Agreement, exerting positive impacts the promotion of import and export transactions. Securing Additional Growth Engines for the Future and set up an ESG management system to integrate the ESG frame- on the environment and society through financial products and services Reinforcing Compliance and Internal Controls With financial authorities worldwide raising the bar on compliance, Woori Bank upgraded a filtering system in relation to AML and sanc- tions and diagnosed the compliance levels of domestic and overseas Woori Bank will strengthen its competitiveness in digital channels as a means to secure additional growth engines for the future and operate such channels strategically by concentrating its investments in high- growth, high-return regions. branches together with a consulting firm. Based on the results, it Increasing Local Support made ongoing improvements to various aspects including the op- erating manual. It shared matters requiring improvement through working-level meetings with members from relevant departments at the headquarters to boost the capacity to achieve global compliance. Training programs are also administered through internal instructors and external agencies for capacity building of personnel responsible for compliance. Providing Support for Overcoming COVID-19 Worldwide Woori Bank joined in on the international efforts to overcome the COVID-19 crisis and commenced social contribution activities be- yond the borders of Korea through local subsidiaries. Relief supplies and monetary donations were delivered to Wuhan, China in order to help contain the virus. In addition, Woori Bank donated money, hand sanitizers and face masks to Cambodia and hazmat suits to Jakarta, Indonesia. Woori Bank will increase training programs for capacity building of em- ployees dispatched abroad and invigorate local business operations by hiring locals at overseas branches. It will maximize the synergistic effect by pursuing collaborations with relevant business groups and increase collaborative operations among branches at home and abroad. Ensuring Sound Risk Management In order to prevent a surge in insolvency filings in the post-COVID-19 era, Woori Bank will examine and manage asset soundness in advance and ensure systematic management by upgrading its internal control sys- tem in the aspects of AML and operational risk. work into its corporate culture. and endeavoring to manage related risks. 2020 Performance Declaration of Reinforcing ESG Management Woori Financial Group included ‘Reinforcing ESG management’ as a core strategy among its mid- and long-term strategies and the 2021 management strategies and established an ESG organizational struc- ture to underpin the efforts to strengthen ESG management. In addition to proclaiming the ‘Woori Financial Group ESG Management Principles’ at the 2021 1H Management Strategy Workshop, the Group joined the CDP* and endorsed the recommendations of TCFD**, as part of its ef- forts to pursue sustainable management and lead the financial industry in fulfilling its environmental and social responsibilities. Establishing the ESG Organizational Structure Establishing an ESG Organization and the Group ESG Management Council•Woori Financial Group newly established the ESG organiza- tional structure in order to pave the foundation for strengthening ESG management. In December 2020, departments dedicated to ESG were established in Woori Financial Holdings and Woori Bank following reor- ganization of the Group. Then, in January 2021, the Group ESG Manage- ment Council, comprised of the CEOs of the affiliates as members, was launched to raise efficiency in ESG management and facilitate commu- nication and cooperation among the affiliates in ESG management ac- tivities. Based on the newly established ESG organizations and council, Woori Financial Group will pursue world-class ESG management and serve as a leader. ESG Structure of Woori Financial Group Board of Directors 034 ESG Management Committee (Subsidiaries) ESG-related departments (Working-Level) Group ESG Management Council (Holding Company) ESG Management Department 035 Audit CommitteeRisk Management CommitteeCompensation CommitteeOfficer Candidate Recommendation CommitteeGroup CEO Candidate Recommendation CommitteeGroup ESG Management Council Internal Control Management Committee INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Establishment of the ESG Management Committee within the Board•For the purpose of consolidating the ESG organizational struc- ture and bolstering ESG management, Woori Financial Group estab- lished the ESG Management Committee within the Board of Directors in March 2021. The Group’s ESG management activities will be managed and supervised by the Board, based on which a robust ESG manage- ment system will be created. The ESG Management Committee, com- prised of 9 inside and outside directors from Woori Financial Holdings, will play the role of the top decision-making body in ESG management of the Group. 2021 Plans Preparing Mid- and Long-Term ESG Strategies for the Group Establishment of an ESG Strategy System •Woori Financial Group plans to pursue effective risk management activities and produce Promoting ESG Finance Establishment of ESG Finance Principles & ESG Finance Classifica- tion System •Woori Financial Group plans to effectively respond to various social and environmental issues and the interests of stakehold- ers through the establishment of the ESG finance principles. The Woori Financial Group Principles for ESG Finance were established for the purpose of joining the global current of switching to a low-carbon econ- omy, expanding upon inclusive finance to solve environmental, financial and social issues and contributing to the sustainable development of society as a whole. The Woori Financial Group Principles for ESG Fi- nance outline the background and purpose of ESG finance, governance, framework, scope and principles, monitoring and reporting. Meanwhile, in order to take leadership in ESG finance, Woori Financial Group is setting up an ESG finance classification system within the Group. The classification system, which will be applicable to all products offered by the Group including credit, depository, PF and investment, will contrib- excellent business performance, based on an advanced ESG strategy ute to the transparent and clear ESG finance product development and system. Of particular note, the Group has set forth mid- and long-term dissemination. The ESG finance classification system, which is set to strategic goals in ESG and is discovering and implementing related be announced in the first half of 2021, will help Woori Financial Group tasks to meet the needs of diverse stakeholders. Furthermore, in order effectively manage the ESG finance performance in an integrated man- to promote ESG management at the Group level, ESG goals began to ner with the actual management performance. be assigned to each affiliate in 2021, with plans to put forth a system in which their performance will be evaluated by the management. Sophisticating the Strategic System in Connection with Global Ini- tiatives •With the growing importance of effectively responding to climate change risks, Woori Financial Group has been carrying out Green New Deal Policy and ESG Finance Verification (Certification) •There are plans to offer a wider ranger of products in connection with the government policy to promote green finance and inclusive finance on a broader scale. Woori Financial Group will contribute KRW 4.2 trillion for Digital New Deal, KRW 4.7 trillion for Green New GOALS Strengthening the ESG Capacity of Subsidiaries •Woori Financial Group has derived a wide variety of strategic tasks to internalize ESG subsidiaries have each formulated specific implementation plans. The tasks that must be carried out for internalization of ESG management, management across the organization and strengthen ESG capacity. such as preparing a system for nurturing female managers and set- These tasks were largely divided into ‘Common Tasks,’ ‘Industry-Spe- ting up a human rights management system, are being carried out as cific Tasks,’ derived in consideration of the nature of business of each swiftly as possible, as part of the efforts to strengthen the ESG capaci- subsidiary, and ‘Tasks in Response to Government Policies,’ and the ty across the organization. Woori Financial Group’s ESG Goals and Tasks 2021 1H 2021 2H 2022~ • Derive strategic tasks for the Group • Execute mid- and long-term strategic • Support affiliates in building their tasks • Complete the internalization of sus- tainable finance within the Group ESG capacity • Prepare a performance monitoring • Sophisticate the ESG management system for the Group activities of the Group environmental management activities in connection with global ini- Deal and KRW 1.1 trillion for reinforcement of safety nets, for a total tiatives. In January 2021, the Group declared its support for the TCFD of KRW 10 trillion, in the course of the next five years. While providing and is set to establish a mid- and long-term implementation roadmap green finance support in connection with the government’s Green New in 2021. There are plans to create a system to check and manage the Deal Policy and 2050 Carbon Neutral Policy, the Group will increase performance related to reducing Greenhouse Gas (GHG) emissions in its PF investments in new and renewable energy, such as hydrogen • Select the mid- and long-term stra- tegic directions and tasks for ESG management • Create the foundation for internal- ization of the sustainable finance four areas, ‘Governance,’ ‘Strategies,’ ‘Risk Management’ and ‘Quantita- fuel cells, wind power and solar power, to contribute to the transition TASKS classification system • Examine the performance of strategic • Compile and give feedback on the tasks by each affiliate outcomes of strategic tasks • Pursue internalization of the sustain- able finance classification system • Comprehensively manage the sus- tainable finance performance of the • Reflect and evaluate the implementa- Group tion of ESG tasks as a KPI • Evaluate the ESG management level tive Indicators/Goals, and introduce a process for tracking the results. to a low-carbon economy. Meanwhile, with the release of ESG finance The relevant performance will be disclosed to the public through the products by domestic and foreign entities, it has been noted that there • Prepare measures for ESG capacity building of the Group and derive support measures issuance of sustainable management reports. In the case of CDP, response to climate change risks and opportunities were designated as major strategic tasks upon joining the organiza- tion in February 2021, based on which Woori Financial Group will set forth mid- and long-term GHG emission reduction goals for the Group and be committed to becoming a carbon neutral financial group. Also, in the second half of 2021, an integrated environmental control sys- tem will be set up for the Group, with plans to systematically control GHG emissions, waste production and energy and water consumption of the Group and disclose the related data with transparency following verification by an external agency. is a need to verify and certify these products. This past March, Woori Financial Group became the first financial holding company in Korea to issue an ESG bond that was given the highest ESG certification grade (ST1). By ensuring thorough follow-up management, the Group will contribute to the creation of a virtual cycle of ESG finance in finan- cial markets. Woori Financial Group’s Milestones in Relation in Global Initiatives Nov. 2019 Jan. 2020 Dec. 2020 Jan. 2021 Joined the UNEP FI Signed the PRB Declared to end coal finance Declared support for the CDP and TCFD 036 037 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Risk Management With the rise of contactless services to better cope with COVID-19, Also, in reflection of the final Basel III reforms that are set to be im- 2021 Plans a digital transformation has occurred in nearly all aspects of life, in- plemented starting in 2023, Woori Financial Group developed and cluding banking. As of June 2020, 64.3% of all banking services are introduced the top 3 risk (operating, market and credit) management obtained on either the Internet or mobile platform, quite a jump from system. In September 2020, a credit risk management system was in- 52.2% in 2018. Financial markets are seen a surge in online transac- tions arising from technological advances, an introduction of non- face-to-face authentication services and ease of use, and competition troduced to be prepared for the regulatory requirements of Basel III, and it became the first financial holding company to set up operating and market risk management systems as well in March 2021. is intensifying across all business areas, including areas centering As a result, Woori Financial Group was able to promote its operating on contactless products and services and platform, with the entry of stability by eliminating potential risks and managing losses and build BigTech companies, such as Naver, Kakao Bank and Toss. Accord- the foundation for recovering from the effects of unexpected risks, such ingly, Woori Financial Group continually comes up with measures to as the pandemic, for a business continuity plan. cover emerging risks in relation to the changes in financial markets. Reinforced Risk and Internal Controls 2020 was a tough year for many sectors due to COVID-19, and the fi- nancial sector is expected to be exposed to a number of risk factors in 2021. With the enforcement of the Financial Consumer Protection Act in 2021, Woori Financial Group will endeavor to build an impeccable in- ternal control system, a prerequisite to ensuring consumer protection and excellent sale processes. Potential risks will be continually moni- tored and the investment assets of the Group will be examined more thoroughly. Woori Bank, an important subsidiary of Woori Financial Group, will reestablish its business model encompassing products and ser- Details of the Emerging Risk Management System Conduct Risk•There are plans to subdivide risk factors according to the non-face-to-face product subscription stages, which include consultation, sale and follow-up management, in order to examine risk factors for each step. Also, Woori Financial Group has secured the time necessary to be prepared for the final Basel III reforms by introducing an operating risk management system (Principles for the Sound Management of Operational Risk, PSMOR) for the first time among the 8 major financial holding companies in Korea. Based on trial and error before the implementation of Basel III, it will endeavor to improve the system and promote operating stability. 2020 Performance Detailed Analysis of Emerging Risks Digital innovations, including FinTech, bring forth new opportunities in financial markets, but at the same time, they can act as serious risk factors for businesses without any proper management measures. For instance, there are operating and reputation risks associated with misuse or abuse of customer information or leakage thereof, which can be devastating for the company. After recognizing the changes in its environment, such as changes in financial markets, rising transactions resulting from technological advancement and rapid speed of financial transactions, Woori Financial Group analyzed the potential risks of ex- panding non-face-to-face product and service channels in relation to the elimination of geographical limitations, accessibility of external users, anonymity of users and use of public networks. Based on the analysis, three emerging risks were predicted: conduct risk; digital fraud risk; and cyber security and data privacy risk. First, conduct risk refers to a risk of causing adverse outcomes for customers with poorly designed prod- ucts or sales processes in the midst of a flood of information due to diversified sales channels and digitization. Next, digital fraud risk is a risk of causing losses to the bank by subscribing to a fraudulent product via a non-face-to-face channel. Lastly, cyber security and data privacy risk is a risk that arises from misuse and mismanagement of personal data obtained via non-face-to-face channels. Development of the Top 3 Risk Management System Following Reform In 2020, Woori Financial Group formed an emergency management committee in early on in the face of an unprecedented global crisis brought upon by COVID-19 to systematically deal with the ensuing chal- lenges, with the safety of customers and staff as its No.1 priority. 038 Monitoring Indicators for Emerging Risk Management Conduct Risk •No. of Subscribers by age group •No. of Scrapping errors •No. of Same-day cancellations •No. of Subscriptions by seniors and minors •No. of Failed real name verification attempts Cyber Security & Data Privacy Risk •No. of Hacking attempts •No. of System failures •No. of Security patch installations •App log increase rate •Average app usage time by customer Digital Fraud Risk • No. of Subscriptions using prepaid phone numbers •No. of Financial fraud cases • No. of Login attempts from overseas IP addresses • No. of Login attempts after re-reporting the password • No. of Subscribers with erroneous custom- er information vices, processes and data with the aim of achieving cutting-edge data-centric banking services, based on a mid- to long-term strategy to Cyber Security & Data Privacy Risk•Cyber security risks will be mit- igated by monitoring for hacking and information leakage, while data strengthen the digital business. Management Measures for Emerging Risks privacy risks will be addressed by setting forth a clear set of standards in relation to the use of personal information. In addition, core digital technologies, such as cloud, machine learning and AI, will be intro- duced, in addition to establishing a system to recruit and foster digital Non-face-to-face channels are characterized by ease of access, sim- experts, in order to build the necessary infrastructure and manpower ple procedures and analysis of diverse data. It is also advantageous for the digital channels. for those seeking to secure new technologies, as there are many areas that are still untapped. To better manage the emerging risks associate with the rise of non-face-to-face channels, Woori Financial Group plans to establish and operate an emerging risk management system with an understanding of the characteristics unique to non-face-to-face channels. Woori Financial Group is sharing its risk management value and culture and systematically examining the risk factors associated with non-face-to-face channels. Also, emerging risks are clearly identi- fied through management reports and risk assessments and reviews to better deal with them. Digital Fraud Risk•There are plans to pursue multifaceted risk man- agement by using a wide array of data based on a database created to collect, analyze and manage internal, external, structured and unstruc- tured data. To enable risk management based on RiskTech services, the risk management system will be upgraded in reflection of the lat- est digital trends, such as AI risk management, non-face-to-face credit assessment models and fraudulent corporate loan detection system. PSMOR in Relation to the Operating Risk Management Development of Products and Services Sales of Products and Services Follow-up Management Ensure consistency and efficiency by classifying products and services and Strengthen the connection between the headquarters and branches Promote the effectiveness of risk management by deriving monitoring establishing a standardized manage- centering on the key businesses and measures suitable for each risk and ment system for each type perform integrated management at control activity the company level 039 123INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Social Responsibility Woori Financial Group undertakes social contribution activities 2020 Performance alongside local communities with the vision of ‘Benefit from Finance, Warmth from Sharing.’ Based on the three core values, Humanity, Happiness and Hopefulness, the Group is dedicated to sharing with local communities and practicing ESG management. It has also established its own sustainable development goals (SDGs) in con- sideration of the nature of the financial industry and joined in on the international effort toward sustainable development centering on five social contribution areas: inclusive finance, fostering the future gener- INCLUSIVE FINANCE Support for microfinance•Woori Financial Group provides wide-rang- ing support for microfinance in order to deliver the social value of finance by alleviating the burden of financial costs for ordinary citizens and to grow alongside them. With its notable microcredit product, ation, supporting the underprivileged, spreading the mecenat spirit of ‘New Hope Spore Loan,’ Woori Bank handled KRW 551.8 billion, as of the end of 2020. Non-face-to-face channels were opened in 2020 to improve convenience for those who find it difficult to visit the bank in person. ‘Sunshine Loan 17’ launched to support microfinancing in line with the government’s policy targeted borrowers who were forced to turn to the secondary financial sector and private lenders due to FOSTERING THE FUTURE GENERATION Supporting Underprivileged Children and Youth in Online Learning• Woori Financial Group donated KRW 500 million, which included donations from executives and employees, to the Korea Council of Group Home for Children and Youth to help underprivileged children and youth engage in online learning during the pandemic. To facilitate online learning, 340 computers and peripheral devices and online edu- cation program vouchers were donated for children and youth belong- ing to group homes, in addition to introducing assistant teachers for children with disabilities. Woori Financial Group will continue its efforts to promote equal education opportunities for underprivileged children in the midst of rapid changes in the education environment caused by COVID-19 and foster the future generation. Digital Talent Promotion Project for Specialized Vocational High Schools•Each year, Woori Financial Group offers assistance to students from low-income facilities attending specialized vocational Woori Bank Kkumnamu Scholarship Program Woori Bank Kkumnamu (“Dream Tree”) Scholarship Program is a so- cial contribution program that was launched in 2011 to foster future generations using the Woori Love Fund with donations voluntarily made by executives and employees from their paycheck. In 2020, KRW 50 million in scholarships was provided to 75 children from chil- dren’s centers with which Woori Bank has formed sisterhood ties with, along with messages of encouragement written by executives and employees. Not only that, but Woori Bank also invited 966 elementary school students from children’s centers across the country to take part in a non-face-to-face financial education program offered by Woori Bank Museum (for a total of 53 sessions). As such, various education- al programs are being organized to nurture future talents. SUPPORTING THE UNDERPRIVILEGED Social Contribution Activities of the Employees of the Group•Woori Financial Group has been organizing volunteer activities on an ongo- philanthropy and protecting the environment. Woori Financial Group’s CSR Strategies Implementing CSR strategies aligned with the UN SDGs for sustainable management and creation of social value Inclusive Finance Promoting inclusive and sustainable economic growth and creating jobs Fostering the future generation Guaranteeing inclusive and equitable quality education, promoting lifelong learning opportunities Supporting the underprivileged Reducing inequality within and among countries and contributing to social inte- gration Spreading the Mecenat activities Spreading cultural value by sponsoring the arts, cultural and sports sectors Protecting the environment Responding to climate change and pursu- ing sustainable protection and restoration of ecosystems poor credit scores, despite having an income. Through this product, high schools who are facing difficulties in pursuing career develop- KRW 107.0 billion was extended to borrowers, and it helped reduce ment or acquiring the skills to apply digital and information technol- ing basis since the launch of Woori Bank Volunteer Group in July 2007. the polarization in the financial sector. Meanwhile, Woori Bank began ogy due to daunting private education costs. In 2020, vouchers for Woori Bank has formed sisterhood ties with social welfare institutions the “Special Program for Pre-Workout for Household Loans” on April online classes on digital and information technology were provided and children’s centers near its branch locations across the country, and 29, 2020 to support borrowers who have overdue loan repayments to 100 specialized vocational high school students faced with con- its executives and employees pay regular visits to volunteer and deliver or are at such risk due to a decrease in income during the pandemic. straints in capacity building and learning due to COVID-19. It entailed donations throughout the year. In 2020, 758 volunteer sessions were Vulnerable groups suffering financial hardships due to COVID-19 and education in various aspects of digital and information technology, carried out with the participation of a total of 7,004 members of the or- borrowers with overdue payments were allowed to defer the payment including but not limited to big data, information security, applica- ganization to assist underprivileged neighbors in the local community. of the principal (for 6 or 12 months), extend the loan period, renew the tion programming interface (API), web development and artificial Also, KRW 518 million was donated to social welfare institutions and loan or switch to a different loan product. As of the end of 2020, a total intelligence, and executives and employees from Woori FIS, which children’s centers to assist vulnerable groups as well. provides comprehensive ICT services within Woori Financial Group, provided mentoring via live streaming videos to help students ex- plore career paths and develop practical skills. ••• of 77 such cases amounting to KRW 1,607 million were handled. Support for Small Business Owners and SMEs•Woori Bank became the first financial institution to initiate consulting services for SMEs (SOHOs) in 2001. Today, financial experts including management consultants, certified accountants and tax accountants at the Bank provide SMEs and SOHOs with individually tailored consulting on various aspects of managing a business, including accounting and taxation. Special funding was provided to support innovative SMEs and small business owners bearing the brunt of the coronavirus crisis and facing hardships due to the economic downturn and crisis in their respective industries in managing their businesses with stability and creating jobs. A special funding agreement valued at KRW 40 billion was signed with credit guarantee foundations across the country, including the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation, through which KRW 2.3 trillion was extended as guaranteed loans under special funding agreements with a guarantee ratio of 100% and loans for the guarantee fees with the maximum guarantee fee rate of 0.8% (0.4%, 2 years) to support innovative SMEs Woori FIS staff mentoring students to nurture them into digital talents New hires engaging in volunteer activities and revitalize local economies. 040 041 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Support Programs to Overcome COVID-19•Woori Financial Group ini- tiated a wide range of social contribution programs in an effort to over- donation certificates and KRW 200 million donated by executives and employees of the Group were provided to Seoul National University come the COVID-19 crisis in 2020. In January 2020, KRW 100 million Children’s Hospital. Going forward, Woori Financial Group will continue worth of COVID-19 prevention kits, each consisting of masks, a hand its blood drives with the participation of executives and employees as sanitizer and a thermometer, was donated to welfare facilities helping a way to give blood and share life. children and seniors who are particular vulnerable to the virus. In Febru- ary, KRW 200 million worth of infection control supplies was delivered to shelters for children at high risk in the Daegu and Gyeongbuk re- gions, which were COVID-19 hotspots at the time. In March, 6,000 food kits and 1,000 bags of rice valued at KRW 300 million in total were pur- chased from traditional markets and donated for children and seniors in the Daegu and Gyeongbuk areas, which helped support vulnerable groups and revitalize the local economy at the same time. KRW 200 million was donated to the Daegu Branch of Korean Red Cross to pro- vide healthy meals to the healthcare professionals at major hospitals in Daegu to help boost their immune systems and nourish their bodies and souls. Wibee Cloud, a crowdfunding platform of Woori Investment Bank, was utilized to carry out a donation project with the participation Sharing with Vulnerable Groups on Holidays•Woori Financial Group has been sharing with those in need during the Lunar New Year and Chuseok holidays each year. In January 2020, some 300 new recruits of Woori Financial Group made 3,000 Woori Hope Boxes consisting of holiday food at the head office of Woori Bank and donated them to senior welfare facilities around the country. In September, 2,000 food kits were prepared and donated to some 40 senior welfare facilities operating under the Comprehensive Support Center for the Elderly Living Alone. Woori Financial Group will continue its charity activities in an effort to fulfill its CSR and eliminate the blind spots in welfare. SPREADING THE MECENAT ACTIVITY The 23rd Woori Bank Woori Art Competition•The Woori Bank Woori Art Competition launched in 1995 celebrated its 23rd year in 2020. It is an iconic social contribution program of Woori Bank in the arts and cultural sector that is aimed at giving an opportunity for children and youth to share their hopes and dreams. In the past 25 years, around 750,000 young artists participated in the competition, boasting a long history and tradition, and unleashed their artistic potential. In 2020, the preliminary and final rounds were held online for the first time, thereby in the area that was destroyed by the massive wildfire in Goseong, Gangwon-do Province, and it helped restore the natural environment and allow children receive education surrounded by greenery. Eoul Elementary School situated in the vicinity of Anseong training center of Woori Financial Group was chosen as the second forestation project site, and every step of the project, including planning, design and forestation, was carried out based on the opinions collected from students, teachers and staff as well as local residents. Woori Financial Group will pursue social contribution programs in connection with ESG management to promote coexistence between man and nature. enabling young artists to continue fostering their dreams even in the 2021 Plans midst of challenges brought upon by COVID-19. PROTECTING THE ENVIRONMENT of Woori customers, with the aim of assisting those who have been hit hard by COVID-19. Along with these activities, the Good Consumption Woori Bank’s Charity Culture: Woori Love Fund•Woori Bank is known for the Woori Love Fund, a charity program where executives and em- Movement was launched to support small business owners and turn ployees donate a portion of their paycheck each month. Created with Environmental Protection Campaign to Coexist with Nature•Woori Financial Group has been carrying out an environmental protection the economic tide. Gift certificates valued at KRW 10 billion were pur- voluntary participation in 2003, the fund amassed KRW 384 million campaign throughout the year as part of the efforts to promote ESG chased from traditional markets and given to employees, in an effort in 2020 alone with contributions made by 5,524 members of the or- management and environmentally conscious practices since 2019. to support local merchants, and around 100 restaurants near the head ganization a month, on average. The money collected is used toward In 2020, all members of the Group engaged in eco-friendly practices, office were prepaid for KRW 100 million worth of meals. Blood Drive Campaign•Woori Financial Group carried out a blood drive with the participation of executives and employees across the or- ganization after becoming aware of the decline in blood donations due to social distancing measures. The Blood Drive Campaign was con- ducted for the 15th consecutive year in 2020 since the related agree- ment was concluded with Korean Red Cross in 2006. Executives and employees voluntarily visited the blood banks near the office or branch during the month-long campaign period to donate blood as well as the blood donation certificates. In October 2020, a total of 500 blood assisting those in need, supporting volunteer groups of the bank and holding contents to select excellent social welfare programs. Woori Love Fund Contest Program, which has been in operation since 2009, is aimed at selecting exceptional social welfare programs operated by social welfare facilities to support marginalized classes. In 2020, KRW such as using tumblers, refraining from the use of disposables and saving energy. A donation drive was held to collect used toys from executives and employees and donate them to the Seoul Green Toy Library. Through these activities and more, Woori Financial Group is leading the efforts to protect the environment and leave behind a clean 200 million was donated to twelve social welfare institutions and ten and healthy planet for future generations. children’s centers. A social media campaign was carried out to involve customers of Woori Bank and its partners by having them leave com- ments and like and share posts to show their support for underprivi- leged children. Woori Finance Forest of Life •Woori Financial Group held the com- pletion ceremony for the second forest created as part of the Woori Finance Forest of Life Project at Eoul Elementary School in Anseong, One Click Funding System will be introduced on WON Banking services Gyeonggi-do Province in December 2020. Initiated in 2019, the first for- for customers to make donations in the event of a national disaster or estation project was carried out at Inheung Elementary School located emergency so as to facilitate speedy recovery with timely assistance. Practicing Green Management and CSR Management Woori Financial Group plans to establish ESG management processes in 2021 to reinforce ESG management, in addition to strengthening its CSR management by diversifying CSR channels and pursuing green management. After joining global environmental initiatives to build a climate change response system, the Group will come up with a long- term roadmap to countering climate change and formulate specific measures to achieve the intended objectives, such as building the infrastructure for reduction of carbon emissions and carrying out cam- paigns to raise environmental awareness among the employees. In light of the recent trends related to the widespread use of digital technology and the need to carry out social contribution activities while maintaining social distancing, Woori Financial Group plans to introduce digital CSR programs and discover and implement zero-contact CSR activities. In the first half of 2021, small business owners suffering from a sharp decline in sales due to the prolonged pandemic will be provided with digital signage at Woori Bank branches across the country and dig- ital ads on Woori WON Banking, a mobile banking app. To boost sales, small businesses will be offered an opportunity to open shop on Wibee Market, an online open market operated by Woori Card. In addition, the Sharing Woori Hope Boxes for the Lunar New Year Woori Financial Group’s blood drive Woori Protects the Earth Good Stores in Woori Neighborhood to support small business owners 042 043 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 BUSINESS OPERATIONS 046 Woori Bank 072 Woori Card 074 Woori Financial Capital 076 Woori Investment Bank 078 Woori Asset Trust 080 Woori Asset Management 082 Woori Savings Bank 084 Woori Credit Information 086 Woori Fund Service 087 Woori Private Equity Asset Management 089 Woori Global Asset Management 091 Woori Finance Information System 092 Woori Finance Research Institute 044 045 Woori Bank Woori Bank www.wooribank.com Woori Bank has consistently spearheaded bank-wide operations for digital transforma- tion 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 dig- ital 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. The Banker Named Three World's Best Banks Retail Banking Retail banking has undergone dramatic changes since the outbreak Expansion of the Customer Base of COVID-19. Along with a sharp decline in customers visiting banks in person, there has been a surge in demand for mobile banking. Also, with the expansion of asset markets, including equity investments and real estate, and low interest rates, retail banking is expected to fulfill its fundamental roles, such as ensuring convenient transac- tions. Under these circumstances, the Retail Banking Business Group The Retail Banking Business Group provided customers with benefits through customer-oriented promotions. In January 2020, the launch of a high-interest savings product called Woori Customers, Thank You led to KRW 1 trillion in sales. Also, various marketing campaigns were carried out with partners to consolidate the customer base. High-inter- est rate installment savings products began to be offered in connec- is effectively dealing with changes brought upon by COVID-19. It is tion with Hyundai Card and Woori Card to attract customers looking to providing a wide variety of products and services for retail customers, generate interest income, while marketing campaigns targeting young planning partnerships and marketing campaigns and focusing on the children, youth, wage earners and others were carried out. As a result, fundamentals of the retail banking business. the monthly balance of the low-cost funding accounts of individual customers was KRW 10.5 trillion higher compared to the end of the previous year, thereby contributing to the improvement of profitability 2020 Performance for the bank. In 2020, Woori Bank provided its 23.8 million retail customers with dif- ferentiated value and customer experience in the non-face-to-face era. The Prime Power Loan (PPL) application process, for example, was taken to the online platform for customers to file an application on- line without having to visit in person. The campaign using Pinkfong characters that are popular with young children was continued, while the e-sports (League of Legends Championships Korea, LCK) spon- sorship agreement from last year was renewed to attract Generation MZ, which includes millennials and Gen Z, as part of the strategy to consolidate the digital native customer base. In addition, the new and improved Tablet Branch, WINI mini, and smart kiosks were used to speed up the processes for a more convenient digital experience for customers. Efforts to Promote Non-Face-to-Face Banking Through digital transformation, the product subscription process was re-established to raise the competitiveness of flagship products. It is now possible for customers to look up their maximum loan amount and interest rate within just two minutes on the web, without the need to install the WON Banking app. Woori WON Loan for Workers, launched exclusively for the digital platform in March 2020, recorded a balance of KRW 2.1 trillion by the end of the year, the success of which was owed to the convenient process. Furthermore, the PPL program was completely moved to the online platform to attract more prime customers. Total Loans of Retail Banking (Unit: KRW in trillions) Total Deposits of Retail Banking (Unit: KRW in trillions) Total Customers of Retail Banking (Unit: thousand customers) 131.6 121.0 109.4 100.5 YoY +8.8% YoY +8.9% 23,835 23,507 YoY +329 2019 2020 2019 2020 2019 2020 046 047 2020 Global Best BankAsia's Best BankKorea's Best BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ••• Woori Bank & LCK’s partnership agreement ceremony Renewal of the E-sports (LCK) Sponsorship Agreement The Retail Banking Business Group became the first in the financial industry to sponsor the League of Legends Championships Korea (LCK) and has been sponsoring the international esports league for two years since 2019. The ambassadors of 20-Year-Old Woori, a youth brand of Woori Bank, achieved the effect of a KRW 180 billion ad cam- paign over the course of two years, with the issuance of nearly 27,000 LCK cards. Based on Woori Bank’s industry know-how and strategies to attract the avid fans of the LCK, a strong partnership was formed with the organization and the contract was renewed until 2023. The Retail Banking Business Group is actively communicating with Gen MZ, making up the biggest portion of LCK viewers, by incorporating the LCK into its marketing campaigns. 2021 Plans Going forward, a wide range of strategies will be applied to gain more retail customers amid fierce competition. An exclusive marketing brand will be launched to attract prime customers among wage earn- ers, while efforts will be made to appeal to Generation MZ who are gaining stronger social and economic influences. Further, the Retail Banking Business Group will seek to achieve digital transformation (DX) of the product and service subscription and bank- ing processes, through which low-cost funding accounts and prime as- sets will be increased in a non-face-to-face manner in order to achieve greater financial soundness. COVID-19 Support Activity • ATM Fee Reduction - For individual customers & individual business owners in the Dae- gu and Gyeongbuk areas (Mar. 6, 2020 to May 31, 2020) •Pre-workout for household loans in the COVID-19 era - For borrowers who have failed to make their loan payments (or have concerns thereof) due to decreased income since the outbreak of COVID-19 (Feb. 2020) - Payment of the principal deferred (for 6 or 12 months), etc. Corporate Banking The Corporate Banking Business Group of Woori Bank, providing Strengthening Relationships on an Ongoing Basis services to corporate customers, including major domestic con- glomerates (Samsung, LG, POSCO, etc.), has the largest number of corporate group customers in Korea, as of late 2020. The branch managers, who are corporate finance experts who have turned Woori Bank into Korea’s top corporate banking service provider, and the (corporate) finance center managers in charge of supporting the affil- iates and business partners of corporate customers and overseeing retail banking for their executives and employees, help meet various financial needs of corporate customers in a timely manner. Woori Bank prides itself on having provided corporate customers with world-class financial services that helped them emerge as global leaders over the past 122 years and is committed to using its know- how to better serve new and existing corporate customers. 2020 Performance In 2020, the Corporate Banking Business Group made achievements befitting its status as the No.1 leader in corporate banking services by providing top-notch financial services to corporate groups including main debtor groups. Along with this, diverse financial needs were discovered through the operation of Woori Diamond Club for CEOs of large corporations, and efforts were made to strengthen relationships with customers. In response to the growing emphasis on corporate social responsibility, products aimed at developing win-win relation- ships with enterprises were developed in an effort to promote coop- eration. The Corporate Banking Business Group managing KRW 24.1 trillion in total assets, as of the end of 2020, generated KRW 679.2 billion in operating income. With the corporate customers growing into global leaders, their finan- cial needs are changing faster and more diverse than ever. To better cater to such needs, Woori Bank has been operating Woori Diamond Club since 2003. Woori Diamond Club, celebrating its 18th anniversary, plays an important role in strengthening Woori Bank’s relationships with its corporate customers and providing services tailored to the financial needs of customers in a timely manner. Supporting Win-Win Relationships with SMEs and Large Corporations Woori Bank offers a product package in which it enters into business agreements with large corporations and offers to finance small- and medium-sized enterprises (SMEs) at low interest rates. Through the Sangsaeng Loan for Partners of Large Companies launched in 2008, 2,499 enterprises were provided with KRW 770.6 billion in loans, while Woori Sangsaeng Partner Loan, a loan package for settlements devel- oped in 2013, helped provide KRW 597.9 billion in loans to 7,576 en- terprises, as of the end of 2020, through a system upgrade in 2015. As the bank with the largest number of corporate group customers in Ko- rea, Woori Bank contributes to the formation of win-win relationships between large corporations and SMEs by reducing financial costs for SMEs with its Sangsaeng (win-win relationship) System and extensive client network. 2021 Plans The Corporate Banking Business Group will strengthen its corporate banking services under the slogan, “No.1 Corporate Banking Service Provider Based on Total Marketing,” and implement the following strat- Corporate Banking Total Assets of 2020 egies to achieve this objective: KRW 24.1 trillion First, it will diversify sources of revenue by developing new financial products and markets and normalizing interest rates and fees to pur- sue profit-generating businesses. Second, it will pursue a balanced loan business by ensuring adequate growth of conglomerate assets and managing related risks. Third, it will implement the total marketing strategy by promoting transactions among partners, executives and employees using its conglomerate network. 048 049 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 SME Banking The Small and Medium Corporate Banking (SME Banking) Business Group oversees financial services for SOHOs/SMEs/middle market Leading Productive Finance through Support for Korean New Deal and Innovation Finance Providing COVID-19 Support and a Safety Net for SOHOs and SMEs Woori Bank provided KRW 8.2 trillion in investment and loan support for the Korean New Deal and innovative financing support, thereby increas- ing financial support for enterprises in the digital and environmental sectors, enterprises with excellent technologies and Intellectual Prop- Woori Bank provided prompt and practical assistance to SOHOs and based on innovation and inclusive financing for SMEs. Through the SMEs suffering from COVID-19 by providing some 170,000 applicants agreements with government-funded financial institutions and devel- with KRW 11 trillion in new funding, KRW 13 trillion in renewed loans opment of financial services to SMEs, Woori Bank will boost profitabil- and KRW 2 trillion in deferrals and interest exemptions amounting to a ity, growth potential and soundness through systematic support for erties (IPs) and enterprises creating jobs. There are plans to continually total of KRW 26 trillion in value. 2021 Plans In 2021, Woori Bank will be dedicated to achieving tangible growth enterprises, handling a total of KRW 98.0 trillion in loans and KRW 61.5 trillion in deposits, as of the end of 2020, while ensuring custom- er satisfaction. Rather than simply pursuing profits, it is dedicated to practicing sustainable management with the aim of achieving mutual growth with its customers, even amid various challenges such as economic recession, a drop in the base interest rate and more. Woori Bank is a leader in providing inclusive banking and productive banking services, fulfilling its corporate social responsibility and contributing to the national economy and local communities through financial as- increase support based on inclusive and innovative financing through the New Deal industry guarantee, funding from policy funds and pre- liminary loan limit assignment, total marketing in connection with large corporations and so on. Other than that, Woori Bank achieved a KRW 7.1 sistance to enterprises suffering financially due to COVID-19, financial trillion increase in technical financing in 2020 alone by issuing technical consulting to SOHOs, support for innovative enterprises and so on. evaluation reports to innovative enterprises with leading technologies 2020 Performance 2020 was a year in which Woori Bank made qualitative and quantitative achievements by offering full-fledged support to SOHOs and SMEs through the COVID-19 financial assistance program and more. Com- pared to 2020, loans increased by KRW 8.3 trillion (9.3% △), deposits by KRW 7.8 trillion (7.4% △) and business customers by 100,000. Financial soundness was substantially improved with the weight of prime assets reaching 86.7% ( 2.5%p YoY increase). Despite the continued drop in the base interest rate in the low growth era, the profitability of loans was boosted thanks to efficient asset man- of the Fourth Industrial Revolution in a prompt and systematic man- ner based on an in-house evaluation system. In order to discover and nurture enterprises with outstanding technologies, Woori Bank holds a contest twice a year to select 20 enterprises to be funded KRW 1.0 billion each, in addition to operating a wide variety of direct and indirect investment programs and programs that incorporate investment and loans as forms of support. Plus, technology financing training is provid- ed at all the branches each year to help employees acquire qualification certificates as technology credit appraiser, as part of the efforts to dis- cover and nurture exceptional financial experts. Building Policy Funds and Offering Guaranteed Loans agement, and as a result of providing more loans to SMEs in a prime In line with the government policies, Woori Bank offered low-interest asset and reducing non-performing assets, the default rate of SMEs policy funds of KRW 2.3 trillion to SOHOs and SMEs in 2020. The pri- mary and secondary loan programs for secondary preservation of the interest rate and security on a letter of guarantee helped provide KRW 1 trillion at low interest rates as emergency liquidity programs. Other than that, Woori Bank promoted policy funding with competitive inter- est rates using 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. Moreover, KRW 39.4 billion was extended based on agreements were concluded with the Korea Credit Guaran- tee Fund, foundations and central and local governments, in addition dropped 0.07%p from the end of the previous year to 0.28%. Not only that, but the SME Banking Business Group provided KRW 26.0 trillion in financial assistance to around 170,000 borrowers affected by COVID-19 in 2020 and extended KRW 7.3 trillion to enterprises with ex- cellent technological prowess, including material, parts and equipment manufacturers and innovative enterprises, thereby contributing to the national economy and local development. In response to the govern- ment policies, Woori Bank offered KRW 2.3 trillion in policy fund loans to SOHOs and financially vulnerable groups and fulfilled its corporate social responsibility through financial inclusion. 050 In addition, a debt readjustment program and a soft landing plan for borrowers through payment deferrals were implemented to help cus- new customers and follow-up management, in addition to increasing financial support to innovative companies with outstanding technolo- gies and enterprises that have been adversely affected by COVID-19. tomers overcome the COVID-19 crisis. Woori Bank is providing total With plans to upgrade its internal system in order to design custom- financial solutions to customers through extraordinary support for er-centric and customer-first financial schemes, Woori Bank will boost business stabilization, support in connection with guarantee providers, the competencies of the personnel overseeing services to SMEs the operation of a customer service center for those with financial and discover best practices to be disseminated throughout the orga- difficulties. Also, there are five locations of Woori SOHO Support Cen- nization. Furthermore, Woori Bank will leap forward to become the ter providing online and offline consulting on business management, No.1 bank by building the best-in-class customer-centric asset man- including taxes, accounting, entrepreneurship and crisis management. agement system and analyzing comments and feedback obtained In 2020, there were 565 SOHO financial consulting cases, and there through the Voice of the Customer (VOC) system to strengthen pro- are plans to open new locations in four regions, Gwangju, Daegu, Dae- tection for financial consumers and support customers in achieving jeon and Seoul, 2021. success. No. of SOHO & SME Customers 1.76 million Total SME loans in Won (Unit: KRW in trillions) Prime Asset Ratio(SMEs) (Unit: %) to providing guaranteed loans of KRW 2.3 trillion, which helped in- 76.6 82.1 crease prime assets and asset soundness. 91.1 86.7 83.3 84.3 YoY +11.0% 2018 2019 2020 2018 2019 2020 YoY +2.4%p 051 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Institutional Banking Digital Banking The Institutional Banking Business Group consists of the Institutional Providing Optimal Financial Solutions to the Government and With the rapid digitization of financial services due to the Fourth & Public Fund Customer Department, which caters to the needs of Public Institutions the central and local governments, courts and public institutions, and the National Pension Department dedicated to providing financial services to the National Pension Service (NPS), one of the three larg- est pension funds in the world, and other domestic pension funds. Woori Bank assigns competent professionals to the Institutional Public Fund & Customer Department to effectively support the govern- ment and policy institutions in policy and project implementation by providing optimal financial solutions for the execution of public proj- The Institutional Banking Business Group became the first in the ects. Selected as the primary banking partner for the Korea Institute of Korean banking sector to establish a pool of institutional banking Science and Technology (KIST), Korea Medical Device Development specialists for institutional relationship management (RM) to provide Fund (KMDF) and others in 2020, Woori Bank worked toward the suc- first-class financial services to institutional customers. As of 2020, cess of the new growth policies of the government. With a differentiat- Woori Bank serves a number of institutional customers including ed fund management system, Woori Bank was chosen as the foreign the Ministry of Land, Infrastructure and Transport (MOLIT), Korea Post, NPS, Korea Land & Housing Corporation (LH), Korea Railroad Corporation (KORAIL) and Korea Exchange (KRX) and managing the exchange service provider by the Korean Teachers’ Credit Union and has been playing a critical role in its business operations ever since. coffers of the Seoul Metropolitan City and 20 district offices of Seoul. Maximizing Synergy While Serving Institutional Customers Industrial Revolution, COVID-19 pandemic and other factors, digital competency has become a critical factor in determining the surviv- ability and competitiveness of a bank. Woori Bank has been imple- menting a streamlined strategy to achieve Digital Transformation (DT) with the aim of leading digital innovation and even restructured its organization for digital readiness to boost its executive power and make agile responses to the changes in the market. In addition, Woori Bank further strengthened its capacity to generate income by honing its competitive edge in finance using new digital technology and proactively responded to changes in the financial environment by forming more partnerships and creating innovative businesses. Going forward, it will consolidate its position as a digital leader in the banking sector by doing away with outdated practices and bolstering its execution power, with the aim of ‘Incorporating the Digital DNA’ into its business methods, work environment and organizational cul- As such, Woori Bank has consolidated its position as the bank with the largest number of public institution clients in Korea. 2020 Performance Woori Bank broadened its services for government agencies, local governments and major public institutions and built a reputation as a financial institution working for the people through diverse social contribution activities in local communities. Since March 2018, it has been serving as the primary bank of the NPS, one of the world’s three biggest pension funds, managing around KRW 830 trillion in funds. In 2020, Woori Bank provided institutional banking services as the prima- ry bank to 102 out of 340 public institutions designated by the Ministry of Economy and Finance, and it maintained banking relations with around 5,000 institutions, with loans and deposits amounting to a total of KRW 31.2 trillion. Total Deposits (Unit: KRW in trillions) 31.2 31.7 30.6 2018 2019 2020 052 The Institutional Banking Business Group not only provides financial ture to accelerate the bank-wide DT. services directly to institutional customers but also discovers and delivers opportunities for SMEs and individuals to become involved in projects initiated by institutions. As one of the key businesses in 2020, 2020 Performance Woori Bank provided comprehensive financial services for companies Boosting Digital-Based Operations and Increasing Business and so on. that have been successful in R&D, while managing and executing R&D Coverage funds for system operations and beyond, as the bank designated to handle the research and development (R&D) funds for the Ezbaro program of the Ministry of Science and ICT. Furthermore, the group has laid the groundwork to attract and support promising exporters through the export voucher program management system supervised by the Korea Trade-Investment Promotion Agency (KOTRA). Clients among local governments In December 2020, the "Corporate Woori WON Banking" was made In 2020, Woori Bank established objectives for non-face-to-face chan- available. Prior to the re-launch, the would-be users were interviewed nels to boost digital-based operations and improved digital perfor- and user tests were carried out for a couple of months to clearly mance indicators and developed Business Internet Banking (BIB) prod- identify the needs of corporate customers. Based on the results, the ucts. Digital marketing carried out in connection with branches was main channels, including corporate banking and notification app, were modified as an indicator to assess the digital performance of the bank renewed. The renewed mobile app offering a personalized main page as one of its main businesses, and products in line with the current and new services befitting the mobile platform, such as a non-face- market trends were launched to strengthen competitiveness. Through to-face loan service, helped raise the efficiency in serving corporate partnerships with external entities, channels have been created to customers. attract new customers and funds. In July 2020, Woori began imple- Seoul Metropolitan City, 20 gu offices in Seoul and Gwangmyeong City menting the mobile take-a-number system on a wider scale in partner- Clients among government and public agencies ship with Naver, which helped create an environment for collaborating with FinTech companies and developing digital business models with promising companies. Additionally, digitization of corporate financial Ministry of Land, Infrastructure and Transport, Korea Post, National services and other business areas unique to the banking industry was Pension Service, National Health Insurance Service, Korea Housing pursued to discover digital business opportunities across the banking Finance Corporation, Korea Land & Housing Corporation, Korea Hous- business. ing & Urban Guarantee Corporation, Seoul Housing and Communities Corporation, Korea Railroad Corporation, Korea Exchange, Korea Se- curities Depository, Korea Public Finance Information Service, Korea Institute of Startup & Entrepreneurship Development, Korea Inclusive Finance Agency, Agency for Defense Development, etc. The launch of Corporate Woori WON Banking, following the launch of Woori WON Banking for individual customers in 2019, helped Woori Bank take a step closer to completing its digital financial platform. Keeping in pace with the trend of growing importance of non-face-to- face channels in the financial industry, Woori Bank will continually de- velop WON Banking services as the representative marketing platform of Woori Financial Group by offering convenient and personalized services. 053 ••• "Corporate Woori WON Banking" service usage guide video Video link A System for Constantly Advancing Digital Channels In 2020, Woori Bank made two major updates in reflection of user requests for improvement through the operation of the WON Banking Innovation Task Force and set up a system for constantly advancing digital channels by reflecting customer feedback, upgrading the UX/UI Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Part 3. Financial Innovation and Bank-wide DT Number of People Using Woori’s Digital Platform Woori Bank is continually reinforcing its digital market monitoring (as of December 31, 2020) system and pursuing new businesses to be prepared for innovative financial policies and market trends. In August 2020, Woori Bank was chosen for a priority review for the MyData Project in recognition of its readiness and acquired a preliminary approval in December, after which it has been discovering innovative business models. In order 5.03 million users to explore new business opportunities from various angles and fulfill * The sum of digital platform users of Woori WON Banking and its role as a project partner, Woori Bank newly established the DT ACT(Agile Core Team)in July 2020 to actively support the discovery of potential projects to collaborate on for the Group. Furthermore, efforts are being made to spread digital innovation across the bank through reverse mentoring to executives and communication channels for collaboration on DT, in addition to promoting collaboration and agile operations and pursuing change management at the head office. 2021 Plans In 2021, it is expected that the competition with FinTech and BigTech companies will become fiercer than ever, as non-financial companies enter the market with increase ease thanks to the growing demand for non-traditional banking channels and changes in related regulations. DT will also be driven by the digital financial innovation policy of the government through the implementation of the open banking and MyData projects and approval of comprehensive payment and settle- ment businesses. Based on this forecast, Woori Bank plans to be prepared for the digital Corporate Woori WON Banking Digital First, Change Everything financial market based on its ‘Digital First, Digital Initiative’ policies Digital Slogan and by pursuing Digital Transformation across the organization. First, digital innovation will be pursued through self-core of the Group for the purpose of seeking digital transformation of all its business operations and achieving digital business performance. Also, efforts will be made to increase digital business coverage by revamping its zero-contact financial services for corporate customers and personal financial management (PFM) services, which are areas where the Group has a competitive advantage against FinTech and BigTech companies. Plus, Woori Bank will respond to the shift toward digital-based finan- cial consumption patterns, restructure its asset management system, expand its open banking services and open key financial services, such as MyData/PFM and MyPayment, in a step-by-step manner for improved customer experiences. By introducing collaboration tools for efficient management of development procedures and analyzing and eliminating obstacles causing delays in DT, Woori Bank will improve its corporate culture and re-orient its operations for efficient execution. 054 Investment Banking Woori Bank’s Investment Banking Business Group consists of three Finance Team, the first of its kind to be established by a Korean com- departments: the Investment Finance Department, the Project Finance mercial bank at the end of 2018. It has also hosted six competitions, Department and the Global IB Finance Department. There are a total as of late 2020, executing a total of 55 direct investments in innovative of 12 teams: the CIB Team, M&A teams 1 and 2, Equity Investment growth companies. teams 1 and 2 and Innovative Growth and Finance Team under the In- vestment Finance Department; the Infrastructure Finance Team, Struc- tured Finance Team, Power and Energy Team and Real Estate Finance teams 1 and 2 under the Project Finance Department; and the Aircraft and Ship Financing Team, Global Syndication Team and Global PF Team under the Global IB Finance Department. With increasing impor- tance 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 finance, power generation and infrastructure arrangements, while broadening the business scope through its global network and IB desks. In October 2006, Woori Bank established Woori Global Markets Asia Ltd. in Hong Kong, becoming Korea’s first financial institution to set up an overseas business unit with focus on international IB. As of 2020, Woori Bank has global IB desks running in New York, London, Germany, Singapore, Sydney, Vietnam, and Dubai, through which inter- national IB opportunities are being created on an ongoing manner. 2020 Performance 2021 Plans The IB Group will strive to achieve further growth in 2021, as one of the most crucial business area of the organization creating synergistic effects within the holding company, based on the efforts it has made over the past two years since the founding of Woori Financial Hold- ings in 2019. With the primary objective of ‘Leapfrogging into a Global IB Group by Building an Innovative Profit Structure,’ the group plans to ‘build a foundation for sustainable growth’ and ‘optimize assets to maximize profits.’ In response to the growing volatility in capital mar- kets across the world, efforts will be made to set up swift and efficient asset management processes and systems. Last but not least, the group will continually endeavor to create synergy with the affiliates under Woori Financial Holdings, including Woori Financial Capital (formerly, Aju Capital) acquired in 2020, by solidifying cooperative re- lations. In addition, the group will further strengthen the CIB business based on collaboration with major shareholders in securities, insur- ance and asset management as well as with other business groups within the bank, while seeking ways to raise synergy with the affiliates In 2020, the IB Group generated higher non-interest income by boost- of the holdings company, including securities, insurance and VC firms. ing financial arrangements and making aggressive principal invest- ments (PIs) in power generation, infrastructure and real estate projects as well as M&A finance, and new global IB desks were additionally set up, promoting international business expansion. With a competitive advantage in M&A finance and equity investment markets, Woori Bank outperformed its competitors in non-interest income and operating income per person. It has also been achieving remarkable growth in global IB assets and gains by managing seven global IB desks, the largest number among commercial banks in Korea, which in turn enabled the IB Group to generate an operating income of more than KRW 500 billion in 2020. It also increased high-yield investments through close ties with global top-tier asset management companies, provided aircraft financing, participated in overseas infrastructure and power generation projects, broadened structured finance and issued FRNs in connection with its IB subsidiary in Hong Kong, thereby maximizing short-term prof- its while preemptively making investments for future growth. The IB Group has been contributing to the creation of a financial ecosystem to promote innovative growth as envisioned by the government and investing in innovative enterprises through the Innovative Growth and Total Assets of Investment Banking Operations in 2020 (Unit: KRW trillion) Off-balance Sheet Assets 8.0(47.3%) Loan Commitments 7.5(44.4%) Balance Sheet Assets 8.9(52.7%) Loans 4.1(24.3%) Total Assets (100%) Securities 4.8(28.4%) Payment Guarantees 0.5(2.9%) 055 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 2021 Plans In 2021, the Financial Market Business Group will successfully mini- mize fluctuations in funds by effectively managing liquidity indicators, such as the LDR, LCR and NSFR, even amid the challenges posed by the prolonged COVID-19 pandemic and preemptively managing liquidi- ty in preparation against regulatory tightening. In addition to managing liquidity across the bank by boosting retail deposits, issuing market- able CDs and securing committed lines, the group will raise profitability through the reinforced control of capital-raising management portfo- lio. In trading, the group will broaden both its F/X and derivatives income by diversifying strategies such as arbitrage in F/X and derivatives trading and foreign currency and interest rate hedging. Based on the expecta- tions of rising volatility across the globe driving up the demand for risk hedging, the group will continue to broaden F/X and derivatives trading by offering the right product at the right time for all customers. Also, a team of experts dedicated to serving investors among securities firms, insurers, government agencies and other financial and public institutions will attract new prime customers and help raise non-interest income. Financial Market Business The Financial Market Business Group consists of the Treasury De- Stable Management of Liquidity partment managing Woori Bank’s funds and liquidity; the Trading Department in charge of business operations concerning financial derivatives; the Securities Management Department managing marketable securities; and the, which performs back office duties. In particular, Woori Bank is a leader among all domestic commercial banks in trading derivatives in relation to handling forwards, swaps and options based on the interest rates, foreign exchange, equities and other underlying assets. 2020 Performance Successfully Responding to the New LDR Rule•In preparation for the new LDR rule introduced in 2020 to apply a different weight to loans according to the borrower, the group preemptively increased deposits and restructured its capital-raising structure by issuing marketable CDs and covered bonds. As a result, Woori Bank recorded an LDR of 99.1%, as of December 2020, attesting to its successful response to Complying with Korean Regulatory Guidelines•In 2020, the LCR, foreign currency LCR, NSFR and mid- and long-term foreign currency financing ratio were kept in line with the regulatory standards based on preemptive capital-raising activities and liquidity management. Reinforcing Competitiveness in the F/X and Derivatives Busi- ness •In 2020, the Financial Market Business Group made an effort to strengthen its competitiveness by creating new sources of income the newly introduced rule. and promptly responding to market volatility. Issuing CoCos in Korean Won •The Financial Market Business Group established preemptive financing plans and launched active IR efforts, F/X Dealing •In F/X dealing, the group sharpened its currency fore- casting capabilities by analyzing both domestic and overseas F/ thereby issuing CoCos in KRW amounting to KRW 600 billion at an all- X markets and obtained remarkable gains on F/X trading by taking As a key player in obtaining and managing funds for Woori Bank, the time low interest rate (March, 1.94%) to attract investors of a prime asset anticipatory and proactive action in response to the fluctuations in Financial Market Business Group focused on improving profitability in and better compete in the market. Through these efforts, Woori Bank international financial markets. With high shares (6.8% in USD/KRW 2020 by managing liquidity and boosting efficiency in raising and man- was able to create a strong foundation for stable business operations. exchange, 12.67% in CNY/KRW exchange) of the Seoul F/X market aging capital. The group contributed to enhancing profitability by main- taining an optimal Loan-to-Deposit Ratio (LDR), diversifying ways to obtain funds and downsizing short-term assets. It also improved the public image of Woori Financial Holdings and Woori Bank by improv- ing capital adequacy and capital-raising practices by issuing contin- gent capital securities denominated in KRW and sustainability bonds denominated in KRW and other currencies. As a result, the group was able to keep the Liquidity Coverage Ratio (LCR, minimum 100% from January to March and minimum 85% in April and onward), foreign cur- rency LCR (minimum 100% from January to March and minimum70% in April and onward), NSFR (minimum 100%) and the mid and long- term foreign currency financing ratio (minimum 100%) in compliance with the liquidity requirements set forth by the financial supervisory authorities of Korea. The Financial Market Business Group strength- ened its competitiveness in F/X and derivatives trading by diversifying traded currencies and proactively managing its positions. It also ran night-time equity derivative desks to respond to market risks arising from changes in markets across the world. Fulfilling CSR by Issuing Sustainability Bonds•The issuance of sus- tainability bonds (KRW 750 billion and USD 300 million) to meet the growing demands among domestic and foreign investors to use the funds toward environmental or social contribution purposes helped im- recorded in 2020, Woori Bank is playing the role of a leading Market Maker in Korea. Derivatives •In the derivatives market, the group predicted the trend of market variables related to Korean and international financial poli- prove the public image of Woori Bank as a financial institution that ful- cies and fluctuations in supply and demand, thus managing positions fills its Corporate Social Responsibility (CSR) and cut financing costs. ahead of time and establishing a secure foundation for derivatives trading. The group also offered consulting services on F/X and interest rate risk management and customized solutions for SMEs that were Issued Sustainability Bonds in 2020 lacking experience and knowhow in risk management. KRW 750 billion USD 300 million Securities•As for securities, the group analyzed monetary policies and bond markets at home and abroad to better manage bonds and increase interest and non-interest incomes. It also diversified its sourc- es of non-interest income by varying and increasing bond lending transactions for which risk-free commissions are paid. FX Market Share (Leading market maker in Korea) LCR (Liquidity Coverage Ratio) KRW (Unit: %) LCR (Liquidity Coverage Ratio) Foreign Currency (Unit: %) 104.5 100.0 93.5 92.1 114.4 108.9 106.1 115.0 20.1Q 20.2Q 20.3Q 20.4Q 20.1Q 20.2Q 20.3Q 20.4Q USD/KRW 6.8% CNY/KRW 14.2% 056 057 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Real Estate Finance Investment Product Strategy Group Woori Bank renamed the Housing Finance Division as the Real Estate 2021 Plans Investment products, accounting for a significant portion of the Investment Funds Finance Business Unit in 2013, with the aim of managing real estate financing more systematically and professionally. It is also managing the National Housing and Urban Fund (NHUF) of the Ministry of Land, Infrastructure and Transport (MOLIT) as a custodian. Accordingly, it is offering NHUF products that are available to the low-income class, in addition to the conventional banking products, thereby satisfying diverse customer needs. 2020 Performance In 2020, the Real Estate Finance Business Group Unit of Woori Bank recorded the second biggest share of the mortgage market and the big- gest share of the NHUF market. The Real Estate Finance Business Unit not only eased the burden arising from loan repayments by actively par- taking in the government’s efforts to provide financial assistance to vul- nerable groups but has also been leading the domestic housing finance market by proactively responding to the changes in the market driven by government policies. In recognition of its track record in providing a wide range of housing finance products as a custodian of the NHUF in the past decade, Woori Bank was ranked as the No.1 custodian of the NHUF in 2020. Expanding the Customer Base as a Custodian of the NHUF The NHUF is a crucial program in broadening financing options for prospective home buyers and renters, including vulnerable groups. As a custodian of the NHUF, Woori Bank plays a leading role in raising funds and executing the budget. After it was re-selected as a custo- dian in 2018, it continued provided a wide range of housing finance products and recorded a 37.3% share of the demand-side housing subscription loan market and a 24.4% share of the housing subscrip- tion savings market in 2020. More than 920,000 people signed up for a housing subscription savings account in 2020, with the dream of purchasing their first homes. Going forward, Woori Bank will pave the foundation to offer NHUF products to many more customers. Upgrading the Real Estate Information Platform as a Non- Face-to-Face Channel The Real Estate Finance Business Unit made an effort to deal with changes in the financial sector and provide customers with useful real estate information. By launching WONTHELAND, a platform for providing real estate and financial product information, it is serving as a leader in providing customers with real estate information via a non- face-to-face communication channel with improved convenience. 058 In 2021, Woori Bank will strive to maintain dominance over the NHUF market, with the biggest market share, develop various other non-face- to-face channels and diversify NHUF product subscription channels in partnership with TechFin companies (Kakao, Naver, etc.). In addition to improving customer convenience as a custodian of the NHUF, Woori Bank will concentrate its efforts to obtain new customers for the de- bank’s non-interest income, is one of the important scales for gaug- ing the business competitiveness of a financial institution. The Invest- ment Product Strategy Group established in July 2020 is comprised of the Investment Product Strategy Department in charge of invest- ment product strategies, the Affiliation Product Department responsi- ble for fund and bancassurance products and the Trust Department mand-side housing subscription loans, such as Jeonse (Key Money) in charge of trust products to ensure streamlined implementation Deposits, Monthly Rental Loan Plans and the Beotimmok (Support) of investment strategies and timely launch of investment products. Jeonse Deposit Loan Plan, recording a skyrocketing demand, as well The group is committed to broadening its investment product lineup as housing subscription savings accounts. Also, using its knowhow under well-organized strategies and sophisticating its complete sales and experience in raising and managing funds and its differentiated processes to offer investment products that are geared toward sus- computerized system, Woori Bank will operate a taskforce to be re-se- tainable growth. lected as a custodian of the NHUF in 2023. Efforts will also be made toward supporting the housing welfare programs and promoting and improving national housing. Furthermore, Woori Bank will provide 2020 Performance financial assistance for prospective home buyers to contribute to the government’s efforts to provide housing finance to ordinary citizens and create an asset portfolio designed to achieve balanced asset growth and optimal profitability, while taking minimal risk. . For the purpose of solidifying the foundation for the investment product business, the Investment Product Strategy Group continually strengthened its research capabilities, broadened its investment prod- uct lineup and pursued digital transformation of investment products. Amid the growing market uncertainty due to the spread of COVID-19, the group implemented the strategy of increasing non-face-to-face customer touchpoints and gained customer trust in the investment products offered by Woori Bank. Investment Product Strategies Woori Bank launches a wide array of investment fund products based on sales brokerage agreements signed with leading asset manage- ment firms. The Affiliate Product Department, in particular, does not just sell investment fund products but provide financial services, including analytical data on domestic and overseas equity and cap- ital markets, for customers to gain a better understanding of such products and make well-informed investment decisions. In 2020, the focus was placed on establishing a complete sales procedure, which involves providing full explanations and delivering crucial documents, for investment fund products and gain customer trust. Also, by ensuring rigorous product selection and follow-up man- agement procedures, an effective and stable product management system was created to sell mainly products offered by asset man- agement companies with proven track records. Fund products in line with market trends that are easy to understand for customers were launched in a timely manner to promptly respond to changes in the market. A non-face-to-face consultation channel was created to offer consultation on fund products on a video conferencing platform in response to the COVID-19 restrictions. Bancassurance As a leader in the bancassurance market since its introduction in 2003, Woori Bank has been offering a wide variety of insurance products in partnership with some 30 insurance companies. In 2020, special pro- motion products with fixed interest rates and products with excellent Demand-side Housing Subscription Loans No.1 The Investment Product Strategy Department is responsible for es- posted interest rates were launched to maximize gains for customers, tablishing streamlined investment strategies through the Investment in addition to the introduction of guaranteed-type products to meet Strategy Team formed by integrating multiple analyst groups handling customer needs. (37.3%)Market Share Performance 397,438 Housing Subscription Saving No.1 (24.4%)Market Share Performance 6,082,797 different funds and trust products into one. A comprehensive invest- ment product strategy system, encompassing funds, trusts and ban- cassurance products, has been created through the Product Strategy Team as well. In order to formulate strategies based on market out- looks from diverse perspectives provided from the frontline, the group offers research data, including house views from Woori Bank and a number of prominent securities firms, through comprehensive busi- ness agreements. Woori Wealth Live, a web seminar for customers, was held to prevent gaps in customer services even in the midst of a pandemic. Woori Wealth Live ••• Video link 059 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Wealth Management Trusts Investment Funds The Wealth Management(WM) Group is comprised of 3 departments Expansion of the Sales Base for Wealth Management The Trust Department offered diverse trust products to meet cus- In 2021, a universe of key investment fund products will be created tomer needs in relation to investment products in the midst of rapidly based on market reviews and investor propensity analysis. Key prod- changing market situation. Consistent sales of Money Market Trust ucts will be chosen among the ones enabling portfolio investment and (MMT) products, in particular, contributed a substantial portion of boosting returns for customers, while taking into consideration the (WM Strategy Department, PB Customer Department, and Pension Department) and 12 teams that are responsible for overseeing the wealth management businesses of Woori Bank, including Private Banking (PB). Woori Bank’s non-interest income. government’s policy direction, market currents, latest trends and more. The WM Strategy Department oversees asset management bank- In 2020, improvements were made across the system with the aim Plus, an asset management system will be introduced so as to provide of establishing a complete sales procedure for trust products. As part support for customers in selecting products and managing the return of such efforts, restrictions were placed against ELT sales channels on investment in addition to recommending suitable products. wide and sales strategies targeting PB customers. It is in charge of financial performance management and institutional improvements, in addition to managing and carrying out new businesses and mar- In October 2020, a TCE Center was newly established as a channel ded- icated to Ultra-High-Net-Worth Individuals (UHNWIs). By operating this channel, it has become possible to provide PCIB* services to UHNWIs and improve the professionalism of wealth management services. Also, based on a one-stop service model, the TCE Center offers outstanding financial solutions tailored to individual customer needs, such as asset management consulting, global investment support, and accounting/ legal services. keting activities. It also sets forth non-face-to-face asset manage- * PCIB : A business model consisting of three services, PB(Private Banking)+CB(Corporate Banking + and subscriptions to products with a higher risk than what the inves- tor is willing to accept. Also, customers subscribing to money trusts via a non-face-to-face channel were provided with material informa- Bancassurance tion through a video call. Key products, including ELT, ETF, MMT and The Affiliate Product Department plans to increase its offerings of ban- fixed-income trust products as well as the Senior Plus Woori Secure cassurance products tailored to customer needs and strengthen its ment strategies and operates and manages related systems. The PB Customer Department is dedicated to fostering professionals in asset management and operating and managing asset management channels. Also, it provides asset management services, including fi- Trust, a living trust, underwent renewals for a relaunch and KRX Gold competitiveness through non-face-to-face channels in 2021. Guaran- nancial planning and taxation and real estate consulting, to High-Net- Trust and hybrid bond were newly launched to expand the product teed-type insurance products and pension insurance products, in addi- Worth Individuals (HNWIs). IB(Investment Banking) Growth of Retirement Pension Business Woori Bank pursued customer-oriented services in order to better re- spond to the rapid changes in the labor market and to help customers be financial stable after retirement. It continually provided pension-re- lineup. 2021 Plans The Investment Product Strategy Group has chosen the Establishment of Streamlined Investment Product Strategies, Ongoing Provision of Customer-Oriented Investment Products and Field-Oriented Business Support as its core project for the year 2021. tion to savings-type insurance products, will be continually launched to diversify the product portfolio, and some of the products will be made exclusively available via non-face-to-face channels to improve accessi- bility. Trusts The Pension Department oversees the sales strategies for retirement lated information, such as key issues and trends and asset manage- pensions and supports the development and marketing of related ment data, and managed pension assets through the Pension Asset products and services. It also supports business operations concern- Management Center. As a result, the pension AUM increased KRW 2.7 ing retirement pensions such as education and yield management. trillion YoY to KRW 22.2 trillion in 2020. Customers were provided with In addition, the Customer Care Center Team is in operation directly under the Wealth Management Group. The team has various respon- improved convenience by expanding the scope of non-face-to-face IRP services, and the target date fund (TDF) lineup was expanded to boost returns for customers. In 2021, the Trust Department will offer more diverse trust products, sibilities aimed at protecting investors, such as managing yields for including living trusts and gift in trust products, after establishing the customers, inspecting the sale processes for investment products, Investment Product Strategies New Trust Team staffed with legal and tax experts to strengthen its checking for incomplete sales, and monitoring and analyzing risks. Ensuring Complete Sales and Strengthening Risk Management In 2021, there are plans to build a system allowing close cooperation with the production departments to launch investment products in line competitiveness in the trust business in the long run. There are also plans to expand the lineup of ELT, ETF and other major products and bolster the business in property in trust through business agreements with the latest trends and customer needs identified through thorough within the Group. market research and to provide rebalancing guides based on ongoing product analysis and reviews even after the product launches. More- over, an AI-based market forecasting system will be utilized to offer house views containing market analysis, asset allocation and product evaluation information and research data, such as asset allocation strategies, from experts. Establishment of Streamlined Investment Product Strategies 2020 Performance As of the end of 2020, Woori Bank has 682 wealth management branches, of which there are one Two Chairs Exclusive (TCE) Center and five Two Chairs Premium (TCP) centers, which providing services specifically to HNWIs. There are 694 Private Bankers (PBs) and Finan- cial Advisors (FAs), who specialize in wealth management, and PB customers, in particular, are provided with wealth management ser- vices of the highest standard through a PB brand called ‘Two Chairs.’ CORE PROJECT for 2021 Ongoing Provision of Custom- er-Oriented Investment Products Expansion of the Customer Base Field-Oriented Business Support The core part of the wealth management business is PB customers. As of the end of December 2020, Woori Bank has 232,329 PB custom- ers. This is the result of carrying out a wide range of business support and marketing activities to attract new customers and prevent cus- tomer attrition. Systems related to complete sales and customer-centric business oper- ations were completely revamped. By requiring the use of the electronic document system and creating a checklist for each step of the product subscription procedure, it was possible to lower the chance of missing documents and set up a complete sales process. Plus, risk management was reinforced by applying differentiated ap- proval processes according to the amount contributed to the product concerned. Also, risks associated with financial instrument providers were eliminated in advance by disallowing launches of substandard products or terminating related contracts based on risk assessments. Number of PB customers in 2020 232,329Customers 060 061 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Compliance Management Woori Bank has established the Woori Code of Conduct and Stan- Programs for Practicing Ethical Management dards of Conduct, which sets the standards for the way its executives and employees perform their day-to-day responsibilities and raises awareness of the importance of ethical management and fulfillment of corporate social responsibility for survival and sustainable devel- opment in the era of global competition. By providing reliable finan- cial services through the Woori Code of Conduct, Woori Bank strives Woori Bank has a number of programs in place to promote ethical management. The first being the Woori Hotline, through which a viola- tion of the Code of Conduct committed by an executive or employee can be report. It is a channel for executives and employees, partners and other stakeholders to report on various irregularities and violations of ethical management standards, aimed at encouraging compliance to fulfill its responsibility to all stakeholders, including customers, with the laws, regulations and the Code of Ethics. shareholders, executives and employees, the nation and society, and contribute to social development. Second, the Ethical Management Support Council serves to propa- gate the concept of ethical management and compliance across the 2021 Plans Woori Bank plans to run a wide range of ethical training and legal com- Last but not least, Woori Bank plans to serve as a great example, both pliance programs to promote transparency and ethical management internally and externally, through its ethical management activities across the organization and make various system improvements and publish a new guidebook on the Code of Ethics to be used as an to minimize legal risks, as part of compliance management. A new education material designed to promote compliance and a sound regulatory management system, with improved user convenience in workplace culture. These efforts in turn will allow executives and em- searching for regulations and so on, and a new legal portal system for ployees to gain a deeper understanding of ethical management and prompt and accurate legal support will be introduced. practice it in their day-to-day activities. A comprehensive legal guide will be provided on common cases oc- In 2021, Woori Bank will “innovate today [to] create tomorrow” with an curring at customer touchpoints so as to provide answers to recurring understanding of the importance of ethical management. questions about identical or similar legal matters that may arise during business activities and to prevent legal violations by raising awareness of the importance of legal compliance. By practicing ethical management, Woori Bank works to prevent organization. The Council, chaired by the Compliance Officer, meets Ethical Management Practice Program non-ethical corporate practices and build morality among members biannually to discuss and decide on policies related to ethical manage- of the organization, in addition to engaging in fair competition in ad- ment, including measures to practice the Code of Ethics and ways to herence to the law and fundamental principles based on compliance improve ethical management. management. 2020 Performance Third, members are advised to report any compensations they re- ceived for external activities and encouraged to contribute to charities. Executives and employees are required to report any payments they received for services they rendered, such as giving a lecture and teach- Reinforcing Ethical and Compliance Training ing class, as well as any allowances, such as transportation expenses In 2020, Woori Bank carried out various ethical and compliance train- ing programs for all its employees to understand and practice ethical management. First, in order to raise awareness of ethical management among its executives and employees, Woori Bank held the Woori Bank Code of Conduct Compliance Pledging Ceremony. Second, the Ethics/Compliance Self-Check Test and We-Check Day (a cyber pact) were carried out every other monthly with the participation of all staff members so that they could develop a clear understanding of the Code of Conduct and examine the Code of Conduct and Stan- via the Supplemental Income Reporting Center. Also, if the amount received, excluding the allowances for necessary expenses, exceeds a certain amount, they are encouraged to donate the excess amount. These practices help create a culture of integrity and anti-corruption within the organization. Lastly, Woori Bank implemented the Clean Contract System to ensure transparency and fairness in tenders, contract conclusion and contract execution, thereby contributing to the promotion of fair trade and the spread of ethical management. dards of Conduct applicable to their respective job positions. Field-Oriented Legal Support Third, education materials concerning ethics, internal control and Woori Bank established a legal team for more rigorous management legal compliance were posted on the Ethics and Compliance at Work of legal risks by ensuring independence of those dealing with legal af- section on the intranet so that they could be used during the monthly fairs. Legal advice is provided promptly and efficiently by lawyers, each compliance training and in the field. Lastly, Woori Bank convened the Council of Compliance Officers four times to provide instructions on internal control, compliance monitor- ing activities, insider trading control and prohibition against the use of undisclosed material information, as part of the efforts to raise aware- ness of the importance of internal control. assigned to a specific business group, and there is a pool of lawyers dedicated to providing emergency legal counseling to branches on the frontline. Case-specific standard agreements uploaded on the legal portal system ensure promptitude in providing on-site legal support as well. Furthermore, the bank provides the FAQs About Legal Cases, with answers to the most frequently asked questions from branches, to raise understanding among bank employees of legal cases they may come across in their line of work. ETHICAL MANAGEMENT SUPPORT COUNCIL CLEAN CONTRACT SYSTEM A working-level council established for the pur- poses of decision making and communication on the Code of Ethics programs of practice for employees. FIT & PROPER(ELIGIBILITY REVIEW) SYSTEM Aimed at promoting the eligibility, ethical mind- set 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. CORPORATE ETHICAL MANAGEMENT INDEX FOR CREDIT EVALUATION This program of practice aims at disseminating and inducing CSR and ethical management. The corporate ethical management index is re- flected 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 appli- cable interest rates Woori Bank has a “Clean Contract System” with all partners participating in contracts and pur- chases with us to encourage transparent and honorable bidding, contract signing and con- tract implementation. Furthermore, this system is a declaration of Woori Bank’s commitment to ethical management and aims at disseminat- ing ethical management among partners. WOORI HOT-LINE (REPORTING AND COUNSELING) Woori Hot-Line receives reports from execu- tives and employees, partners and stakeholders regarding various irregularities and violations of the ethical management policy as well as complaints. After confirming the details with the relevant departments, an investigation is requested if it is deemed that an internal viola- tion has occurred. Through this direct reporting channel, Woori Bank is endeavoring to become as a strong and honest organization and con- tribute to the establishment of sound practices in the finance sector. 062 063 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Information Security Anti-Money Laundering Woori Bank is dedicated to preventing customer information breach- Technical Security Measures Woori Bank has established policies in conformance with domestic for greater internal control.Second, sanctions risk assessments were In response to the series of DDoS attacks against financial institutions in Korea, Woori Bank has built a multi-level defense system by equipping itself with equipment capable of defending against DDoS attacks, be- coming the first in the industry to set up a cloud-based defense system with the Financial Security Institute, and adopting KT’s automatic clean zone transition system at the DR Center. Voice phishing using a remote laws and recommendations from international organizations prohib- carried out on domestic and overseas branches for reinforced internal iting money laundering and terrorism financing. A dedicated organi- control. The inherent risks of banks in relation to sanctions were de- zation as well as related regulations, guidelines and systems are also termined and the appropriateness of the internal control activities was set in place as part of a money laundering and terrorism financing control structure. The Anti-Money Laundering Center, a department working to prevent Woori Bank’s involvement in any money laundering es by enhancing its level of administrative and technical security and fortifying its information security organization. Bolstered Information Security Organization The Head of the Information Security Group bears the responsibilities of Chief Information Security Officer (CISO) and Chief Privacy Officer (CPO), managing all teams dedicated to privacy (credit information) protection. Woori Bank regularly convenes the Information Security Committee, chaired by CISO, with the meetings held in the presence of 15 depart- ment heads who are responsible for information security, IT opera- tions and development, handling customer information and so forth. access app has been on the rise and in response, the policy to detect and terrorism financing activities, is responsible for the prevention of and block remote access apps has been strengthened. Further, a sec- money laundering and terrorism financing at home and abroad and ondary authentication process is required for ID and password logins. management of sanctions and is dedicated to maintaining a control This is to prevent financial scams and better protect consumers. system that is up to par with domestic and international standards. 2021 Plans 2020 Performance The Committee discusses agenda items that cover IT security issues Going forward, Woori Bank will introduce an Identity and Access Man- as well as internal control and overall institutional improvements for agement (IAM) system for integrated management of user access privacy protection. The Global Information Security Team was newly incepted in 2020 to support compliance with local information security regulations and conduct infiltration tests as a way to examine the IT security system on a regular basis. Woori Bank also became the first bank in Korea to analyze the entry route of malware using big data from overseas branches and is applying financial security technology of the highest standard throughout its network. Administrative Protection Measures To prevent the potential abuse or misuse of customer information, Woori Bank grants employees with access to only the bare minimum amount of customer data required to perform their job duties. The bank continually reinforces internal controls for both the head office and branches by regular monitoring of unauthorized personal infor- mation queries deemed irrelevant to work duties, along with inspec- tions of how they are managing customer information. In addition, all employees are mandated to attend an information security training at least twice a year, and Woori Bank also makes onsite visits to promote privacy awareness and prevent security breaches. As part of the efforts to proactively respond to the enforcement of the three laws on data in relation to the movement and disclosure of public information, Woori Bank became the first in the finance sector to acquire ISO 27701 and ISMS-P certifications pertaining to privacy protection, attesting to its strengthened capacity to protect personal information through a world-class information security system. to its systems and prevention of illegal access by internal users and set up a system for real-time monitoring of abnormal behaviors con- cerning the use of customer information using AI technology. Through these efforts, it will further sophisticate its personal information pro- tection system and strength internal controls for information security. Moreover, a hyper-personalized Fraud Detection System (FDS) will be established based on customer journey analysis using big data to bet- ter respond to new types of digital frauds and financial cybercrimes. This will help protect invaluable customer information and assets, through which Woori Bank will gain customer trust. Information Security Bolstered Information Security Organization Administrative Protection Measures Technical Security Measures Strengthening the Money Laundering Prevention System at Overseas Branches In order to be better prepared for the global compliance regulations that are becoming stricter by the day, a project was carried out to strengthen the money laundering prevention system at overseas branches in connection with a global consulting firm. By upgrading the Anti-Money Laundering (AML) system at overseas branches, it was possible to create a world-class system for managing all relevant aspects, including the Know Your Customer (KYC) policy, transaction monitoring and risk assessment. At the same time, in line with the increasing demand for international money laundering and terrorism financing prevention efforts, such as mutual evaluations by the Financial Action Task Force (FATF), the compliance of foreign subsidiaries of Woori Bank was enhanced to check the money laundering and terrorism financing prevention activi- ties and upgrade related programs. In addition, an AML diagnosis sat- isfying the global standards led to improvements in many areas, and as a result of continued management and supervision to be prepared for inspections by American supervising agencies requiring the strict- est compliance in the world, Woori Bank’s American network has been noted for its excellent anti-money laundering system. Strengthening of the Sanctions Compliance Program Woori Bank conducted a wide range of control activities to strengthen its Sanctions Compliance Program. First, it strengthened the review concerning the sanctions law. It became the first bank in Korea to carry out rigorous F/X reviews for regions at risk of being placed under sanctions, and it even reviewed trade documents using AI technology assessed, followed by improvements to the identified vulnerabilities. Third, employee awareness of sanctions and compliance was raised by providing education on economic sanctions and sharing informa- tion on the latest trends as quickly as possible. A video education program for sanctions compliance was developed and administered to all employees, and customized training was provided to the staff primarily responsible for F/X processes for imports and exports. By keep executives and employees informed about the latest changes in the environment concerning sanctions, the sanctions compliance pro- gram was strengthened further. Reinforcement of Internal Control to Prevent Money Launder- ing and Terrorism Financing Woori Bank strengthened its Know Your Customer (KYC) policy, which creates three lines of defense: customer verification, inspections of the Anti-Money Laundering Center and independent audits by the Board of Audit and Inspection. It has also upgraded the domestic anti-money laundering system in order to prevent money laundering and terrorism financing. Related education is provided to all members of the organiza- tion to raise awareness of the importance of legal compliance, and the national risk assessment data from the Basel Committee on Banking Supervision were standardized and reflected in order to continually im- prove the internal control system. 2021 Plans Woori Bank plans to set up an AI-based money laundering and terror- ism financing inspection system and re-establish a money laundering and terrorism financing prevention system at its foreign subsidiaries to be prepared for more stringent domestic and international standards. Woori Bank will introduce an evaluation system for measuring the risks of money laundering and terrorism financing in new businesses in the international community and set up an internal control system, thereby meeting the anti-money laundering and anti-terrorism financ- ing requirements as a global financial institution. 064 065 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Nurturing Professionals and Strengthening Wealth Manage- Taking a Greater Share of the Pension Market ment Capacity There are plans to secure pension customers who will make Woori Woori Bank is sparing no efforts or resources in nurturing qualified Bank their primary bank and take a bigger chunk of the market. When wealth management professionals. Each year, the bank carries out it comes to retirement pensions, stability and ongoing management customized training for PBs and FAs based on clear CDP. In 2020, in par- are especially crucial. Woori Bank will manage returns for customers ticular, a PB qualification system was introduced in order to evaluate the based on outbound service management such as product switching professional competency of PBs and verify their performance related to for customers whose investments have reached maturity and custom- returns for customers. 2021 Plans ers with unmanaged assets. The Wealth Management Group will also gain new customers and investments by offering retirement pension ETF according to customer needs, launching products in line with the market trends, and providing a wide-ranging product lineup including The objective of the Wealth Management Group in the year 2021 is to guaranteed investments. create a stable profit structure and a foundation for long-term growth. By strengthening the competitiveness of its face-to-face and non-face- to-face channels, expanding the PB customer base and fostering re- Fostering Professionals of the Future Employee Satisfaction Woori Bank believes that in order to provide customers with the best Stay Strong, Korea Bazaar possible services, the executives and employees must be highly sat- isfied with the working environment. Accordingly, the Employee Sat- isfaction Center was established in 2007 and has been developing and implementing a wide array of programs to boost employee satis- faction ever since. As such, diverse employee satisfaction programs The Stay Strong, Korea Bazaar is an employee satisfaction program initiated under the concept of mutual cooperation through the pro- motion of consumption. Through this program, Woori Bank achieved high employee satisfaction by offering employees with a chance to purchase agricultural and industrial products and specialty products of designed to create a customer-centric mindset based on a sense of the finest quality, while fulfilling its CSR by assisting small businesses ownership instilled through improved job satisfaction are planned, facing financial hardships due to COVID-19 and enterprises affected developed and operated on a regular basis. by natural disasters such as wildfires, typhoons and torrential rain. lated professionals, Woori Bank will innovate the way it does business, The Wealth Management Group will select and nurture young and com- through which it will achieve strong growth and gain recognition from petent employees with the potential to become leaders of the future in 2020 Performance the market. Strengthening Channel Competitiveness their respective fields. To do so, it will secure a pool of professionals and promote human resource development according to the CDP system. By offering them with diverse capacity building opportunities, such as work experience, intensive training, and experience working in relevant Implementing Programs for improved Employee Satisfaction Woori Bank has been running a wide range of original and interesting programs to improve employee satisfaction. The TCE and TCP centers will additionally be established in key re- departments, it will nurture the employees of Woori Bank into wealth In 2020, various new programs were developed and carried out to gions for the wealth management business, and the specialty and management experts with professionalism and sales capacity. maximize employee satisfaction, while adhering to the COVID-19 The Stay Strong, Korea Bazaar not only led to increased employee sat- isfaction but was met with appreciation from many business owners. Even after the end of the program, the executives and employees of Woori Bank continued to purchase from the participating businesses and build win-win relationships with them. ••• competitiveness of face-to-face channels for wealth management will be reinforced in various areas, including corporate banking and retail banking. Also, the non-face-to-face channels will be upgraded by im- proving the wealth management platforms and operating consultation channels. There are plans to launch wealth management platforms after optimizing the UI/UX and reorganizing the features centering on users and incorporate MyData, AI and other promising businesses into the platforms in order to build digital capacity. Moreover, for the pur- pose of setting up a non-face-to-face customer management system at the branches, Woori Bank will establish the Wealth Management Consulting Center, reinforce the in- and outbound wealth management services, and strengthen its non-face-to-face wealth management consulting capacity. Expansion of the Customer Base The Wealth Management Group plans to continually expand its PB customer base based on ongoing customer management. It will strategically assign PBs and FAs based on the Value Group (VG) pro- gram, a new business system introduced by Woori Bank to provide financial services of the highest standard by promoting collaboration among the branches. By jointly providing services to and managing PB customers, it will encourage existing customers to increase its busi- ness with Woori Bank and attract new customers. Loyalty among PB customers will be enhanced through sophisticated target marketing based on big data, while excellent cases of joint services will be contin- ually discovered and shared to achieve further improvements. 066 WM Distribution Channels businesses suffering from the pandemic and provide a chance for The bazaar, Stay Strong, Korea, was organized to support … small guidelines. 682Channels Asset Management Experts 694PBs/FAs consumers to purchase quality products at affordable prices. This was part of Woori Bank’s efforts to fulfill its CSR and boost employee satisfaction. The Employee Satisfaction on LAN Program, on the other hand, was implemented to help employees overcome the Corona bluesand engage in pastimes and cultural activities. Themes included cooking, music, at-home workouts and interior decor, and there were even pro- 'The Stay Strong, Korea Bazaar' poster grams inviting employees to participate with their families, which was to promote a balance between work and family life. Woori Bank is dedicated to promoting employee satisfaction based on the belief that the happiness of employees and their families is what gives the bank a competitive edge. Private Asset Management Brand Private Banking Brand of Woori Bank One-on-one tailored financial consulting services by asset management experts Private banking services dedi- cated to each customer offered in a fittingly refined setting Employee Satisfaction on LAN The Employee Satisfaction on LAN Program was introduced to sup- port employees in enjoying their pastimes and cultural activities under the theme of ‘zero-contact, home, and family.’ It helped employees get over the Corona blues caused by restrictions against social activities and discover and share their talents and ca- pabilities, which promoted communication among employees and boosted employee satisfaction. The activities included cooking (Home Cook), workout (Home Train- ing), music (Let’s Hear You, Home Sing), and interior decor (Show Us Your Home). Home Cook was a non-face-to-face cookoff where contestants participated from home to share their unique recipes and receive votes from other employees. 067 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Risk Management Home Training was a non-face-to-face bilateral at-home workout pro- Upgrading the PC-Off System to Normalize Work Hours In 2020, the global economy took a devastating blow from the Responding to the COVID-19 Pandemic gram where participants got to take yoga lessons from home and ob- tain feedback from the instructor on Zoom. Let’s Hear You, Home Sing was a non-face-to-face singing competition program where employ- ees were invited to participate with their families. The final round was streamed live on YouTube with the viewers voting for the participants in real time. Show Us Your Home was organized to promote commu- nication among the staff and harmony within each family by giving a chance for them to show off their home interior and companion ani- mals and plants in time for the Christmas holidays and New Year’s. In 2013, a system was introduced to normalize work hours and im- prove the work environment, considering that bank employees typi- cally work overtime. The system has become intricately incorporated into the corporate culture of Woori Bank with most of the branches complying with the related standards. Computers are configured to COVID-19 pandemic. This in turn led to the contraction of the real economy in Korea, along with increased volatility in financial and F/X markets as well as credit risks. While the tension in financial markets was somewhat eased by market stabilization measures introduced by financial authorities, there still remain internal and external risks, turn off before 7 p.m. so that employees can enjoy leisure activities including a surge in confirmed cases and weak recovery of the global and spend quality time with their families after work. This practice economy. Plus, individual businesses are in greater debt amid in- also boosts work efficiency and concentration, thereby eliminating the creasing business uncertainty and household debt has been hitting a need to work overtime. In July 2019, a 52-hour work week policy was new all-time high record each year. Woori Bank Team Finishes First in the 13th Regular Season of WKBL Woori Bank women’s professional basketball team finished first in the 2020-2021 season of the Women’s Korean Basketball League introduced and the PC-Off system was revamped to promote a bal- ance between work and family life as well as flextime. Going forward, Woori Bank will improve these systems based on ongoing monitoring and feedback and endeavor to boost employee satisfaction. A comprehensive review of the economic situation in 2020 shows soaring household and business debt and asset markets, such as real estate and stock markets, seeing a flood of money, which has been leading to a disconnect between financial markets and the real economy. Unless the real economy recovers adequately, non-per- (WKBL), which was its 13th regular season since its launch. Although Free Rental of the Auditorium at the HQ as a Wedding Hall forming loans will be on the rise due to the risks in vulnerable areas. In 2020, risk management became especially crucial in dealing with the major crisis faced in financial markets and the real economy due to the COVID-19 pandemic. Accordingly, Woori Bank mobilized an emergency response organiza- tion and implemented a Contingency Plan(C.P.) to successfully man- age the risks arising during the crisis situation. Measures introduced to reinforce risk management in vulnerable areas included expanding the scope of management for potential insolvency, and industries with increased credit risks were managed more intensively. Also, in consideration of fluctuations in the economy caused by COVID-19, the portfolio was rebalanced by reducing concentration on certain industries and managing the limits in a timely manner so as to prepare against an economic downturn. they did not win the championship (V12) in the playoffs, their results were praiseworthy considering the fact that Park Hye-jin, the team’s star player, had been off the roster for an extended period of time due an injury and Kim Jeong-eun, another star player, had been out for the entire season due to an ankle injury. This actually gave the younger players a chance to be on the court and demonstrate their potential to lead the team in the future. Woori Bank allows its employees to use the auditorium at the head- quarters as a wedding hall for free. It has been receiving rave reviews, with employees expressing their appreciation in regard to the spa- ciousness and classy appearance of the auditorium-turned-wedding hall and being given plenty of time to host a wedding. The exquisitely This will consequently degrade asset soundness of banks and in turn Approval of Early Adoption of Basel III in the Credit Risk Area increase the bad account costs and lower capital adequacy. Accord- ingly, risk management has become more important than ever. In rec- Woori Bank obtained approval from the Financial Supervisory Service for early adoption of Basel III in the credit risk area in 2020 3Q. As a ognition of this, Woori Bank has been fortifying its risk management result, the BIS capital adequacy ratio increase 318bp to 17.34%, as of system in an effort to remain strong and resilient against external 2020 4Q. beautiful waiting room for the bride, renovated luncheon area, pyebaek shocks. room, and wedding car created from the CEO’s car have also gained a Woori Bank women’s professional basketball team, which recorded its favorable response. From 2012 to 2018, a total of 1,023 couples tied 7th win in 2020 including 6 successive victories in the 2010s, will do its to knot at the auditorium, and weddings were held for 160 couples in 2020 Performance best to become the undisputed No.1 team in the league in the 2020s. 2019 and 100 couples in 2020, attesting to the fact that it has become Woori Bank successfully managed risks even in the midst of challeng- a highly sought-after wedding venue. The wedding hall rental service es brought upon by COVID-19 and other internal and external situa- offered by Woori Bank not only helps employees save money but also tions in 2020. A proactive risk management system was strengthened gain a sense of pride and loyalty toward the company with increased to better prepare against an increase in risk factors associated with satisfaction. potential insolvency. Also, approval was obtained from the Financial Supervisory Service for early adoption of Basel III in the credit risk area. Along with this, a risk management system was established for emerging sectors that have been recording rapid growth and various improvements were made using cutting-edge technology to continually develop and upgrade the risk management system. Capital Adequacy Ratio (Unit: %) Adoption of Basel III in the credit risk area 15.40% 14.77% 14.80% 17.75% 17.34% 19.4Q 20.1Q 20.2Q 20.3Q 20.4Q Woori Bank Team Finishes First in the 13th Regular Season of WKBL 068 069 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Advancement of the Risk Management System As for retail loans, the monitoring system for loans provided via non- Due to the COVID-19 pandemic, there has been a rapid transition 2021 Plans IT Group IB, derivatives, non-face-to-face products and non-deposit financial investment products, the demand for which has been on the rise due to soaring asset prices and an increase in non-face-to-face channels, were defined as ‘Emerging Risks,’ and a system to manage these risks was improved by ensuring in-depth monitoring and preparing a regular face-to-face channels will be upgraded, in addition managing high-risk from traditional face-to-face financial services to contactless services borrowers more intensively. In the global business area, the group will using new digital technology. It has become essential for financial boost its risk management capacity in accordance with the localiza- tion strategy and continually strengthen risk management in IB, a high- risk, high-return business. institutions to attract customers through non-face-to-face channels using information technology, and in response, financial firms across the country are pursuing new businesses incorporated with IT to gain reporting system. In the case of non-deposit financial investment prod- Second, the group will be prepared against the institutional changes dominance in financial markets. The IT Group plans to make 2021 the year of innovation for Woori Bank to take technological leadership in the financial industry, based on the vision of ‘Change Starts with IT.’ First, as the ‘Innovation Strategy for the Next Normal,’ the IT Group will ‘completely reform Woori FIS and ITO to spearhead business innova- tions’ and ‘pursue IT innovations to shape the next normal’ to prepare Aside from this, an integrated interest rate and liquidity manage sys- Third, in response to the contactless trend, the group will pursue 2020 Performance ucts, in particular, a procedure for consulting the Risk Management that will have a direct impact on the business environment. In relation Department ahead of a product launch was newly established, and to the adoption of Basel III, the group will ensure stability of the regula- the risk examination process was reinforced by requiring the Head of tory capital calculation system for the credit risk area where the inter- the Risk Oversight Department and the Head of the Risk Management national regulatory framework began to be applied in September 2020 Group to attend the Non-Deposit Product Council and Non-Deposit and set up the system for market and operational risks in time for its Product Committee meetings. adoption in 2023. tem was established by creating a dashboard for monitoring related Risk-Tech to apply frontier technology to risk management. A good risks and developing a comprehensive analytical tool. example of such efforts is to apply non-financial information, such as 2021 Plans communication information, to non-face-to-face loan strategy model to support the sophistication of the decision-making process for retail loans and develop a non-face-to-face loan model specifically for indi- In 2021, the Risk Management Group of Woori Bank will seek to op- vidual businesses. timize the Risk-Return profile by ensuring efficient capital allocation and steady asset growth with priority on risk management. To this end, there are plans to pursue businesses in connection with four risk management strategies: be prepared against potential risks, proactive- ly respond to changes in the financial environment, pursue Risk-Tech and sophisticate the risk capital management system. First of all, in order to be prepared against potential risks, the group will improve its portfolio management against corporate risk exposures and better manage household loans. With respect to corporate loans, the credit limit will be adjusted for each industry in consideration of the changes in risk levels caused by the pandemic and the adequacy of credit analysis will be managed better. The timeliness of loan reviews for those in vulnerable industries will be improved as well. Finally, the group will ceaselessly polish the risk capital management system to optimize resource allocation. To this end, the group will allocate and manage risk capital limits in reflection of the financial objectives of each group and risks in the business environment under the principle of considering profitability and the risk level in a compre- hensive manner. In order to turn Woori Bank into a leading IT bank in the industry, the for the contactless era. Further, the cloud establishment project will be IT Group has created a robust foothold for future growth by building continued in order to build advanced tech-based infrastructure. cloud infrastructure, reestablishing the bank-wide communications network and ensuring top-class IT services. Second, the IT Group will ‘Develop Human Resources in IT’ to secure future growth engines. By strengthening the ‘professional competen- cies of the IT manpower’ and ‘development capacity of the bank,’ the IT Group will improve the quality of development projects, and it will also strengthen the ‘marketing capacity of employees through capacity Reestablishment of the Bank-wide Communications Network building of data experts.’ In 2020, the IT Group re-established the communications network across the data center, branches and call center to build advanced net- work infrastructure. Through this project, a major overhaul took place across all areas related to the communications network including the transmission network, IPT, communication security and audio record- ing system. In the case of the data center, three communication lines were established with the Disaster Recovery (DR) Center to be ensure uninterrupted operation even in the event of a natural disaster or acci- dent. For branches, the communication speed was doubled and the backup lines were replaced to create a stable operating environment. In addition, the latest equipment was introduced into the communica- tions network to be prepared against malfunctions and failures and improve service quality. By building a cutting-edge network, Woori Bank is prepared to readily incorporate new technology and respond to changes in the financial environment, through which it will provide customers with services of higher quality and stability. Creation of Cloud Infrastructure Woori Bank endeavored to introduce cloud infrastructure to pursue digital financial business in a timely manner in line with the trends of the age of Digital Transformation (DT). Through this effort, the bank expected a prompt introduction of cloud infrastructure and cut IT costs based on efficient management of infrastructure resources. Woori Bank plans to continue the project on building cloud infrastruc- ture and developing a management portal in 2021 to secure future growth engines. Third, the IT Group will ‘Reinforce Support for Business Operations.’ The investment process will be made swift by improving the review procedure and support will be provided for the core digital businesses of each business group, while providing robust IT services. Fourth, stability will be ensured by reinforcing risk management. The IT Group will ensure continuity of operations by applying more stringent measures for IT risk management and strengthen internal controls through an internal audit system. Change Starts with IT 2021 IT Group vision Innovation Strategy for the Next Normal Develop Human Resources in IT Reinforce Support for Business Operations Stability Ensured by Reinforcing Risk Management 070 071 Woori BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Woori Card www.wooricard.com Woori Card was incorporated in April 2013 following a spin-off from Woori Bank aimed at strengthening the credit card business of Woori Financial Group and fortify its compet- itiveness in the non-banking sector. Based on an extensive network and customer base, Woori Card formulated optimized business strategies as a card company of a financial group and has been aggressively discovering new business areas to secure new growth engines. With customer value as the top pri- ority in every business area, the company is constantly developing new products and ser- vices that meet customer needs. It is planning to provide differentiated services by pursuing digital transformation, pushing forward innova- tion across all business areas and partnering with companies from other industries. 2020 - 2021 Woori Card wins 2020 Performance Business Performance 2021 Plans While an increase in credit sales resulting from recovery of consumer Since 2016, Woori Card has been engaging in installment payment, lease spending is expected in 2021, there are concerns of intensifying com- Operating Income (Unit: KRW in billion) and credit loan businesses to generate income from diverse sources. petition in card and car loans due to easing of regulations on leverage Also, as part of the efforts to enter overseas financial markets, Woori and a decline in financial soundness of vulnerable groups in relation Card obtained a Micro-Finance Institution(MFI) license in Myanmar in Oc- to COVID-19. Also, the amendments to the three laws on data and tober 2016 and has been offering small-sum loan services since Decem- the Electronic Financial Transactions Act have given non-financial ber 2016 following the establishment of TUTU Finance-WCI Myanmar. In companies greater power and influence in the financial industry and 2020, the company has been preparing to initiate new businesses, such driven up the demand for data-based businesses. Not only that, but as MyData, individual business CB and open banking, in response to the also the tightening of regulations on the Debt Service Ratio (DSR) and amendments to the three laws on data (Personal Information Protection recalculation of the merchant fees (2022), posing concerns of lower- Act, Act on Promotion of Information and Communications Network ing profitability for card companies, have necessitated proactive risk Utilization and Information Protection and Credit Information Use and management, asset increases and diversification of the profit struc- Protection Act) and promotion of the data economy. After receiving ap- ture. In response, with the management objective of ‘Digital, Efficiency proval for the credit information management business (MyData) from and Growth: A Design of Sustainable Future’ for the year 2021, Woori 1,387 1,368 1,388 YoY +1.4% 2018 2019 2020 the Financial Services Commission in January 2021, it has formed an Card has established five management strategies: efficient growth organization to pursue the business. Based on these efforts, Woori Card and increase in income-generating assets; discovery of future income Net Profit (Unit: KRW in billion) recorded KRW 120.2 billion in net income in 2020, an increase of KRW sources; fully digital across all areas; data-based risk management; 6.0 billion from the previous year, despite shrinking consumption due to and customer-centric ESG management. Accordingly, it will reorganize COVID-19. This was possible thanks to an increase in financial assets its business portfolio as a ‘loan specialist that is achieving sustainable 127 120 114 from car financing and financing services used by credit card users of a growth.’ To this end, Woori Card will create steady income streams prime asset as well as improved asset soundness. Rationalization of Management by implementing differentiated customer recruitment strategies for different channels, building an income-generating portfolio centering on high-yield financial assets, pursuing data-based hyper-personalized marketing and risk management and cutting costs through digiti- Woori Card is seeking to continually restructure its organization to zation. In addition, there are plans to create future income sources proactively and systematically respond to the changes in the business through business diversification by entering into new business areas environment. It has concentrated its core functions and sped up the of the financial industry, expanding global businesses and initiating decision-making process by restructuring the sales organization to the data business and overseas remittance services. Along with these promote the use of cards and recruit additional users. In order to boost efforts, the company will invest utmost efforts to create synergy with prime financial assets and auto financing, a dedicated division and the global network of Woori Bank and the companies under Woori Fi- regional centers were newly established. The Future Growth Division nancial Holdings in order to secure new growth engines. YoY +5.3% 2018 2019 2020 was launched to further expand its global businesses and incubate new growth businesses, while digital platform organizations have been integrated into the Digital Innovation Group to pursue digital innovation at an accelerated rate and produce tangible results. Usage (Unit: KRW in billion) 76,3588 82,650 85,037 YoY +2.9% COVID-19 Support Activity (as of Feb. 2021, KRW million) Category Description Cases Amount Deferral of credit card payments 6-month deferral for payment of the principal for credit sales, financing and capital sales Discounts on interest rates for card loans and payment deferrals Up to 50% discount on the interest rate, Switch from installment payment to interest-only payment Emergency loans for household spending Up to 50% discount on interest rates(Up to KRW 3 million) Exemption of overdue interest and deletion of related records Exemption of overdue interest and deletion of related records for up to 3 months from the payment due date Postponement of the maturity date (repayment of the principal and interest) 6-month deferral for loans related to financial support for SMEs and self-em- ployed individuals Pre-workout for personal debt Total Deferral of payment of the principal for 6 months or longer for those at risk of defaulting 1,347 255 80 44 295 30 8,986 2,500 195 127 3,233 365 2,051 15,406 073 072 2018 2019 2020 • Wibee Market wins the Best Financial Shopping Platform Award at the 2020 Mobile Awards Korea (Apr. 9, 2020) • The Best Credit Card Award at the 2020 Korea Good Brand Awards (May 28, 2020) • The Minister of Trade, Industry and Energy Award at the 22nd Korea Brand Awards (Dec. 11, 2020) • The Governor of Financial Supervisory Service Award at the 2021 Edaily Korea Financial Consumer Awards (Jan. 28, 2021) Woori CardINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Woori Financial Capital www.woorifcapital.com Woori Financial Capital is one of the leading capital providers in the industry that was es- tablished in 1994. In December 2020, Woori Financial Group took over the position of the largest share- holder from Well to Sea No. 3 Special Pur- pose Corporation, which marked a turning point for the company. Woori Financial Cap- ital will endeavor to become the best capital provider by pursuing digital innovation, dis- covering new business areas, creating a syn- ergy system and honing its competitive edge in core business areas by working closely together with Woori Financial Group. Digital Finance Innovation Award at the 2020 Finance and Securities Awards In recognition of contributing to the digital transformation of the financial sector by devel- oping innovative digital products General Financial Blog Award at the i-Awards Korea 2020 Demonstration of excellence through a fair and objective evaluation of the service quality 2020 Performance 2021 Plans Strategic Risk Management in Response to a Downturn in the Real Economy In 2020, the real economy took a hit a from the COVID-19 pandemic, creating concerns of insolvency of borrowers. in response, Woori Financial Capital strengthened its screening capacity by introducing SOHO overview service and managed the soundness of high-risk products and borrowers who are exposed to economic risks, such as personal finance and commercial finance customers. As a result, the percentage of sub-standard credit extended was improvedfrom the previous year by 22% to 1.77%. Diversification of Income Sources and Improvement of Man- agement Efficiency It is becoming increasingly competitive in the car financing market, making up the biggest portion of the credit market. Inter-industry com- petition is growing in the area of auto loans for new cars, in particular, with credit card companies and banks entering the market. According- ly, Woori Financial Capital has been honing its competitive advantage by concentrating on used car financing and corporate finance. As for used cars, on the other hand, the Dealer Lounge, a platform exclusively for used car dealers, was upgraded and relaunched in September In 2021, it is expected that financial markets will continue to suffer from unpredictable events. There is increased volatility in interest rates, with the rise in long-term interest rates, and financial authorities are tightening regulations, such as contracting the leverage ratio to control the liquidity of the non-card credit providers. With contactless services becoming the next normal across all industries, it is predicted that competition will become heated in financing with the use of new dig- ital technology. Woori Financial Capital was incorporated into Woori Financial Group in December 2020, and it is expected to undergo tre- mendous growth in the future. In the midst of rapid changes, the company has established the fol- lowing four management strategies to attain the management objec- tive to ‘Prepare the foundation for a new giant leap with the DNA for innovation’: Loan portfolio (Unit: KRW in billion) 6,895 5,739 4,591 YoY +20.1% 2018 2019 2020 First, Boost productivity based on digital technology and innovate ze- Net income (Unit: KRW in billion) ro-contact business models; Second, Discover promising businesses of the future and establish measures to strengthen businesses and competitiveness in connec- tion with affiliates; Third, Break away from the competition with differentiated core busi- 97 91 76 YoY +6.4% 2020 to maintain a competitive edge by directly dealing with dealers. nesses; As a result, the number of dealers using the platform increased by more than 3,000 and sales surged by about KRW 5 billion a month, on average. As for corporate finance, the company has been selectively Fourth, Be proactive in responding to financial regulations and the macroeconomic environment. 2018 2019 2020 partaking in excellent deals in PF and real estate collateral that are Furthermore, Woori Financial Capital will increase assets in high- highly sensitive to changes in the economy. While concentrating on yield strategic products, pursue company-wide risk management the NPL business, the company recorded 360% YoY growth with a and reduce the bad debt expense, thereby promoting asset and profit new operating income of KRW 430 billion in 2020. Aside from this, growth. Woori Financial Capital has been discovering future income sources by partnering with a wide array of online platforms and financial firms and entering the general lease market, in addition to pursuing digital in- novation by introducing electronic contracts, promoting digital finance and setting up an open API system. Substandard & below (Unit: %) 2.28% 1.77% 1.38% YoY -0.51%p COVID-19 Support Activity • Deferral of principal and interest payment for small businesses af- fected by COVID-19 KRW 122.5 billion • Donating to assist households affected by COVID-19 in regions des- ignated as disaster areas by the State and households in a crisis 074 2018 2019 2020 075 Woori Financial Capital INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Woori Investment Bank www.wooriib.com Woori Investment Bank is Korea’s one and only all-encompassing financial firm whose primary business areas including depository business, including bills issued and CMA, as well as corporate loans, structured finance and securities management. Recently, Woori Investment Bank has been striving to diver- sify its sources of income by expanding into NPL investment, brokerage and venture cap- ital areas, while discovering new businesses such as CIB to create synergy with Woori Financial Group. 2020 Performance Paid-in Capital Increase of KRW 100 Billion Depository Business: Non-Face-to-Face Channels Woori Investment Bank increased the capital by KRW 100 billion in The Digital Finance Department was newly established to deliver services via non-traditional, contactless channels, as the COVID-19 pandemic ushered in the era of telefinance. A high-interest product exclusively available on online platforms (The Dream Installment Sav- ings) was launched, and online marketing campaigns helped attract more than 30,000 new customers. Woori Investment Bank continually improved its platforms by boosting convenience in opening an ac- count using a computer or mobile device and enhancing information security, in addition to offering new products and services through partnerships with affiliates and FinTech platforms. Loans & Investment: Expansion of IB and Fixed-Income Business Amid the low interest rate, low growth trend, Woori Investment Bank concentrated on the securities business in order to boost non-interest income. Woori Investment Bank revitalized its IB business including deal management, arrangement and advisory services and reinforced its organization and personnel for bonds management, acquisition and brokerage services. The company also entered into new busi- ness areas, such as housing bond brokerage and P-CBO, to generate commission income. Through these efforts, Woori Investment Bank recorded KRW 33.1 billion in commission income and KRW 6.6 billion in income from bonds management in the IB business, and as a result, the CAGR for non-interest income in the past three years has been on the rise at 89.1%. Reinforcing Risk Management Woori Investment Bank strengthened its risk management measures in consideration of growing uncertainties in the financial environment due to the pandemic. The contingency plan was revised in alignment with the Group’s crisis response system, and credit lines were secured from domestic commercial banks to prepare against a liquidity crisis. As a result, the maximum credit line has reached KRW 210.0 billion, as of March 2021. The company recruited additional loan officers to better manage cred- it risks, in addition to pursuing intensive monitoring of industries sensi- tive to COVID-19, on-site due diligence of places of business receiving PF and follow-up monitoring of loans. As of late 2020, prime loans November 2020, with the aim of eliminating business constraints and drive continuous growth, by granting existing shareholders with the preemptive right to new stocks (subscription rate of 91.4%). There are plans to further boost the value of the company through excellent IR and improved profitability achieved by increases in loans and invest- ments. 2021 Plans The 2021 management objective of Woori Investment Bank is to ‘Emerge as the Investment Bank with the Highest Efficiency,‘ based on which four management strategies were established: ’Strengthen Core Competencies,‘ ‘Expand the Business Portfolio,’ ‘Innovate Risk Man- agement and Internal Controls’ and ‘Strengthen Infrastructure.’ Based on the paid-in capital increase of KRW 100 billion in 2020, Woori Investment Bank is seeking to increase loans and marketable securities by approximately KRW 1 trillion. To this end, there are plans to concentrate on forging a competitive edge in corporate finance, a backbone of the company’s business. In order to generate a steady stream of non-interest income, the IB business will be further expanded and to achieve this, related special- ists were recruited, resulting in an increase in the number of structured finance departments from one to three. There are also plans to expand the DCM business and enter into the ECM business to explore new income sources. Woori Investment Bank will expand the CIB business in full swing to create synergy with other affiliates of the Group and raise the value of Net operating income (Unit: KRW in billion) ■ Non-interest income ■ Net interest income 113 78 88 54 63 43 20 34 35 YoY +28.8% 2018 2019 2020 Net income (Unit: KRW in billion) 63 33 53 YoY +17.8% the company by preparing an ESG management system. 2018 2019 2020 COVID-19 Support Activity Number of non-face-to-face customers (Unit: persons) • Exemption of digital money transfer fees for all retail customers : 386,970 exemptions (KRW 190 million) • Financial assistance for enterprises affected by COVID-19: Post- ponement of loan maturity: 2 loans (KRW 5 billion) •Provision of face masks to customers (1,000 masks) •Discount on rent for enterprises affected by COVID-19 account for 87% of all loans, attesting to the efforts made to strive for • Crowdfunding on Wibee crowdfunding platform: COVID-19 asset growth in consideration of risks. To scrupulously formulate and support and damage prevention by six NGOs implement companywide loan strategies, the Loan Policy Department was newly established. • Compensatory funding for face mask manufacturers • A charity event to overcome COVID-19 (Gwangju) • Sponsored the music education program for children from marginalized classes: Beautiful Mind (KRW 3 million) 65,311 31,096 YoY +34,215 757 2019 2020 076 077 Woori Investment BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 In 2020, the company achieved remarkable land trust, which is expected to enable sustainable growth in the long run. Second, Woori Asset Trust will concentrate on new businesses. It will expand its urban renewal business through the Urban Renewal Team Woori Asset Trust www.wooriat.com Woori Asset Trust celebrated its 1st anniver- sary in 2020 after being incorporated into Woori Financial Group in December 2019. growth in every area, including new contracts, ROE and profits, by improving the internal or- ganization and systems and entering in land trust agreements with construction comple- tion guarantees. In 2021, the company will dedicate its efforts to the core business areas and strive to gain dominance in the real estate trust business. 2020 Performance 2021 Plans Contract value (Unit: KRW in billion) In order to build the industry’s best management system, Woori Asset Woori Asset Trust plans to ‘Intensively Pursue Core Businesses,’ Trust restructured its organization and review system. The RM Team ‘Pursue New Businesses’ and ‘Develop the risk management system 129 was separated into the Risk Management Team and Compliance and internal control system’ as strategies for ‘Obtaining a competitive Support Team and the Risk Management Officer and Compliance Of- advantage in the real estate trust market with stability and innovative ficer were appointed so as to reinforce the risk management system. growth,’ as the objective for 2021. 76 Along with this, the review process for management-type land trusts with construction completion guarantees and loan-type land trusts was made more scrupulous. As a result, Woori Asset Trust recorded an NCR of 1,286%, the second highest among 11 companies, despite aggressively entering into new agreements in 2020. As for more specific management strategies, the company plans to hone its competitiveness in the real estate trust area, while striving to secure non-land trusts by creating synergy with the Group. To this end, it will discover management-type land trusts with construction completion guarantees, selectively pursue loan-type land trusts with In addition, considerable efforts were invested in winning new land excellent stability and win contracts for general management-type trust agreements with construction completion guarantees, which land trusts with relatively low risks. In addition to increasing agency greatly improved the business portfolio. The portion of the aforemen- services centering on local housing cooperatives of a prime asset, tioned type of trust in the portfolio increased from a mere 12% to 50%, the company will endeavor to selectively secure large-scale collateral indicating a switch in primary products from collateral trust and agen- trusts and win more contracts for collateral trusts and general man- cy service to guarantee-type land trust and general management-type agement-type land trusts by creating synergy withe the Group. YoY +68.6% 2019 2020 Operating income (Unit: KRW in billion) Net income (Unit: KRW in billion) 75 79 31 35 In 2020, Woori Asset Trust won contracts valued at KRW 128.8 billion, established in 2020 and discover small-scale renewal projects for a 69% jump from the KRW 76.4 billion recorded in 2019. Accordingly, which regulations have been eased. In addition, the company will firm- net income climbed 13.4%p YoY. It also recorded the highest ROE in ly position itself in the market by obtaining approval as REITs AMC, es- 2019 2020 2019 2020 the industry at 31.6%, attesting to its excellent efficiency. tablishing related organizations and launching REITs products in 2021. Total equity (Unit: KRW in billion) 129 94 YoY +36.9% 2019 2020 Company ROE (%) ROA (%) NCR (%) Net income Woori Asset Trust 36.4 21.7 1,286 35,312 (unit: %, KRW in millions) Korea Trust 28.1 21.2 1,009 45,791 Lastly, the risk management system and internal control system will be further developed. A preliminary review system and pool of contractors will be created, and partners will be used for pre- and post-construction monitoring. Through the independent operation of a contract review department, the reviews will be carried out more swiftly and with greater professional expertise. Internal controls will be reinforced by creating a related manual and money laundering preven- tion system, and professionals will be nurtured to effectively deal with Hana Asset Trust 26.7 18.9 949 80,821 operational risks. KB Real Estate Trust 23.4 12.7 442 30,725 Kyobo Asset Trust 22.7 17.2 1,322 25,767 Asia Trust 21.9 16.4 887 66,874 COVID-19 Support Activity Mugunghwa Trust 21.0 10.9 1,023 122,573 • Donated 2,500 face masks to the Soraepogu Merchants Associa- Daehan Real Estate Trust Korea Asset Investment Trust Korea Real Estate Investment and Trust KORAMCO REITs and Trust 13.9 10.1 948 16,644 13.8 11.8 8.3 4.5 4.6 3.6 1,163 30,924 639 61,521 508 26,968 Note) Data from Korea Financial Investment Association E-Disclosure Service (as of Dec. 31, 2020, based on 11 asset trust companies) tion (Jan. 6, 2021) • Participated in the donation relay of Sports Doctors and donated KRW 10 million to provide medical care to vulnerable groups during the COVID-19 pandemic (Sept. 10, 2020) • Donated 450 masks and 5 hand sanitizers to Yeongsin Welfare So- ciety (Apr. 7, 2020) • Slashed KRW 635 million in agency service fees (for 9 cases) 078 079 Woori Asset Trust INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Woori Asset Management Woori Asset Management is a comprehen- sive asset management company offering services in relation to fund management, investment consulting, discretionary invest- ment and more. On top of managing the two major publicly offered bond funds, Woori High Plus Bond Fund and SME High-Dividend Stock-Type Fund, Woori Asset Management has launched Woori High Plus Short-Term Prime ESG and Woori Sustainable ESG Fund, thereby leading the movement to incorporate ESG into the asset management business. Entrusted with discretionary funds from various institutions including pension funds, insurers, banks and mutual aid associations. Woori Asset Management surpassed the KRW 21-trillion mark in terms of assets un- der management (AUM) in 2020. 2020 Performance In 2020, Woori recorded KRW 6.9 billion net income, while managing about KRW 21 trillion (net assets, based on the NAV), up a KRW 2 trillion from the previous year. In terms of AUM, its market share was 1.60%, a 0.03%p increase from 1.57% in 2019. Major changes include an increase of KRW 1.9 trillion in MMF (62.9% YoY increase) and a KRW 390 billion increase in fund of funds (813.1% YoY increase), which contributed to a rise in AUM. With nearly KRW 2 trillion drawn out from credit-oriented fixed-income funds under poor market conditions, the situation became grim for asset management companies including Woori Asset Management, The Global Investment Management Unit launched a TDF product The Global Investment Management Unit is working to boost AUM by with BlackRock, an American multinational investment management offering diverse products and implementing customer-specific strat- corporation, in September 2020 and began offering an asset allocation egies. As part of these efforts, it may launch a multi-asset fund using solution that takes into consideration the timing of retirement. While an investment management strategy in connection with the AI system offering opportunities for institutional investors to seek absolute re- of Woori Bank to meet the demands for overseas investment and turns through multi-return funds, the Global Investment Management retirement pension. Although the ETF market is already dominated by Unit broadened its product lineup and strengthened its ability to pro- key players in the industry, the company is reviewing the possibility of vide investment solutions. developing unique ETF products to enter the market. but the credit market gradually stabilized with the flattening of the 2021 Plans Market share (Unit: %) COVID-19 curve and this led to KRW 1.8 trillion re-entering the market. The Equity Investment Management Unit ESG Research Team in April 2020 in order to boost research and management capacity in relation to responsible investment. The company has been chosen as an ESG equity investment management company by a number of fund man- agement institutions, such as Teachers Pension. With robust stock research capacity and the introduction of the quant model, the equity investment management process was improved resulting in excellent performance. Among equity investment funds, the SME High-Dividend Fund recorded high returns in 2020 and was thus chosen as the Do- mestic Equity Investment Fund of the Year 2021 (award given in Feb- ruary 2021 based on 2020 performance). Woori Asset Management’s management objective is to switch from a bond-centered portfolio into a more balanced portfolio. It aims to diversify its products, engage in capacity building in relation to various asset classes, forge cooperative ties with the affiliates of Woori Finan- cial Holdings and increase the AUM from KRW 22.1 trillion in 2020 to KRW 25.8 trillion in 2021, a 16.7% YoY increase. Based on this, it is projected that the operating income will rise 26.3% from KRW 840 mil- 1.57% lion in 2020 to KRW 1.06 billion in 2021 and the net income will climb 22.3% from KRW 670 million in 2020 to KRW 820 million in 2021. 1.60% YoY +0.03%p 2019 2020 In order to achieve these goals, the Equity Investment Management Unit is revamping its investment management processes by further advising the SME stock investment management processes and in- ternalizing the concept of ESG into its investment management policy. The relevant organizations and investment management processes underwent an overhaul to meet the demand for ESG practices among institutional investors, while internal regulations were amended and a responsible investment research team and related systems were set in place to establish ESG-based investment processes. As a result, Woori Asset Management was chosen as an ESG equity investment management company by Teachers Pension, Yellow Umbrella Mutual Aid Fund and others in the fourth quarter of 2020. The company will continue to hone its ESG-based investment capabilities and release related products so as to secure a competitive edge in the market. The Fixed Income Investment Management Unit plans to absorb the funds for short-term investment in the market by taking advantage of and marketing short-term fixed-income investment and MMF prod- ucts that can meet the growing demand for short-term money man- agement amid interest rate hikes, abundant liquidity and a slowdown in the stock market. 080 081 Woori Asset Management Korea Wealth Management Awards 2021 hosted by The Bell Woori SME High-Dividend Securities Investment Trust 1 (Eq-uity) chosen as the Equity Investment Fund of the Year at the Korea Wealth Management Awards 2021 hosted by The Bell (Feb. 24, 2021) INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Woori Savings Bank www.woorisavingsbank.com Woori Savings Bank is Korea’s leading finan- cial institution serving the general public, especially the working class. Its primary busi- nesses are savings deposit accounts, install- ment savings accounts and loans. The head office is located on Namsa-ro in Cheongju, Chungcheongbuk-do Province, and there are four registered branch locations: Samseong, Seocho, Suyu and Mullae. Woori Savings Bank was incorporated as a sub-subsidiary of Woori Financial Group in December 2020, which became a stepping-stone to steady growth. 2020 Performance 2021 Plans In 2020, Woori Savings Bank established a management plan center- Woori Savings Bank’s management objective for 2021 is to establish ing on enhancing management efficiency through improved productiv- a sustainable management environment by securing new growth en- Handling of the Sunshine Loan and Saitdol(Cumulative) ity and pursued stable asset growth based on stringent risk manage- gines. To this end, it has set the following strategies: expand the foun- (Unit: KRW in billion) ment, rather than seeking a mere quantitative growth. dation for growth and diversify the income portfolio; expand the digital Assets In the case of household loans, Woori Savings Bank reduced high-in- terest assets and increased the weight of policy-oriented products, including the Sunshine Loan, as a way to serve its inherent role to serve the working class. As for corporate loans, it reduced precaution- ary-and-below assets and increased assets centering on loans classi- fied as normal. Gains & Losses In 2020, Woori Savings Bank minimized available funds by managing new loans and repayment schedules and implemented a flexible inter- est rate policy in an effort to minimize interest expenses by attracting deposits from corporate customers. As a result, the interest expense ratio was reduced 0.40%p from 2.61% in 2019. In addition to reducing investments and unstable assets, such as high-risk assets, efforts were made to increase the weight of loans in prime asset through cor- porate finance and policy-oriented products, which helped improve the interest margin by 0.26%p compared to 4.31% in 2019. Risk Management Woori Savings Bank enhanced its risk assessment capabilities by upgrading and standardizing its risk assessment system in 2020. By standardizing the risk assessment request form for corporate cus- tomers, it was made possible to write concise reports focusing mainly on key risks. This also helped eliminate unnecessary processes and speed up the assessment procedure. Also, cross-assessments were carried out on the products handled by the bank so as to boost the capacity of the risk assessment officers. Efforts were also made to improve profitability based on proactive risk management. A low-cost credit assessment process was established by attracting customers online, and an emergency response system was initiated in response to COVID-19. A multi-offer system was introduced to maximize effi- ciency and a multi-product assessment process was developed to propose customers with products that are tailored to their individual needs. As a result of these efforts, Woori Savings Bank was able to outperform industry averages in managing assets, with a delinquency ratio of 2.9% (industry average: 3.3%) and a sub-standard-and-below ratio of 3.4% (industry average: 4.3%), as of the end of 2020. infrastructure; improve management efficiency; proactively manage risks and reinforce internal controls; and enhance its preparedness for changes in the future. 866 675 In order to implement these strategies effectively, Woori Savings Bank plans to discover new income sources, such as mid-range interest rate loans and financial support for the New Deal policy, pursue capacity building for core businesses, innovate digital services centering on customer needs, set up an in-house computer network and remote working system, create synergy with other subsidiaries of the Group, boost efficiency by optimizing the cost structure, establish a preemp- tive crisis analysis model and response system, sophisticate internal controls and improve financial credibility, stabilize the organization by internalizing the desired corporate culture and play a role as a depend- able financial company. 2018 2019 2020 Prime Asset Ratio (Unit: %) 1096 YoY +26.6% (unit: %, KRW in millions) 96.5% 96.6% Category 2019 2020 Change (amount) Loans in Prime Asset Balance 864.6 994.2 +129.6 Weight 96.5% 96.6% +0.1%p YoY +0.1% 2019 2020 COVID-19 Support Activity • In order to assist customers who have defaulted or are at risk of de- faulting on their household debt due to financial hardships caused by COVID-19, Woori Savings Bank has been implementing a house- hold loan pre-workout program since April 2020. The program offers relief to those who have taken out household credit loans through payment deferrals (6 months or 12 months), contract extension or renewal and refinancing. KRW 1.4 billion 89 cases 082 083 Woori Savings BankINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 2020 Performance Stable Financial Soundness Woori Credit Information currently operates business with zero lever- age and have been recording a surplus ever since its establishment. In addition, it is financially sound and has the largest assets and the 2021 Plans Woori Credit Information has set forth ‘Building the Foundation for Growth, Improving Management Efficiency‘ as the management ob- jective for this year. It intends to achieve this objective based on the following management strategies: lowest debt ratio (31.7%) among all credit information companies that First, it is to ‘Expand the Income-generating Base.’ are operating under the wings of financial holding companies in Korea. Category Woori Credit Information Company A Company B (Unit: KRW 100 million, %) Debt-to-equity ratio 31.7% 63.8% 73.9% Woori Credit Information will make every effort to boost sales in non-collection areas and from non-affiliates and diversify the income sources. Efforts will also be made to discover new income sources by expanding the business portfolio to include an examination of the rights and investigation into companies. Second, it is to ‘Enhance Competitiveness in the Market.’ Woori Credit Information will concentrate on raising the recovery rate in the collection business and lease income and hone its competitive edge by improving the quality of its research reports. www.wooricredit.com Total assets 409 278 277 Woori Credit Information Woori Credit Information boasts the longest history of running debt collection, credit investigation and asset management busi- nesses in Korea. With the smallest liabilities and largest assets among credit information companies operating under financial holding companies in Korea, Woori Credit Informa- Highest Percentage of Revenue from Non-Affiliates One measure of the sales capacity of credit information companies affiliated with financial holding companies is the percentage of their revenue generated outside the corporate group. Woori Credit Infor- mation has proven its sales capacity with the highest percentage Third, it is to ‘Innovate the Cost Structure.’ COVID-19 Support Activity Efforts will be made to reduce operating costs by innovating the cost structure through improved organizational, personnel and operational efficiency and commission and fee structure. Lastly, it is to ‘Strengthen Consumer Protection.‘ • Donated 10,000 face masks and 120 hand sanitizers to Jung-gu Office in Seoul to support the local community in overcoming the COVID-19 crisis tion is known for its relatively stable financial of revenue from non-affiliates in the industry. It has secured various Woori Credit Information will promote debt relief for vulnerable groups soundness. It has even reinforced its busi- ness viability by forging relations with a wide range of clients and recording a high level of sales from non-affiliates. Woori Credit Infor- mation will maintain its leading position in the market based on vigorous sales capacity and business management efficiency. business partners outside the holding company and boosted revenue in line with the government’s policy and strive to reduce complaints by continuously expanding the scope of business through aggressive from customers by collecting debt in compliance with relevant laws marketing efforts. and protecting consumers. Category Woori Credit Information Company A Company B (Unit: %) Percentage of revenue from non-affiliates 35.1% 21.3% 2.9% Percentage of revenue from non-affiliates (Unit: %) Debt-to-equity ratio (Unit: %) 35.1% 21.3% 2.9% 73.9% 63.8% 31.7% Woori Credit Information Company A Company B Woori Credit Information Company A Company B 084 085 Woori Credit Information2020 Corporate Social Responsibility AwardsAwarded for the fourth consecutive year in the social welfare category of the 9th Corporate Social Responsibility Awards 2020 organized by the Digital Chosun IlboINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Woori Fund Service Woori Fund Service providing diverse administrative management services for real estate investment companies and handling fund accounting and reference price computation for collective investment vehicles. It has gained trust from its clients and become a leader in the virtual asset market. It is also regarded as a key player in the REIT administrative management service industry, providing administrative management and accounting services for REITs. The company successfully developed the next-generation system, FundOne, in August 2014, and has been continually developing the system and related human resources to offer better services. Woori Private Equity Asset Management www.woorifs.co.kr www.wooripe.com The private equity market has seen steady growth, as major investors, including pension funds, increase their alternative investments in response to diminishing returns on traditional investments and private capital assumes a larger role in the restructuring and M&A market. Woori Private Equity Asset Management, estab- lished in October 2005, was among some of first private equity fund management companies in Korea. In July 2016, the company expanded into management of hedge funds in addition to its existing business of managing private equity funds (PEF), thereby contributing to Woori Financial Group’s scale-out in the IB sector. Woori Private Equity Asset Management will continue striving toward quantitative and qualitative growth as a leader in PEF management by presenting the best in- vestment value and realizing customer satisfaction. Total AUM as of the end of 2020 2020 Performance more than 130 trillion Management in March 2020 after transferring data and upgrading the system for 6 Woori Fund Service commenced administrative management services for Woori Asset YoY +45% months from October 2019. In September 2020, it began offering the services to Woori Global Asset Management and even attracted an investment pool of private pensions in December 2020. As such, by providing services to asset management companies, institutions, private equity management companies, REITs and more, it reached KRW 130 trillion in AUM, a 45% YoY increase, as of late 2020. Moreover, the Management Direction Forwarding Service was developed to eliminate the risks associated with reference price computation, making it possible to manage the entire process in which management directions are sent from the asset management company to the administrative manage- ment company, and a patent application has been filed in Korea. 2021 Plans In March 2021, Woori Fund Service signed an agreement to jointly develop a platform for corporate accounting for digital assets designed to provide virtual asset accounting ser- vices to corporate members with Peertec, the operator of a virtual asset exchange called GDAC. The Platform for Corporate Accounting for Digital Assets is a total IT solution enabling management of the entire process concerning digital assets in the client’s possession or management. Woori Fund Service has become the first in the industry to begin devel- oping a system facilitating accounting for virtual assets with plans to finish developing a computer system in the first half of 2021 and launching the service in the second half. The key to providing administrative management services for digital assets for corporate customers is to provide assistance based on convenience and reliability. By adopting the digital asset accounting solution, companies can view and be issued accounting data, transaction certifications, balance certificates, management directions and various other evidentiary documents concerning virtual assets that have been verified by a third party, through which they can handle digital assets legitimately. They can also use the solution for internal and external reports, decision-making, submission of required documents to public agencies and financial institutions, accounting, tax filing and reporting, etc. 2020 Performance Woori Private Equity Asset Management achieved quantitative and qualitative growth by discovering and pursuing various investments with the intention of emerging as an industry leader by delivering maximum value to investors and achieving customer satisfaction. Entrusted to manage the assets of KDB and Korea Growth Investment Corp, the company had its PEF Department create 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 Corpo- rate Restructuring Private Equity Fund, KRW 155.1 billion), from which it discovered excellent investment opportunities and made five investments amounting to KRW 131.1 billion in 2020. Woori-Shinyoung Growth-Cap Private Equity Fund I, in particular, achieved remarkably quick investment execution performance with the capital commitment ratio reaching 77.5% in just two years after its establishment, and the investment returns were maximized by building an excellent portfolio. The Asset Management Department, on the other hand, 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. In 2020, new funds amounting to KRW 162.1 billion, including Innovative Growth Support No. 2, were es- tablished for a total of KRW 1,359.3 billion in capital commitment for all funds to date. Successful Investments by the PEF Department The PEF Department manages three funds, as of the end of 2020, with a total capital commit- ment of KRW 361.6 billion. In 2020, the primary focus was on executing additional investments for the two existing blind funds and meticulously managing investments to better deal with the domestic and inter- national economic situations devastated by COVID-19. In the case of the Woori-Shinyoung Growth-Cap Private Equity Fund I, the company achieved excellent performance, with the cap- ital commitment ratio reaching 77.5% in just two years of its establishment, which was made possible by selectively investing in companies with technological prowess and growth poten- tial, such as global game developers, electric vehicle parts manufactures and semiconductor and wafer manufacturers. 086 087 Woori Fund ServiceWoori Private Equity Asset ManagementINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Proactive management of risk factors associated with domestic and international business environments in relation to COVID-19 and Total Capital Commitment in PEF KRW 3.6trillion Total Accumulated Commitments Reachin in Alternative Investment KRW 13.6 trillion aggressive value-up activities targeting invested enterprises led to a remarkable improvement in performance of the enterprises in the portfolios. For some of the portfolios, investments were recovered in 2020, through which a gross IRR of 15% was recorded. Diverse Investments Characterized by Stability and Profitability The Alternative Investment Department manages 17 funds, as of the end of 2020, with accumulated commitments reaching KRW 1,359.3 billion in total. 2020 was a tough year due to a downturn in the global business environment triggered by the outbreak of COVID-19, which in turn led to difficulties in discovering new investment opportunities. De- spite these circumstances, the company established new funds with a size of KRW 162.1 billion, including Innovative Growth Support No. 2, in 2020 by continually exploring excellent investment opportunities at home and abroad. Woori Global Power Generation Infrastructure Syn- ergy Fund, established as a USD 80 million fund in 2019, was trans- ferred USD 65 million, accounting for 81.3% of the commitments, as of the end of 2020. It is also worth noting that the company has never suffered any investment losses since day one, as a result of fastidious pre- and post-investment risk management practices. 2021 Plans Woori Private Equity Asset Management plans to achieve quantitative and qualitative growth in 2021, with the aim of emerging as a leading asset management company in the industry known for delivering the best value to investors based on innovation and efficiency. The PEF Department, in particular, will maximize returns by enhancing the val- ues of enterprises contained in the portfolios of the two blind funds, while making additional investments to achieve the best possible results. In addition, it will consolidate its position as a key player in the domestic PEF market by pushing ahead to foster another blind fund of around KRW 200 billion in volume by attracting investments from ma- jor institutions. The Alternative Investment Department, on the other hand, plans to increase assets under its management by discovering new investment opportunities in infrastructure and real estate at home and abroad, in addition to ensuring excellent investment performance through stringent follow-up management of its current investments. The department will create a new fund amounting to around KRW 250 billion, which will bring the commitments to a total of KRW 1.6 trillion by 2021, and continue playing an important role as a long-tern income generator by managing risks and discovering excellent businesses. Woori Global Asset Management www.wooriglobalam.com Woori Global Asset Management, which started off as Allianz Global Investors, has emerged as a global asset management company managing about KRW 8.4 trillion in assets, as of the end of 2020. Woori Global Asset Management became an af- filiate of Woori Financial Group in August 2019 and broadened its business scope from stocks, bonds and overseas fund of funds, the company to include alternative investments 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. The company 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 net- works of the Woori Financial Group, it presents customers with best-in-class man- agement competencies and competitive investment solutions. Total AUM as of the end of 2020 2020 Performance Domestic Equity 8.4 KRW trillion In 2020, the Domestic Equity Investment Department renewed Woori G Active SRI Securities Investment Trust under its management since 2008 into Woori G Korea ESG Securities In- vestment Trust to meet the demand for ESG investment. Woori Global Asset Management was also chosen as an asset management company by three institutions in recognition of its improved equity investment management performance. Overseas fund In 2003, Woori Global Asset Management launched the very first overseas fund of funds in Korea that was based on the advanced asset management methodology of the German Alli- anz Group. Since then, the company has been launching multi-asset funds in partnership with leading asset management companies and diversifying its product lineup. Alternative Investment The Alternative Investment Department managed to overcome tremendous obstacles such as the pandemic and PEF issues and successfully made deals in real estate, PF, new and re- newable energy, PE investment and acquisition financing at home and abroad. As a result, the total commitments in alternative investment funds climbed to around KRW 3 trillion. This has been reviewed as a testament to the quantitative growth of the company as well as its quali- tative growth in that it created synergy with the Group and secured competitiveness at home and abroad. 088 089 Woori Private Equity Asset ManagementWoori Global Asset ManagementINTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 2021 Plans Global and Alternative Investments Amid increased market volatility, Woori Global Asset Management In the case of global and alternative investments, the goal is to be- aims to provide investment products providing steady income based come an overseas fund management company trusted by customers on specialized and accurate in-house research and investment man- by forging strategic partnerships with reputable asset management agement system as well as cutting-edge risk and compliance monitor- companies overseas and enhancing management of the launched ing systems. As an affiliate of Woori Financial Group, Woori Global Asset Manage- ment will strive to present the best investment solutions to all individ- ual, corporate and institutional customers of the Group and generate synergy with other Group affiliates through aligned business opera- tions, combined product development and more. products and communication with customers. Furthermore, based on its global network in relation to alternative investments, the company will develop various alternative investment instruments in domestic and overseas real estate, infrastructure, aircraft financing and acquisi- tion financing, in addition to its existing product lineup of equity invest- ment funds and fixed-income fund of funds. Woori Finance Information System Woori FIS is a subsidiary responsible for total IT outsourcing of major players of Woori Financial Group, including the holding company, banks and card company. Serving as the IT backbone of the Group, Woori FIS is providing the necessary support for the Group to be prepared against changes in the financial business environment where digital technology and non-face-to-face services are becom- ing increasingly more important. It is also concentrating its efforts to bring upon innovation across the organization, personnel, processes, system architecture and more so that Woori Financial Group can attain its strategic objectives from stable operation of the core systems of Woori Bank and Woori Card and attain- www.woorifis.com ment of digital transformation. Set up the Infrastructure New Deal Fund In 2020, Woori Global Asset Management set up the Infrastructure New Deal Fund, the first of its kind in the financial sector, and through this product, it will invest in smart logistics facilities, smart transporta- tion facilities and the like. This year, the company plans to uphold the New Deal policy and launch a series of Infrastructure New Deal Fund products in line with the structural reform marked by a transition into a digital economy and an eco-friendly economy. Equity Investment Management The Equity Investment Management Department analyzes the fun- damentals and value of companies based on in-house research with mid- and long-term results that exceed the benchmark. Meanwhile, competitive asset management and risk management systems are being set up in order to achieve steady returns from domestic stock funds and SME stock funds. In addition, the company will increase ESG investment by introducing the stewardship code and reinforcing the CSR-related investment management system. Fixed-income investment As for fixed-income investment, efforts will be made to build a system that can further stabilize asset management and achieve outstanding risk-adjusted returns. In the case of discretionary investment, the com- pany will bolster collaboration with the marketing unit in order to boost AUM and ensure reliable investment management to increase the net asset value of MMFs. Top 3 Management Strategies in 2021 2020 Performance Fine Operation of High-quality IT Impression IT Development for Customer Satisfaction Soar-Up Pursuit of IT of the Future In 2020, Woori FIS pursued three management strategies, ‘[Stability] Uninterruptible, High-in- tegrity IT Operation,’ ’[Innovation] Continued System, Process and Staff Management Inno- vations’ and ‘[Expansion] Expansion of the IT-Biz Convergence,’ in order to achieve the man- agement objective of ‘IT-Biz Convergence.’ An application Monitoring System was set up for system stability, and system failures were prevented for 140 consecutive days through the Clean Road Failure-Free Campaign, which helped dramatically lower the frequency of system failure. In addition to innovating IT service processes from the customer perspective, Woori FIS initiated a customer pre-proposal system and put 315 pre-proposals into action, as part of its efforts to transform from a passive developer to a proactive business partner. In order to provide uninterrupted IT services even in the midst of a pandemic, a COVID-19 emergency re- sponse headquarters was established to create a companywide response system. Staff from different business units were separated and employees were permitted to work from home, if necessary, as a way to contain the spread of the disease in the event that a confirmed case was reported within the company. 2021 Plans The management objective for the year 2021 has been set forth as ‘Future Creator.’ To achieve this, Woori FIS will undertake a number of tasks to implement three management strategies: ‘Operation of High-quality IT, ‘IT Development for Customer Satisfaction’ and ‘Pursuit of IT of the Future.’ Main tasks include enhanced system monitoring for stable IT operation, expansion of the data center, establishment of digital architecture for flexibility in digital devel- opment, an increase in AI-based service support, creation of an on-time corporate customer support system, creation of IT cloud, fostering of digital development manpower and creation of an ecosystem for new businesses. Through these efforts, Woori FIS will serve as a reliable IT and digital partner of Woori Financial Group and dedicate itself to bolstering the Group’s competitiveness in every business area. 090 091 Woori Global Asset ManagementWoori Finance Information SystemCreated a New Deal fund for infrastructure amounting to KRW 200 billion Invested in various types of infrastructure including smart logistics centers, data centers, renewable energy complexes including wind and solar farms, hydrogen fueling stations, etc. INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 FINANCIAL REVIEW 094 Management’s Discussion and Analysis 124 Separate Financial Statements 184 Consolidated Financial Statements 353 Global Network Woori Finance Research Institute www.wfri.re.kr Woori Finance Research Institute (WFRI) was established in 2012 with the vision of becoming ‘Korea’s best think-tank specializing in finance and an in- sight provider that spearheads financial development.’ In order to effectively facilitate decision-making for the management, WFRI conducts in-depth re- search across all aspects of management strategies of financial companies and the economy and financial markets. The institute has successfully posi- tioned itself as an opinion leader in the financial industry of Korea by sharing research results with customers, the authorities and financial market partici- pants. 2020 Performance COVID-19 Support Activity • Supervised market sensing processes in risk management of the Group Emergency Management Committee As an in-house consulting organization supporting Woori Financial Group in its endeavors to become the No.1 financial group, WFRI has been publishing an increasing number of reports each year, with 357 reports issued in 2020 to present its outlook for the Group in relation to the macroeconomic and financial market indicators. The institute provided internal consulting to subsidiaries, offered support in expanding the business portfolio • Published 197 daily reports on economic of the Group, published ‘Woori Research Plus’ and ‘Woori Financial Group CEO Binder,’ and financial situations at home and abroad periodicals designed to promote the utilization of research reports and organized lectures in relation to the COVID-19 pandemic by the advisory committee and external experts for qualitative improvement of research Number of Published Report 197 reports. In 2021, for the purpose of reinforcing its role as a consultant that enhances the Group’s competitiveness, WFRI will take on five management tasks: strive for qualitative and quantitative improvement of its reports; provide improved consulting to subsidiaries and the global network; increase research to pave the foundation for the Group to grow and achieve digital innovation; hone its competencies in economic and financial risk anal- ysis and forecasting; and lay the groundwork for ESG management research and devel- opment of a knowledge platform. 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 092 093 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 MANAGEMENT’S DISCUSSION AND ANALYSIS Key Management Indicators 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 2020 was a difficult year for the entire world, including Korea, due to COVID-19. Most countries recorded negative growth due to an economic downturn triggered by the pandemic, and Korea, in particular, saw a decline in private consumption and exports, resulting in a 1% y-o-y decrease in real GDP, even though government spending and investment in plants and equipment were up from the previous year. In an effort to boost the economy, the Bank of Korea and other central banks across the world slashed base rates, which in turn increased volatility in financial markets. Despite the challenges faced at home and abroad, Woori Financial Group sought opportunities for growth in 2020 marking its second anniversary. As a result, it successfully acquired Aju Capital and Aju Savings Bank in the fourth quarter of 2020 in order to gain a stronger foothold in non-banking sectors and strengthen the Group. Such diversification of the business portfolio will not only lead to improved financial performance but also allow the Group fulfill its corporate social responsibility even better by providing financial services to a wider range of customers, including SMEs and vulnerable groups. With respect to its financial performance, Woori Financial Group earned KRW 1.3 trillion in net income in 2020, based on the consolidated financial statements. This was due to the creation of reserves for COVID-19 response and PE funds (approx. KRW 500 billion) in reflection of potential costs in a time of uncertainty. If such one-time costs are excluded, the financial performance in 2020 is comparable to that of the previous year. Although the business environment was generally unfavorable due to the global economic slowdown caused by COVID-19, Woori Financial Group made consistent efforts to improve the profit structure based on asset growth and an increase in deposit savings and, as a result, generated KRW 6.0 trillion in interest income, a 1.8% y-o-y increase. With the base rate reduced twice in 2020, the annual NIM dropped 0.13%p compared to the previous year, but it is expected to rebound in 2021, as market interest rates are projected to steadily rise as economic activity becomes normalized in major countries. As for asset soundness, Woori Financial Group is among the industry’s best with an NPL ratio of 0.42% and a default rate of 0.27%. This is an achievement made possible with the management’s strong commitment to ameliorate the asset portfolio and carry out businesses based on risk management. In 2020, reserves were created to be prepared for future uncertainty, and asset soundness will be managed within the controllable extent, even if the economy stays sluggish longer than expected or bad debt expenses rise in the process of economic recovery. In the case of the capital adequacy ratio, approval was obtained from the supervising agency in June for a part of the internal ratings-based approach and the final set of Basel III reforms was quickly introduced to improve the BIS ratio to about 14% and the capacity to deal with uncertainties in the financial environment. It is expected that additional approval of the internal ratings-based approach will further boost the capital adequacy ratio. As structural reforms continue in the financial industry with the application of new digital technologies, zero contact services are predicted to become the next normal. Kakao Bank’s steady growth, the launch of Toss Bank and the growth of other online banks are the latest threats to traditional banks. In response, Woori Financial Group came up with the vision of Digital for Better Life in 2020 in order to pursue digital innovation at an accelerated rate and created a digital system by establishing a digital control tower and more. In 2021, efforts will be made to emerge as a digital leader in the financial industry by creating a MyData ecosystem, strengthening cooperation with the leaders of the future, collaborating with BigTech companies and expanding its external networks. Also, the stagnant growth of the domestic financial market has made it necessary to diversify income sources by expanding into overseas markets. In recognition of this, Woori Financial Group, which boasts a global network of 473 branches in 23 countries as of late 2020, has been developing new markets through various efforts, such as the mergers of the subsidiary in Cambodia and expansion of the network in Vietnam. By strengthening global business operations to improve the profit structure, Woori Financial Group recorded a 19% y-o-y increase in total assets in global operations, which are now contributing more than 10% to the total income. Going forward, the company will promote its retail business in the rapidly growing digital financial market in Southeast Asia and pursue qualitative growth based on stringent risk management, which involves checking for signs of non-performing assets and so on. 094 Category B/S Total Assets (Including AUM) Total Assets (Excluding AUM) Loans in KRWNote 1) Net Interest Income Net Fees & Commissions Income Other Operating Income I/S Operating Income Net Income Net Income Attributable to Non- Controlling Interests Net Income Attributable to Controlling Interests ROA Including Non-Controlling Interests Excluding Non-Controlling Interests Management Indicators ROE Including Non-Controlling Interests Excluding Non-Controlling Interests NPL Ratio BIS Total Capital RatioNote 2) 2020 525,919 399,081 249,889 5,999 1,014 △976 2,080 1,515 208 1,307 0.40 0.34 6.80 5.87 0.42 13.84 (Unit: KRW in billions, %) 2019 Change (amount) Change (%) 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 52,125 37,100 28,202 105 △89 △546 △720 △523 43 △565 △0.17 △0.18 △3.31 △3.43 △0.03 1.95 11.00 10.25 12.72 1.78 -8.07 - -25.71 -25.66 26.06 △30.18 - - - - - - Note 1) Based on consolidated financial statements Note 2) BIS capital adequacy ratio: Based on the internal ratings-based approach at the end of 2020 and based on the standard approach at the end of 2019 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 & 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 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 3. Financial Position & Business Performance A. Financial Position & Business Performance (1) Growth ■ 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 At End-2020 At End-2019 Change (amount) Change (%) (Unit: KRW in billions, %) 525,919 399,081 249,889 28,029 55,179 8,543 473,794 361,981 221,687 26,206 53,764 8,399 52,125 37,100 28,202 1,823 1,415 144 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 11.00 10.25 12.72 6.96 2.63 1.71 095 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 The total assets (incl. AUM) of the Group, as of the end of 2020, amounted to KRW 525.9 trillion, KRW 52.1 trillion (11.0%) higher compared to the previous year. Major factors contributing to the increase were an increase of KRW 28.2 trillion in loans in KRW, an increase of KRW 15.0 trillion in the AUM of subsidiaries, and the impact of the newly incorporated subsidiary, Woori Financial Capital (KRW 8.9 trillion). The loans in KRW stood at KRW 249.9 trillion, loans in foreign currencies at KRW 28.0 trillion, and marketable securities at KRW 55.2 trillion, as of the end of 2020. ※ Total Assets (Incl. AUM) of Major Subsidiaries Category Group Woori Bank Woori Card Woori Financial Capital Woori Investment Bank Woori Asset Trust Woori Asset Management Woori Credit Information Woori Fund Service Woori PE Woori Global Asset Management Woori FIS Woori Finance Research Institute At End-2020 At End-2019 Change (amount) Change (%) (Unit: KRW in billions, %) 525,919 435,066 11,367 8,880 4,332 35,655 21,284 41 19 1,049 8,492 97 7 473,794 403,914 10,087 - 3,399 27,651 19,248 38 17 811 8,696 91 5 52,125 31,152 1,280 8,880 933 8,004 2,036 3 2 238 △204 6 2 11.00 7.71 12.69 - 27.45 28.95 10.58 7.89 11.76 29.35 △2.35 6.59 40.00 Note 1) Woori Bank: Based on consolidated financial statements, Woori Financial Capital: Based on consolidated financial statements, newly incorporated into the Group in 2020 ■ Woori Bank Category Total Assets Loans in KRW Corporate Loans Household Loans Public and Other Loans 2020 2019 End of the (current) 187th term End of the (previous) 186th term 374,310 241,356 107,798 130,353 3,204 348,182 219,910 97,080 119,720 3,110 (Unit: KRW in billions) Change (amount) Change (%) 26,129 21,445 10,718 10,632 95 7.50 9.75 11.04 8.88 3.04 Note) Based on consolidated financial statements of Woori Bank As of the end of 2020, the total assets of Woori Bank, based on consolidated financial statements, amounted to KRW 374.3 trillion, a KRW 26.1 trillion (7.50%) increase year-over-year. The main driver was the growth of loans in KRW by KRW 21.4 trillion (or 9.75%) y-o-y. Meanwhile, corporate loans increased by KRW 10.7 trillion and household loans by KRW 10.6 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 2021, taking into account risk management and profitability. ■ Financial Information of the Major Subsidiaries Category Woori Card Asset Liability Equity Asset Woori Financial Capital Liability Equity Asset Woori Investment Bank Liability Equity 096 At end-2020 11,366,594 9,312,985 2,053,609 8,880,117 8,053,840 826,277 4,332,474 3,803,594 528,880 At end-2019 10,087,342 8,299,175 1,788,167 7,473,168 6,659,178 813,990 3,398,960 3,031,622 367,338 (Unit: KRW in millions) At end-2018 9,987,400 8,305,436 1,681,964 6,201,432 5,449,071 752,361 2,682,660 2,367,418 315,242 Category Woori Asset Trust Woori Asset Management Asset Liability Equity Asset Liability Equity Asset Woori Savings Bank Liability Equity At end-2020 At end-2019 At end-2018 185,633 56,396 129,237 118,121 5,133 112,988 1,196,633 1,086,581 110,052 139,839 45,410 94,429 112,781 6,017 106,764 1,110,597 1,011,809 98,788 113,786 37,333 76,453 101,536 3,824 97,712 1,084,596 997,390 87,206 Note) Woori Card/Woori Financial Capital/Woori Investment Bank: Based on K-IFRS consolidated financial statements, Woori Asset Trust/Woori Asset Management: Based on separate financial statements (K-IFRS), Woori Savings Bank: Based on K-GAAP As for Woori Card, the total assets increased by about KRW 1.3 trillion year-over-year as a result of an increase in financial assets and auto loans. 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 (800%) of credit card companies. Woori Financial Capital saw an 18.8% y-o-y growth in total assets to KRW 8.9 trillion, based on the consolidated financial statements, as of the end of 2020. As a result of improved fundamentals and incorporation into the Woori Financial Group as a subsidiary, Woori Financial Capital saw its long-term credit rating climb two steps (A0 → A+ → AA-) between 2019 and 2020, and this made it possible to raise funds at lower interest rates. This in turn has allowed the company to improve its competitiveness and secure new accounts, thereby gaining more assets. It is working to diversify its business portfolio to include personal finance and corporate finance in addition to car financing, the area where it has traditionally been strong in. There are plans to produce synergy with other affiliates and hone its competitive edge based on digital finance. As of the end of 2020, Woori Investment Bank has KRW 4.3 trillion in total assets, a KRW 1 trillion (27.5%) increase from the previous year, based on the consolidated financial statements. This was achieved by pursuing credit transactions in connection with Woori Bank and gaining more credit transaction users in good standing according to the credit business expansion plan, which resulted in an increase of KRW 280.1 billion (23.2%) in loans in KRW. Also, public bonds and financial bonds climbed KRW 374.9 billion (66.8%) as a result of full-fledged commencement of bond management. Woori Investment Bank will continue to roll out balanced asset growth strategies, taking into account risk management and profitability. At the end of 2020, Woori Asset Trust recorded KRW 185.6 billion in total assets, up KRW 45.8 billion (33%) from the previous year, and managed KRW 35.5 trillion in terms of AUM, a KRW 7.9 trillion increase. In 2020, due to the reinforced regulations against real estate speculation and economic slowdown caused by COVID-19, there was a sharp increase in bad debt expenses due to a decline in the profitability of income-generating real estate properties, along with growing risks. As a result, loan-type land trusts, where the trust companies raise the money themselves, saw stagnant growth, whereas management- type land trusts with guaranteed construction completion saw increased growth, as growing importance began to be placed on the inherent objective of trusts to protect the trust property. In 2020, the company expanded into the managed land trust market with improved credibility as a subsidiary of Woori Financial Group and, at the same time, entered the small-scale renewal project market in the Seoul Capital Area, through which it recorded an increase in sales. With the management objective to secure a competitive advantage in real estate rusts based on stability and innovation-driven growth in 2021, Woori Asset Trust will discover mid-risk, high-return development projects to bolster its competitiveness and continually win contracts for small-scale renewal projects. It will also consolidate the foundation for stable business operations by producing synergy with the affiliates of the Group and pursue stability in the future by launching new products after obtaining a license as a REIT AMC and more. At the end of 2020, Woori Asset Management managed KRW 21.1 trillion, a 10.5% y-o-y increase, in terms of net asset value (NAV). In the first half of 2020, the AUM temporarily declined due to an outflow of money from fixed-income funds comprised of mainly corporate bonds and an increase in credit spread due to COVID-19. However, the quantitative easing policies of countries around the world help stabilize financial markets, including the credit market, in the second half, and as a result, the company achieved recovery in AUM in relation to fixed-income products. Also, the increased money supply flowed into short-term finance markets causing a rise in AUM in relation to short-term financial products. While market volatility is still high, in consideration of the continued implementation of quantitative easing policies, new products will be added to a lineup of MMFs, index funds, EMPs and more to attract institutional investment and PE funds. The company has set a goal to boost AUM by KRW 3.3 trillion in 2021. To this end, it is working to diversify new sales channels, build a non-face-to-face service infrastructure, expand the product lineup, upgrade the ESG management processes, strengthen risk management and produce synergy with other affiliates of the Group. There are plans to be prepared for small OCIO according to the changes in the retirement pension market and review the possibility of entering the ETF market. Woori Savings Bank has achieved KRW 1,196.6 billion in total assets, an KRW 86.0 billion (7.7%) increase from the previous year, based on an increase in prime household loans, prime SME loans and Sunshine Loan. Household loans in KRW rose KRW 42.6 billion due to an increase in credit loans and Sunshine Loan, while corporate loans increased KRW 90.6 billion due to balanced growth centering on SMEs in good standing. 097 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Profitability ■ 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 2020 5,999 1,014 △976 3,956 2,080 △79 2,001 486 - 1,515 208 1,307 (Unit: KRW in billions, %) Change (amount) Change (%) 105 △89 △546 190 △720 △2 △722 △199 - △523 43 △565 1.78 △8.07 - 5.05 △25.71 - △26.51 △29.05 - △25.66 26.06 △30.18 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 Woori Financial Group generated KRW 1,515 billion (KRW 1,307 billion based on controlling interests) in net income in 2020. This was a y-o-y decline of KRW 523 billion, attributable to the reserve created for COVID-19 response and an increase in selling and administrative expenses due to increased voluntary retirement benefits. The net interest income stood at KRW 5,999 billion, an increase of KRW 105 billion from the previous year achieved despite two interest rate cuts (March and May 2020) thanks to asset growth and an increase in low-cost deposit savings. As a result, it helped offset a decrease of KRW 89 billion in the net fee and commission income. As for the other operating income and loss, △ KRW 784 billion out of △ KRW 976 billion is attributable to the bad debt expenses (+ KRW 410 billion), while the selling and administrative expenses y-o-y increased of KRW 190 billion to KRW 3,956 billion. The operating income stood at KRW 2,080 billion, while the net income attributable to non-controlling interests includes the dividends for hybrid securities issued by Woori Bank (KRW 162 billion). ※ Net Income of Each Affiliate Category Group Woori Bank Woori Card Woori Financial Capital Woori Investment Bank Woori Asset Trust Woori Asset Management Woori Credit Information Woori Fund Service Woori PE Woori Global Asset Management Woori FIS Woori Finance Research Institute 098 2020 1,515 1,370 120 △30 63 35 7 2 3 1 △1 2 0 (Unit: KRW in billions) Change (amount) Change (%) △523 △536 6 △30 10 35 5 0 1 3 △0 △1 △0 △25.66 △28.12 5.26 - 18.87 - 250.00 10.70 50.00 - - △33.33 △34.81 2019 2,038 1,906 114 - 53 - 2 2 2 △2 △1 3 0 Note 1) Net income: Based on total net income (KRW 1,307 billion attributable to the controlling interests + KRW 208 billion attributable to the non-controlling interests for the Group) Note 2) Woori Bank: Based on separate financial accounts + foreign subsidiaries in 2019 and consolidated financial statements in 2020 Note 3) Woori Financial Capital: Performance over 3 months (October to December) after being incorporated into the Group in 2020, based on the consolidated financial statements (incl. Woori Savings Bank; △ KRW 39 billion in goodwill amortization in relation to Woori Savings Bank) Note 4) Woori Asset Management and Woori Global Asset Management: Performance over 5 months after being incorporated into the Group in 2019 ■ 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) 187th term (Previous) 186th term 2020 (Unit: KRW in billions) Changes 1,926 5,291 717 846 166 18 △314 △535 △3,547 △138 1,788 - 418 1,370 1,363 7 2,592 5,317 887 972 214 84 △383 △118 △3,494 52 2,644 △471 645 1,527 1,506 22 △666 △26 △170 △126 △47 △66 +69 △417 △53 △190 △856 +471 △228 △157 △142 △14 In 2020, Woori Bank posted KRW 1,363.2 billion in net income (attributable to controlling interests), a KRW 142.3 billion y-o-y decrease, and KRW 1,925.7 billion in operating income, a KRW 665.9 billion y-o-y decrease, based on the consolidated financial statements. Major factors contributing to the decline in net income were the reserve for COVID-19 response and a drop in non-interest income due to a decrease in the sales of asset management products and imports and exports. As a result of the two interest rate cuts (1.25 → 0.75 → 0.50) by the Bank of Korea, the net interest margin (NIM) fell 0.11%p. However, corporate and household loans grew 11.04%p and 8.88%p, respectively, leading to an increase in earning assets, as a result of which the net interest income fell only by KRW 25.6 billion y-o-y to KRW 5,291.1 billion. Non-interest income dropped KRW 170.4 billion from the previous year. This was mainly attributable to the restrictions on the sales of asset management products, such as complex products and ELTs, and reduced movement at home and abroad due to COVID-19. The net fee and commission income decreased by KRW 126.1 billion and the securities income dropped by KRW 47.5 billion, while a net loss on disposal of financial assets at amortized cost was recorded at KRW 66.3 billion. On the other hand, the F/X, derivatives and other operating income increased by KRW 69.4 billion from the previous year. The impairment losses due to credit loss stood at KRW 535.3 billion, a KRW 417.0 billion increase from the previous year. This was due to the fact that, while the ordinary credit cost was reduced as a result of the efforts to improve asset soundness, a reserve was created to better prepare for the increasing uncertainty caused by COVID-19. Woori Bank has been managing its asset soundness and credit cost by increasing credit quality, monitoring sectors of interest such as shipbuilding, construction and shipping and implementing stringent risk management. Through these efforts, the sub-standard or below ratio reached its record-low level of 0.32%. General and administrative expenses stood at KRW 3,547.0 billion, and the percent increase was kept minimal at 1.5%, or KRW 52.9 billion, through the efforts to increase the efficiency of keeping the costs under control. Non-operating income was recorded at △ KRW 137.7 billion, a KRW 189.8 billion y-o-y decrease due to the cost associated with the sales of PE funds such as Lime funds. The business environment is expected to remain unfavorable due to increased uncertainty in domestic and overseas economies in 2021. However, Woori Bank will make every effort to generate stable income, based on strong asset soundness, proactive risk management and customer-centric innovation. 099 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ■ Woori Card Category Credit Card Payment Volume Operating Revenue Net Income 2020 (8th Term) 2019 (7th Term) 2018 (6th Term) 85,036,695 1,387,465 120,229 82,649,489 1,368,140 114,196 76,357,503 1,386,707 126,534 (Unit: KRW in millions) Woori Card saw a KRW 25.6 billion decrease in income from credit card merchant fees due to the impact of COVID-19 but achieved KRW 120.2 billion in net income, based on an increase in financial assets, cost reduction and non-recurring factors. It has been forecast that the business environment for the credit card industry will continue to worsen in 2021. Business growth will be sluggish due to shrinking private consumption due to COVID-19, maturation of the credit card industry, rising household debt and lower merchant fees. An additional threat is the intensifying competition with BigTech companies and others triggered by the amendments to the three laws on data and the Electronic Financial Transactions Act. However, Woori Card will work to boost income by managing the profitability of each business and efficiently controlling costs. For instance, the company will expand profitable assets by reinforcing data analytics and pursuing marketing campaigns targeting prime customers, in addition to readjusting its portfolio to attract new members and improving the cost structure to raise business efficiency and cut costs. In addition, the company will raise the efficiency of business management by strengthening its asset soundness based on stringent risk management, thereby creating a strong foundation for continually generating income. Furthermore, in order to secure new growth engines, Woori Card will continue its efforts to create synergy with other affiliates of the Group and take advantage of the global network of Woori Bank. ■ Woori Financial Capital 1) Category Operating Revenue Operating Expenses Operating Income Net Income before Income Tax Expense Net Income 2) Total Comprehensive Income 2) 2020 832,511 694,411 138,100 98,921 58,980 58,596 2019 726,369 592,614 133,756 133,905 101,588 98,971 (Unit: KRW in millions) 2018 615,238 505,213 110,025 109,896 90,969 89,314 Note 1) Based on consolidated financial statements Note 2) 2020: Reflecting the goodwill impairment of KRW 39.2 billion for Woori Savings Bank Through the diversification of the portfolio centering on high-return products as well as the growth of loan assets, Woori Financial Capital saw a 14.6% y-o-y increase in operating revenue in 2020. On the other hand, net income fell compared to the previous year, due to the creation of a reserve to prepare for insolvencies and other uncertainties brought upon by COVID-19 and the reflection of the goodwill impairment of Woori Savings Bank. In the future, however, Woori Financial Capital expects to see an increase in operating revenue due to asset growth as well as continuous improvement in its profit structure, as it will be able to borrow at cheaper rates as a subsidiary of Woori Financial Group and reap the benefits of creating a reserve for COVID-19 response in advance. ■ Woori Investment Bank Category Operating Revenue Operating Expenses Operating Income Net Income before Income Tax Expense Net Income Total Comprehensive Income Note 1) Based on separate financial statements (K-IFRS) 2020 (49th Term) 2019 (48th Term) 2018 (47th Term) (Unit: KRW in millions) 253,303 185,198 68,105 67,801 62,233 61,570 201,329 145,790 55,539 53,945 54,981 53,719 202,168 170,086 32,081 31,732 32,388 32,369 Woori Investment Bank recorded an operating income of KRW 68.1 billion, a 22.6% (KRW 12.6 billion) increase year-over-year, in 2020. An increase in interest income from increased lending and gains on marketable securities pushed up the operating revenue by 25.8% (KRW 52.0 billion) compared to the previous year, and the operating expenses also climbed 27.0% (KRW 39.4 billion) due to the losses on marketable securities. General and administrative expenses, on the other hand, rose from KRW 31.2 billion in 2019 to KRW 39.0 billion in 2020 due to an increase in the workforce between 2019 and 2020. The net income after deducting non-operating income (expenses) and income tax expenses amounted to KRW 62.2 billion, up 13.28% (KRW 7.2 billion) from KRW 55.0 billion in 2019. Increases in deferred tax assets led to income tax benefits of KRW 1.0 billion in 2019, while an income tax of KRW 5.6 billion was recorded in 2020. Woori Investment Bank is implementing a roadmap to achieve continuous growth and become a key subsidiary of the Group in the non-banking sectors, especially in the area of financial investment. ■ Woori Asset Trust Category Operating Revenue Operating Expenses Operating Income Net Income from Continuing Operations before Income Tax Expense Net Income Total Comprehensive Income Note) Based on separate financial statements (K-IFRS) 2020 79,426 31,861 47,565 47,716 35,312 35,954 2019 75,191 34,037 41,154 40,876 31,122 30,584 (Unit: KRW in millions) 2018 63,666 22,649 41,016 41,202 31,495 31,120 Woori Asset Trust recorded a 6% (KRW 4.2 billion) increase in operating revenue from the previous year. Despite the negative outlook on the domestic real estate market, its operating revenue from land trusts and other trusts increased 17% (KRW 6.9 billion), and interest income also climbed 61% (KRW 1.8 billion). Dividends, on the other hand, decreased 99% (KRW 1.7 billion), and operating expenses dropped 6% (KRW 2.2 billion) y-o-y to KRW 31.9 billion. Selling and administrative expenses increased by 12% (KRW 3.0 billion), partly due to an increase in payroll from an expansion of the workforce. Bad debt expenses for loans fell 52% (KRW 2.1 billion) thanks to recovery for loan-type land trusts. Woori Asset Trust’s return on assets was one of the highest in the industry in 2020 at 20.03%. Real estate trust revenue has been stagnant due to the continuous decline in compensation for trust management and increased competition with three new securities firms entering the market. However, Woori Asset Trust will boost profitability based on its strong business foundation in the management-type land trusts and non-land trusts, such as collateral trusts and agency services, as well as synergy with the other affiliates of Woori Financial Group. The sales and profitability of Woori Asset Trust are expected to improve in the future through the gradual expansion into the mid-risk, high-return management-type land trusts backed by a completion guarantee and the small-scale renewal projects and by launching new businesses as a REIT AMC. ■ Woori Asset Management 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) Note) Based on separate financial statements (K-IFRS) 2020 23,329 14,941 8,388 8,906 6,707 6,224 2019 24,990 14,754 10,236 10,629 8,001 8,822 (Unit: KRW in millions) 2018 23,999 15,584 8,415 8,237 5,991 5,743 Woori Asset Management’s operating revenue stood at KRW 23.3 billion in 2020, a 6.4% (KRW 1.6 billion) decrease from the previous year. Redemption of high-fee PE funds occurred on a large scale due to COVID-19, sending the operating revenue plummeting in the short term, but this was offset by attracting investments in MMFs by marketing toward institutions. Operating expenses increased 1.3% (KRW 200 million) y-o-y to KRW 14.9 billion. Net income minus the non-operating income (expenses) and income tax expenses was recorded at KRW 6.7 billion, a 16.3% (KRW 1.3 billion) decrease from KRW 8.0 billion in 2019. Income tax expenses dropped 16% (KRW 1.7 billion) in line with the decline in net income. Woori Asset Management recorded an ROA of 5.7% in 2020. In 2020, the AUM for PE fixed-income funds shrank due to the impact of COVID-19, and the inflow into active equity investment funds became stagnant due to a growing number of individuals investing on their own. However, it is expected that the AUM and profitability will improve in the future, with an inflow of funds into its new products and traditionally popular products during the post-pandemic period. 100 101 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ■ Woori Savings Bank Woori Savings Bank saw an increase of KRW 3.1 billion in income from loan interests thanks to the growth achieved centering on prime assets. However, net income decreased KRW 150 million from the previous year to KRW 11.1 billion, partly due to the gains on sales of loans declining by KRW 3.9 billion and gains on marketable securities falling by KRW 700 million. Category Operating Revenue Operating Expenses Net Income Note) Based on K-GAAP (3) Asset Quality ■ Woori Financial Group Inc. Category Total Loans Sub-Standard or Below Loans Sub-Standard or Below Ratio Coverage Ratio (Unit: KRW in millions) At End-2020 At End-2019 At End-2018 68,113 21,442 11,120 66,528 23,822 11,272 59,936 21,302 15,763 Dec. 2020 299,075 1,256 0.42 153.8 Dec. 2019 266,432 1,198 0.45 133.6 (Unit: KRW in billions, %) Change (amount) 32,643 58 -0.03 20.2 Even in the midst of an economic slowdown caused by COVID-19, Woori Financial Group recorded a sub-standard or below ratio of 0.42%, a 0.03%p decrease from the previous year, based on proactive risk management. While the total loans and sub-standard or below loans increased as a result of lending to companies hit by COVID-19 and rising demand-based loans, Woori Financial Group has kept the sub-standard or below ratio steady by disposing of non-performing loans (NPLs) and thoroughly managing its portfolio. By appropriating an allowance for bad debts to be prepared against uncertainties brought upon by COVID-19, the coverage ratio (excl. the reserve fund) increased y-o-y by 20.2%p, indicating excellent capacity to cover potential losses. ■ Asset Quality Indicators of Major Subsidiaries Category Indicator Total Loans Sub-Standard or Below Loans Sub-Standard or Below Ratio Woori Bank NPL NPL Ratio Coverage Ratio(A/B) Total Allowance for NPL(A) Sub-Standard or Below Loans(B) Total Loans Sub-Standard or Below Loans Sub-Standard or Below Ratio Woori Card Delinquency Ratio Coverage Ratio(A/B) Credit Loss Provisions Outstanding(A) Minimum Regulatory Reserve for Credit Loss(B) (Unit: KRW in 100 millions, %) 2020 2,645,329 2019 2,430,845 2018 2,339,165 8,548 0.32 7,853 0.3 154 13,160 8,548 106,650 673 0.63 1.18 102.65 7,696 7,497 9,797 0.4 8,793 0.36 121.8 11,933 9,797 98,170 789 0.8 1.61 102.84 7,641 7,430 11,825 0.51 10,156 0.43 119.42 14,121 11,825 96,072 772 0.8 1.78 104.02 7,273 6,991 Category Indicator Total Loans Woori Financial Capital 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) Total Loans Sub-Standard or Below Loans Sub-Standard or Below Ratio Woori Investment Bank NPL NPL Ratio Coverage Ratio(A/B) Credit Loss Provisions Outstanding(A) Sub-Standard or Below Loans(B) Assets Subject to Quality Classification Woori Asset Trust Sub-Standard or Below Assets Ratio of Sub-Standard or Below Assets Total Loans Woori Savings Bank Sub-Standard or Below Loans Sub-Standard or Below Ratio 2020 68,946 1,220 1.77 1.33 117.37 1,710 1,457 27,466 216 0.79 56 0.2 84.72 183 216 390 248 63.64 10,292 350 3.4 2019 57,392 1,306 2.28 1.59 96.99 1,278 1,318 18,737 92 0.49 39 0.21 167.39 154 92 712 267 37.51 8,960 314 3.51 2018 45,905 632 1.38 1.41 119.75 1,004 839 16,495 248 1.51 247 1.49 51.21 127 248 431 45 10.52 8,558 288 3.36 Note) Based on Work Report of Financial Supervisory Service (FSS); Woori Savings Bank: Based on K-GAAP Woori Bank has been demonstrating remarkable performance in terms of financial soundness by pursuing proactive credit risk management and sophisticating its risk management system. Sub-standard or below ratio, for example, has been dropping steadily from 0.51% in 2018 to 0.40% in 2019 and 0.32% in 2020. The coverage ratio (excl. the reserve fund) has been raised from 119.4% in 2018 to 121.8% in 2019 and 154.0% in 2020, attesting to its preparedness against additional losses. Woori Bank’s corporate loans increased from KRW 121 trillion in 2019 to KRW 132 trillion in 2020, while the sub-standard or below ratio of corporate loans decreased from 0.57% in 2019 to 0.48% in 2020. The marked decline in the sub-standard or below ratio was made possible by lending to companies in good standing, disposing of NPLs and curbing NPLs by thorough portfolio management. Household loans increased from KRW 120 trillion in 2019 to KRW 130 trillion in 2020, while the sub-standard or below ratio of household loans fell markedly from 0.23% in 2019 to 0.17% in 2020 (based on the NPL records of the Financial Supervisory Service). 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 working to normalize their business operations and if unsuccessful, they are contemplating on liquidating their assets. Although the current indicators of financial soundness are deemed excellent, Woori Bank is monitoring various risks more thoroughly, based on the judgment that the data may be distorted due to payment deferrals granted in response to COVID-19, etc., to be better prepared against uncertainties at home and abroad. Woori Card has seen steady decline in the delinquency rate from 1.78% in 2018 to 1.61% in 2019 and 1.18% in 2020. This was driven by thorough risk management, enhanced capabilities to collect on debt and ongoing disposition of NPLs. Woori Financial Capital has been recording the industry’s lowest delinquency rate at 1.41% in 2018, 1.59% in 2019 and 1.33% in 2020. In 2019, the sub-standard or below ratio increased (2.28%) due to a change in the financial soundness of borrowers closing their businesses among private business owners that affected the entire industry. Despite the reinforced standards for asset soundness classification with respect to the sub-standard or below loans in 2020, the sub-standard or below ratio was substantially improved to 1.77% based on the management of prime assets and reinforced capabilities to collect on debt. The company has conservatively set aside provisions to be sufficiently prepared against losses that may potentially be incurred due to uncertainties at home and abroad. 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. 102 103 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Woori Asset Trust saw a decline in loans by 45% (KRW 32.2 billion) as a result of collection from trust accounts, and the sub-standard or below ratio also fell 7% (KRW 1.9 billion) as a result. Woori Asset Management has been endeavoring to bolster monitoring to improve its preparedness against crisis and set an appropriate risk capital limit and manage it within the limit, in addition to improving transparency in its decision-making by operating a related taskforce (TF). Also, it has also examined the themes of internal control in order to upgrade its internal control system, as part of the efforts to prevent incidents, and reinforced prior reviews of compliance in relation to non-face-to-face sale channels. Woori Savings Bank recorded 3.4% in sub-standard or below ratio, a 0.11%p y-o-y decrease, by making efforts to improve asset soundness through risk management and sales. (4) Capital Adequacy ■ 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 2020 19,828 3,534 4,086 27,448 198,269 10.00 11.78 13.84 2019 19,135 3,340 4,640 27,115 228,046 8.39 9.86 11.89 (Unit: KRW in billions, %, %p) Change (amount) 693 194 △554 333 △29,777 1.61 1.92 1.95 Note) Based on the internal ratings-based approach for 2020 and based on the standard approach for 2019 At the end of 2020, the BIS capital adequacy ratio of the Group stood at 13.84%, a 1.95%p increase year-over-year, and the common equity tier 1 ratio was recorded at 10.0%, a 1.61%p increase year-over-year. This was possible, despite the KRW 9.6 trillion increase in risk-weighted assets as a result of the incorporation of Woori Financial Capital into the Group, due to the efforts to improve the capital adequacy ratio, such as the issuance of KRW 0.9 trillion worth of convertible bonds, and the reduction of risk-weighted assets following the approval of the internal ratings-based approach in June and the early introduction of the final Basel III reforms in the credit risk area in September. Woori Financial Group, Inc. will continue to comply with regulatory requirements, realize profits and recapitalize at an adequate level to raise capital adequacy. ■ Capital Ratios of Major Subsidiaries ※ Woori Bank 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 Note) Prior to dividend payout 2020 Note) 2019 2018 (Current) 187th term (Previous) 186th term (Previous) 185th term (Unit: KRW in billions, %) 19,155 2,752 3,362 25,269 145,755 13.14 15.03 17.34 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 In 2020, the common equity tier 1 capital increased KRW 1,834.0 billion to KRW 19,155.0 billion, a 10.6% y-o-y increase. Capital was increased centering on common equity through a paid-in capital increase of KRW 1 trillion in June 2020 and an increase in internal reserves. The additional tier 1 capital decreased KRW 714.0 billion to KRW 2,752.0 billion, as a result of the repayment of hybrid bonds (call option). Tier 2 capital, on the other hand, fell KRW 165.0 billion to KRW 3,362.0 billion. This was attributable to a decline in subordinated bonds recognized as equity, but the amount of decrease was minimized by new issuance of subordinated bonds. The total BIS capital was recorded at KRW 25,269.0 billion, a KRW 955.0 billion increase from the previous year. In 2020, the risk-weighted assets fell KRW 12,135.0 billion (7.7%) to KRW 145,755.0 billion. This was a result of the introduction of the final Basel III reforms in late September as well as the efforts made to improve the capital adequacy ratio by minimizing potential non-performing assets and maintaining an appropriate amount of prime assets. In 2020, the common equity tier 1 ratio, tier 1 capital ratio and BIS capital adequacy ratio were recorded at 13.14%, 15.03% and 17.34%, a 2.17%p, 1.86%p and 1.94%p y-o-y increase, respectively. Going forward, Woori Bank will continually improve its capital adequacy ratio by generating steady profits, paying an appropriate amount of dividends and increasing capital. Category Woori Card Woori Financial Capital Woori Investment Bank Indicator Adjusted Capital Ratio Tangible Common Equity Ratio Adjusted Capital Ratio Tangible Common Equity Ratio BIS Capital Adequacy Ratio Total BIS Capital(A) Risk-Weighted Assets(B) BIS Capital Adequacy Ratio(A/B) Woori Asset Trust Woori Asset Management Woori Savings Bank Net Operating Capital Ratio (NCR) Minimum Operating Capital Ratio BIS Capital Adequacy Ratio (Unit: KRW in 100 millions, %) 2020 19.93 13.48 12.17 10.77 4,918 31,922 15.41 1,286.43 754.1 13.40 2019 18.33 14.29 13.46 12.08 3,381 26,303 12.86 1,397.97 655.8 13.46 2018 18.08 13.54 15.47 14.04 3,003 23,192 12.95 957.76 558.9 12.29 Note 1) BIS capital adequacy ratio=total BIS capital/risk-weighted assets x 100 Note 2) The numbers for Woori Card and Woori Financial Capital are based on the report issued by the FSS Note 3) Woori Investment Bank: Based on the report issued by the FSS / Based on consolidated financial assets (K-IFRS) 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: Based on separate financial statements (K-IFRS) Note 7) Woori Savings Bank: Based on K-GAAP At the end of 2020, Woori Card had an adjusted capital ratio (ACR) of 19.93%, surpassing the minimum requirement according to the Management Guidance (8% or above) in accordance with the Supervisory Regulations on Specialized Credit Financial Business. Woori Investment Bank also recorded an excellent BIS capital adequacy ratio of 15.41% at the end of 2020 (requirement by the Financial Investment Services and Capital Markets Act: 8%). Woori Investment Bank saw a slight increase in its BIS capital adequacy ratio following a paid-in capital increase in 2020. It is expected to be maintained at over 12% even after reflecting the asset expansion plan according to the business management plan for 2021. In addition, the BIS capital in December 2020 consisted of KRW 481.9 billion in tier 1 capital and KRW 9.9 billion in additional tier 1 capital, indicating a high tier 1 ratio. As such, the company has the capacity to achieve asset expansion and capital expansion through additional tier 1 capital, if necessary. The ACR of Woori Financial Capital was 12.17%, a slight decrease from the previous year. This was attributable to the continued asset growth, and this trend is expected to be observed in the future, depending on the rate of growth. It should be noted, however, that it will be kept above the minimum requirement according to the Management Guidance (7% or above) in accordance with the Supervisory Regulations on Specialized Credit Financial Business. Woori Asset Trust recorded an equity capital that was 1,292.4% of the minimum equity requirement (KRW 10.0 billion) set forth in the Financial Investment Services and Capital Markets Act and the Enforcement Decree of the Act. The net capital ratio (NCR) dropped 112%p y-o-y to 1,286%, but it still remained among the highest out of the fourteen trust companies last year. As for Woori Savings Bank, the BIS capital adequacy ratio was 13.4%. While the earned surplus climbed upward, the BIS capital adequacy ratio fell 0.06%p from the previous year due to an increase in risk-weighted assets resulting from an overall expansion of assets. B. New Businesses and Suspended Businesses Woori Financial Group has been endeavoring to enhance its value and competitiveness by newly incorporating subsidiaries specializing in businesses related to consumer finance in 2020 and building a system to promote synergy with other subsidiaries. [Acquisition of Woori Financial Capital and Woori Savings Bank] Woori Financial Group completed the acquisition of shares of Aju Capital and its subsidiary, Aju Savings Bank, in December 2020. Aju Capital, which displayed excellence in auto financing, was renamed as Woori Financial Capital, and it is expected to achieve accelerated growth with the improved ability to raise funds and manage risks as a subsidiary of Woori Financial Group and by collaborating with other subsidiaries. Aju Savings Bank, renamed as Woori Savings Bank, will play a pivotal role in the consumer finance business of the Group and offer excellent financial services such as loans to SMEs and vulnerable groups along with other subsidiaries. 104 105 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 C. Business Rationalization (1) Alteration and Reorganization of Business Groups ■ Woori Financial Group [Establishment of a business management system and reinforcement of professional expertise (Feb. 2020)] In February 2020, the Management Support Unit and the Business Management Department were newly established to reinforce business management of the existing and newly incorporated subsidiaries. Through these organizations, the main businesses of the Group are managed carefully to pursue steady growth. The Group also established the Finance Planning Unit and Finance Management Department to pursue financial management with professional expertise, the Digital & IT Unit to pursue innovation at an accelerated rate and the New Business Unit to expand into new business areas. The Strategy Group, Public Relations and Brand Group and Financial Consumer Protection Department were also newly established to support the management in decision-making and promote socially responsible management. [Establishment of an organization dedicated to preventing money laundering (Mar. 2020)] In May 2020, Woori Financial Group created a department (Anti-Money Laundering Department) overseeing internal controls to prevent money laundering across the organization. This has allowed the Group to align itself with the growing importance of anti-money laundering practices and its management and coordination activities to combat money laundering. [Restructuring of the organization to power the digital innovation of the Group (Jul. 2020)] In July 2020, a new organization was incepted for the purpose of concentrating the Group’s digital capacity and strengthening its competitiveness in relation to digital technology. The organization will offer assistance in the digital innovation projects of the Group and pursue differentiated capacity in applying cutting-edge digital technology. [Restructuring of the organization to raise efficiency and improve business management (Dec. 2020)] For the purpose of creating an efficient operating system centering on the key organizations, Woori Financial Group endeavored to slim down its organization in December 2020. The position of Senior Vice President and the Business Growth Group were newly established to maximize synergy among the subsidiaries and integrate the business management organizations. In addition, the Public Relations Office and the ESG Management Department were established to strengthen the establishment and implementation of brand strategies at the Group level and to respond to the growing importance of ESG management, while the Audit Group was newly established for more rigorous internal audits. ■ Woori Bank Woori Bank acquired the official approval for MyData (personal credit information management business) on January 27, 2021, with plans to offer innovative MyData services, including personal financial management. It will also continually build its capacity to operate data-based businesses. ■ Woori Card Woori Card restructured its organization to respond systematically and proactively to the changes in the business environment. It has concentrated its core functions and sped up the decision-making process by restructuring the sales and marketing organization to promote the use of credit sales and recruit more users. In addition to introducing a division dedicated to boosting prime financial assets and auto financing, it also set up regional centers as frontline customer touchpoints. The Future Growth Division was newly established to expand on global businesses and incubate new growth businesses, while digital platform organizations were integrated into the Digital Innovation Team to speed up digital innovation and achieve tangible results by strengthening the digital capacity. ■ Woori Financial Capital Woori Financial Capital endeavored to expand its personal finance and corporate finance businesses to diversify its business portfolio, which had mainly focused on auto financing. Also, long-term car rental was added to the car financing product lineup, which had previously consisted of installment payments, lease and loans, and an organization was created to handle leases for general properties, not just auto leases. In addition, in order to effectively produce synergy with other subsidiaries and strengthen its digital-based businesses, it newly introduced a organizations dedicated to synergy creation and to implementing digital strategies at the company level. It also restructured its organization, with the aim of improving risk management by separating sales and review processes, strengthening the strategizing and planning functions and raising the efficiency of management and support. ■ Woori Investment Bank Woori Investment Bank created the Digital Finance Team (Department) in June 2020 in response to the contactless trend in the financial sector. It plans to pursue digital innovation by strengthening the non-face-to-face service platforms and discovering FinTech-related services and increase the number of customers using non-face-to-face channels. The company also restructured its organization on January 1, 2021 for the purpose of promoting sales. The Investment Finance Department was incorporated into the CIB Business Division, with plans to broaden the scope of collaboration with Woori Bank in joint equity investment and more. The FICC Department was expanded as the Capital Market Department to broaden the business portfolio to include ECM and corporate bond management. Furthermore, there are plans to create a loan policy department to oversee loan strategies by establishing a loan portfolio policy and conducting industry research and analysis. 106 ■ Woori Asset Trust Woori Asset Trust endeavored to promote synergy between the business management organizations and business operation organizations under the co- CEO management system and revamped the organizations providing support by reinforcing internal controls (separation of the Risk Management Team and Compliance Team) and improving the contract review system (reinforcing the voting system and hiring examiners) to create a business management system at the Group level. It also newly established the REIT Business Division, a department dedicated to renewal projects and related sales teams, as part of the efforts to secure new growth engines and boost the business operation capacity in 2021. ■ Woori Asset Management Woori Asset Management is striving to create a balanced portfolio as a management objective. To this end, it introduced the RM system to foster the equity investment and global business areas. RMs with professional expertise in marketing and asset management will play the role of marketers that can cater to institutional investors. (2) Early Retirement of Employees, etc. Woori Bank, a major subsidiary of Woori Financial Group, has been carrying out the Outplacement Services Program that serves as an upgraded early retirement program since 2005. The Outplacement Services Program is designed to resolve the bottleneck in promotions and improve its workforce structure, while allowing employees to plan out a new chapter after retirement. Employees looking to resign from their positions are provided with the support necessary to prepare for a life after retirement. In 2020, the related services were provided to a total of 487 employees, which helped improve the workforce structure of the bank. D. F/X Fluctuations 1) Foreign Currency Translation The consolidated financial statements are presented in Korean won (KRW), the functional currency of the parent company. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate at of the end of the reporting period. The difference in foreign currency translation between the effective hedging portion of the fluctuations in the fair value of derivatives that meet the criteria for cash flow hedging accounting and the monetary items in relation to the net investment in overseas operations is recognized as equity. For the purpose of preparing the consolidated financial statements, assets and liabilities of overseas operations that are subject to consolidation are presented in Korean won (KRW) based on the exchange rate at the end of the reporting period. If the exchange rate fluctuates materially during the relevant period, and it is not necessary to use the exchange rate at the transaction date, the items of profit and loss are translated at the average exchange rate for the relevant period, and the resulting exchange difference is recognized as other comprehensive income and aggregated in equity (appropriated to non-controlling interests if appropriate). In the case of disposal of overseas operations site, the cumulative amount of exchange differences related to the overseas operations site attributable to the parent company is reclassified as profit or loss, and while the cumulative amount of exchange differences related to the overseas operations site attributable to non-controlling interests is eliminated but not reclassified as profit or loss. The fair value adjustments for goodwill and identifiable assets and liabilities arising from acquisition of an overseas operations site are treated as assets and liabilities of the overseas operations site and translated at the exchange rate at the end of the reporting period. The resulting exchange difference is recognized in other comprehensive income. E. Asset Impairment Losses and Reduction Losses Asset impairment losses and reduction losses incurred based on consolidated financial statements are as follows: Category (Current) 2nd term (Previous) 1st term 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 (1,529) 934 (3,297) 1,415 (792,250) (385,758) 18,348 (9,874) (8,591) (1,242) 4,352 9,044 (28,192) (3,634) (Unit: KRW in millions) 2018 (2,027) (1,922) (415,084) 105,985 (16,526) 674 (177) 107 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ■ Woori Bank Category ImpairmentㆍLoss Cause Stocks subject to consolidation (Brazil Woori Bank) KRW 20.62 billion More than 30% decrease in the net asset value compared to Woori Bank’s investment in Korean won due to a drop in the BRL-KRW exchange rate Stocks of related company (K Bank) KRW 6.9 billion Recognition of impairment incurred until the reason for the impairment was resolved (capital increase in July 2020) ■ Woori Financial Capital Category Name Loss Cause Beneficiary certificates Beneficiary certificates Total Hyundai Invest Guggenheim CLO Specialized Investment PE Special Asset Investment Trust No. 2 693 A decrease in recoverable amount due to changes in the market situation KORAMCO Specialized Investment PE Real Estate Investment Trust No. 107 2,956 3,648 A decrease in recoverable amount due to delayed collection of principal and interest and a lawsuit - (Unit: KRW in millions, %) ■ Woori Investment Bank Category 2020 (49th term) 2019 (48th term) 2018 (47th term) Impairment Loss on Intangible Assets and Goodwill Impairment Loss on Financial Assets Available for Sale Total 50 - 786 - 786 - - - (Unit: KRW in millions) 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. An impairment inspection was carried out on the membership in possession during the 2020 accounting period, and the book value of KRW 50 million exceeding the estimated recoverable amount was recognized as an impairment loss. ■ Woori Asset Trust Category Impairment Loss on Premises and Equipment Impairment Loss on Intangible Assets and Goodwill Total Note 1) Based on separate financial statements (K-IFRS) 4. Liquidity, Sources & Applications of Fund A. Liquidity ■ Woori Financial Group, Inc. Category Liquid Assets Liquid Liabilities LCR in KRW Note 1) Based on liquid assets and liabilities with time to maturity of one month or less 2020 - - - 2020 40,308 7,911 509.5 108 (Unit: KRW in millions) 2018 - - 2019 660 - 660 - (Unit: KRW in millions, %, %p) Change (amount) △4,771 436 △93.5 2019 45,079 7,475 603.1 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 Bank Category LCR (Including KRW and all other currencies) Foreign Currency LCR 2020 (187th term) 2019 (186th term) 2018 (185th term) 92.07 106.06 107.27 110.5 103.40 108.98 (Unit: %) Note 1) Applied as the same as the calculation criteria for management disclosures (average of the ratio on each business day during the quarter); The LCR requirement was adjusted downward (100% → 85%) until the end of March 2021 in accordance with the Financial Services Commission’s Implementation of Financial Regulation Flexibilization Measures and Future Plans in 2020 4Q, 2019 4Q and 2018 4Q Note 2) Presented in the same manner as the calculation criteria for management disclosures (average of the quarter); The ratio of foreign currency LCR to the regulatory requirement was adjusted downward (80% → 70%) until the end of March 2021 in accordance with the Financial Services Commission’s Implementation of Financial Regulation Flexibilization Measures and Future Plans in 2020 4Q, 2019 4Q and 2018 4Q Woori Bank manages the liquidity coverage ratio (LCR), an indicator for liquidity regulations in Basel III, at 92.07%, as of 2020 4Q, by increasing highly liquid assets through deposits and corporate bonds. (The LCR will be lowered to 85% by March 2021.) Foreign currency LCR was recorded at 106.06% on average, as of 2020 4Q, (set to be decreased to 70% by March 2021) a by securing a sufficient amount of highly liquid assets such as US treasury bills. Woori Bank manages the liquidity gap ratio and concentration of funding, in addition to keeping the LCR and foreign currency LCR above the regulatory requirements, in order to maintain a stable funding structure. The bank also checks for excessive shortages of liquid assets through periodic stress testing, and if liquidity is lacking due to an unexpected crisis, Woori Bank executes a contingency funding plan and utilizes committed lines from overseas financial institutions to acquire liquidity. ■ 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. As of the end of 2020, the outstanding debenture issues amounted to KRW 7,862.5 billion, up KRW 781.6 billion from KRW 7,080.9 billion at the end of 2019. Woori Card has an adequate level of liquidity and a credit line of KRW 550.0 billion so that it can repay borrowings that are set to reach their maturity and provide operating funds without market financing for some time even in the event of an unexpected credit crunch in the financing market. (1) Liquidity Based on consolidated financial statements Category Cash and Deposits Credit Line Total (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) 2020 (8th term) 2019 (7th term) 2018 (6th term) 5,479 5,500 10,979 1,362 4,800 6,162 3,822 5,300 9,122 2020 (8th term) 2019 (7th term) 2018 (6th term) (Unit: KRW in 100 millions) 67,450 9,217 1,958 78,625 60,500 9,383 926 70,809 60,200 9,701 559 70,460 109 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (Unit: KRW in 100 millions) ■ Woori Financial Group, Inc. (based on separate financial statements of the holding company) B. Sources and Management of Fund (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 ■ Woori Financial Capital Category Liquid Assets in KRW Liquid Liabilities in KRW LCR in KRW 2020 (8th term) 2019 (7th term) 2018 (6th term) 21,324 18,976 21,838 16,488 78,625 20,154 17,839 15,616 17,200 70,809 19,555 20,040 16,865 14,000 70,460 2020 (27th term) 2019 (26th term) 2018 (25th term) 1,357,876 616,632 220.2 1,037,894 498,197 208.3 775,050 507,518 152.7 (Unit: KRW in millions) Woori Financial Capital’s LCR increased by 11.9%p to 220.2%, as of the end of 2020. The LCR of the company is the ratio of liquid assets that will reach their maturities within 90 days to liquid liabilities that will reach their maturities within 90 days in accordance with Article 53-3 of the Specialized Credit Finance Business Act and its subordinate regulations. In light of this, Woori Financial Capital is deemed to be maintaining its LCR at a fairly good level. In addition, to respond to the liquidity crisis caused by a credit crunch in the financing market, Woori Financial Capital is maintaining an appropriate level of liquid funds that are immediately available as well as credit lines from financial institutions. ■ Woori Investment Bank Category KRW LCR Foreign Currency LCR 2020 (49th term) 2019 (48th term) 2018 (47th term) 139.27 - 149.49 109.72 266.26 105.80 (Unit: %) Woori Investment Bank’s LCR in KRW decreased 10.22%p y-o-y to 139.27%, as of the end of 2020. The foreign currency LCR cannot be calculated as there are no liquid liabilities in foreign currencies. LCR in KRW is the ratio of assets to liabilities that will reach their maturities within three months, and Woori Investment Bank ensures that the figure remains at 100% or above (Article 8-41 (Liquid assets/Liquid liabilities) of the Regulation on the Financial Investment Services and Capital Markets). As of the end of 2020, Woori Investment Bank’s LCR in KRW was 139.27%, a decrease from the LCR in 2019, but it is still deemed to be at a satisfactory level. Foreign currency LCR, the ratio of foreign currency assets to liabilities that will reach their maturities within three months, is maintained at or above 85% (Article 8-69 (Liquid assets and Liquid liabilities) Regulation on the Financial Investment Services and Capital Markets). ■ Woori Savings Bank Category Liquid Assets Liquid Liabilities LCR Note) Based on K-GAAP 2020 (50th term) 2019 (49th term) 2018 (48th term) 267,927 209,712 127.76 263,961 228,491 115.52 289,957 248,252 116.80 (Unit: KRW in millions, %) Woori Savings Bank recorded an LCR of 127.76%, a 12.24%p y-o-y increase, at the end of 2020. Woori Savings Bank is required to maintain its LCR, which is the ratio of assets to liabilities that will reach their maturities within three months, at 100% or higher (Article 40-1 (Supervisory Regulations) of the Mutual Savings Bank Act) and has successfully achieved the target in 2020. 110 Debentures Other Liabilities Equity Total Funds Cash and Deposits Share Investments in Subsidiaries Non-Current Assets Other Assets Total Funds Managed At End-2020 At End-2019 Change (amount) Change (%) (Unit: KRW in billions, %) 1,148 239 21,044 22,431 469 21,562 18 231 22,280 948 153 20,106 21,207 1,173 19,874 11 149 21,207 200 86 938 1,224 △704 1,688 7 82 1,073 21.10 56.21 4.67 5.77 △60.02 8.49 63.64 55.03 5.06 Note) Other liabilities: provisions + current income tax liabilities + deferred tax liabilities + other liabilities; Other assets: derivatives assets + other assets Woori Financial Group is a financial holding company established 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 2020 include KRW 1,148 billion in debenture issuance, a KRW 200 billion increase from the previous year, while hybrid securities increased KRW 898 billion to KRW 1,895 billion. As for the funds managed, the share investments in subsidiaries increased KRW 1,689 to KRW 21,562 billion, consisting of Woori Bank’s capital increase of KRW 1 trillion, Woori Investment Bank’s capital increase of KRW 55 billion as well as KRW 634 billion of shares of Woori Financial Capital that was newly incorporated in 2020. Deposits stood at KRW 469 billion, a y-o-y decrease of KRW 704 billion. Woori Financial Group also holds KRW 150 billion worth of hybrid securities issued by Woori Card. As for the amount of repayment according to the maturity of the debentures issued by Woori Financial Group, see the section on debentures issued in 4-(3)-2) Analysis of Maturity of Non-Derivative Financial Liabilities 【5. Notes to Financial Statements in Ⅲ. Matters on Financials】. ■ Woori Bank (1) Sources of Funds Category Fund 2020 (187th term) 2019 (186th term) 2018 (185th term) (Unit: KRW in billions, %) Average balance Interest rate % Average balance Interest rate % Average balance Interest rate Deposits, installments 227,416 Certificates of deposit Funds in KRW Borrowings in KRW Call money in KRW Others Subtotal Deposits in foreign currencies Borrowings in foreign currencies Call money in foreign currencies Debentures in foreign currencies Funds in foreign currencies Others Subtotal Total Equity Provisions Others Subtotal Others Total 1,677 8,537 150 21,964 259,743 20,684 7,894 652 4,222 637 34,089 22,576 497 20,449 43,522 337,355 1.09 1.19 0.92 0.71 1.97 1.16 0.47 1.20 0.70 2.53 0.39 0.90 0.00 0.00 0.00 0.00 0.98 67.4 212,555 0.5 2.5 0.0 6.5 4,760 6,966 406 21,925 77.0 246,612 6.1 2.3 0.2 1.3 0.2 10.1 6.7 0.1 6.1 12.9 16,647 7,944 877 4,209 623 30,301 21,875 454 20,007 42,336 1.50 2.09 1.43 1.60 2.36 1.59 1.19 2.24 2.38 3.89 1.11 1.87 - - - - 66.6 197,572 1.5 2.2 0.1 6.9 5,040 6,555 221 20,937 77.2 230,325 5.2 2.5 0.3 1.3 0.2 9.5 6.9 0.1 6.3 13.3 15,220 6,458 787 3,670 659 26,794 20,897 433 17,876 39,207 1.41 1.97 1.47 1.50 2.39 1.51 0.88 2.13 1.84 3.96 0.38 1.62 - - - - 100.0 319,248 1.40 100.0 296,325 1.32 % 66.7 1.7 2.2 0.1 7.1 77.7 5.1 2.2 0.3 1.2 0.2 9.0 7.1 0.1 6.0 13.2 100.0 111 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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 2020 increased by KRW 18 trillion y-o-y to KRW 337 trillion in 2020. The average balance of funds in Korean won was KRW 260 trillion, with the main source being deposits from customers to ensure stable liquidity, and as a result, deposits increased by KRW 13 trillion y-o-y. The average balance of funds in foreign currencies, on the other hand, increased by KRW 3.8 trillion y-o-y, while deposits in foreign currencies rose by KRW 1.4 trillion. By effectively managing liquidity by raising funds to comply with the LCR and loan-deposit ratio (LDR) and managing its portfolio of fund sources and management, Woori Bank has been successfully enhancing profitability. ※ Time to Maturity for Major Financial Liabilities Category of Financial liabilities Financial Liabilities at Fair Value through Profit and Loss Depository Borrowings Debentures Other Financial Liabilities 3 months or less 4 to 6 months 7 to 9 months 10 to 12 months 64,183 3,735 991 - 185,543,586 32,519,258 24,492,945 28,505,125 6,897,972 1,998,575 7,228,999 2,246,200 2,147,939 36,151 1,547,942 2,785,291 32,434 1,763,215 2,093,565 27,761 1 to 5 years - 7,005,101 3,517,124 11,748,493 135,832 (Unit: KRW in millions) Over 5 years Total - 68,909 499,595 452,496 2,079,903 1,998,218 278,565,610 16,424,949 22,853,766 9,459,395 Total 201,733,315 36,953,283 28,859,603 32,389,666 22,406,550 5,030,212 327,372,629 Note 1) Derivative financial liabilities and off-balance accounts (payment guarantees and commitments) are excluded (2) Applications of Funds Category Applications 2020 (187th term) 2019 (186th term) 2018 (185th term) (Unit: KRW in billions, % ) Average balance Interest rate Average balance Interest rate % Average balance Interest rate Deposits in KRW Marketable Securities in KRW Loans in KRW Advance Payments on Acceptances and Guarantees Funds in KRW Call Loans in KRW Privately Placed Bonds Credit Card Receivables Others Allowance for Doubtful Accounts in KRW(-) Subtotal Deposits in Foreign Currencies Marketable Securities in Foreign Currencies Funds in foreign currencies Loans in Foreign Currencies Call Loans in Foreign Currencies Bills Bought in Foreign Currencies Others Allowance for Doubtful Accounts in Foreign Currencies(-) Subtotal 495 47,180 229,678 14 522 68 0 2,439 -1,074 279,321 7,907 5,578 14,539 874 6,165 122 -248 34,937 0.63 1.84 2.68 3.66 1.02 3.30 0.00 1.52 0.00 2.53 0.39 1.56 2.30 1.04 1.32 4.15 0.00 1.57 112 % 0.1 981 14.0 45,341 68.1 216,362 0.0 0.2 0.0 0.0 0.7 14 693 83 0 3,041 -0.3 -1,151 82.8 265,365 2.3 1.7 4.3 0.3 1.8 0.0 5,476 4,619 13,683 1,492 6,505 71 -0.1 -229 10.4 31,616 1.66 2.10 3.21 1.30 1.76 2.80 0.00 2.56 0.00 3.01 1.91 2.09 3.41 2.61 2.71 2.12 0.00 2.80 0.3 3,264 14.2 35,898 67.8 203,432 0.0 0.2 0.0 0.0 1.0 16 1,334 136 - 5,562 -0.4 -1,198 83.1 248,445 1.7 1.4 4.3 0.5 2.0 0.0 3,665 3,467 11,347 2,365 7,275 33 -0.1 -391 9.9 27,761 1.52 2.16 3.22 1.95 1.67 2.89 0.00 2.10 0.00 3.03 1.29 1.30 3.14 2.07 2.70 3.31 0.00 2.50 % 1.1 12.1 68.7 0.0 0.5 0.0 0.0 1.9 -0.4 83.8 1.2 1.2 3.8 0.8 2.5 0.0 -0.1 9.4 2020 (187th term) 2019 (186th term) 2018 (185th term) Category Applications Cash Property, Plant and Equipment for Business Others Subtotal Others Total Average balance Interest rate 1,021 2,713 19,363 23,097 337,355 0.00 0.00 0.00 0.00 2.26 % 0.3 0.8 5.7 6.8 1,091 2,698 18,478 22,268 Average balance Interest rate Average balance Interest rate % 0.3 0.8 5.8 7.0 1,229 2,354 16,537 20,119 % 0.4 0.8 5.6 6.8 100.0 0.00 0.00 0.00 0.00 2.78 0.00 0.00 0.00 0.00 2.78 100.0 319,248 100.0 296,325 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 Guarantee 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 = Securities interests (including dividend received) + Evaluation profit (net) + Gain on redemption of securities (net) + Portion excluding the gain from stock transactions (net) out of gains on sales of securities 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 financial statements (K-IFRS) Note 10) Excluding merchant banking accounts The average balance of funds managed by Woori Bank in 2020 was KRW 279.3 trillion, a y-o-y increase of KRW 13.9 trillion. The main contributing factor was an increase of KRW 13.3 trillion in loans in KRW. Out of all loans in KRW, household loans and corporate loans increased by KRW 5.8 trillion and KRW 7.5 trillion, respectively. Yields for loans in KRW declined 52bp from December 2019, notably due to the two interest rate cuts by the Bank of Korea in 2020. Assets in foreign currency amounted to KRW 34.9 trillion, a y-o-y increase of KRW 3.3 trillion, and this was attributable to the increase of KRW 0.9 trillion and KRW 1.0 trillion in loans in foreign currency and marketable securities, respectively. Woori Bank will stay committed to complying with the liquidity requirements (for LDR, LCR, etc.) and maintaining a stable fund management structure. ■ Woori Card (1) Sources of Funds Category Fund Call Money Borrowings Funds in KRW Debentures Others Subtotal Debentures Borrowings Others Subtotal Total Equity Funds in Foreign Currencies Other Total (Unit: KRW in millions,%) 2020 (8th term) 2019 (7th term) 2018 (6th term) Average balance Interest rate - 142,268 6,692,528 1,142,170 7,976,966 903,918 4,720 6,214 914,852 1,931,459 10,823,277 - 2.20 2.15 0.00 1.84 1.54 1.64 0.00 1.53 0.00 1.49 % - 1.31 61.83 10.56 73.70 8.35 0.04 0.06 8.45 Average balance Interest rate - - 6,733,067 1,006,939 7,740,005 736,986 4,662 6,556 748,204 - - 2.31 - 2.01 1.95 3.31 - 1.94 % - - 65.77 9.84 75.60 7.20 0.05 0.06 7.31 Average balance Interest rate - - - - 6,203,782 2.33 953,134 7,156,916 713,681 3,700 577 - 2.02 2.08 4.21 - 717,958 2.09 % - - 65.15 10.01 75.16 7.49 0.04 0.01 7.54 17.85 1,749,620 - 17.09 1,647,351 - 17.30 100.00 10,237,829 1.66 100.00 9,522,225 1.68 100.00 113 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Applications of Funds Category Applications Funds in KRW Cash and Deposits Call Loans Marketable Securities Loans Subtotal Cash and Deposits Funds in Foreign Currencies Loans Others Subtotal Properties, Plants and Equipment and Intangible Assets Others Total Other Assets Subtotal ■ Woori Financial Capital (1) Sources of Funds Category Fund Deposits Borrowings Debentures Others Subtotal Total Equity Funds in KRW Total 2020 (8th term) 2019 (7th term) 2018 (6th term) Average balance Interest rate % Average balance Interest rate % Average balance Interest rate % 227,337 0.66 2.10 112,614 1.45 1.10 157,630 1.09 1.66 - 274,343 9,697,975 10,199,655 4,555 - 0.68 14.25 14.00 5.61 28,751 28.00 730 - 34,036 24.91 95,989 493,597 589,586 - - - - - 2.53 175,342 89.61 9,431,958 94.24 9,719,914 9,466 - 1.44 14.87 14.47 8.07 0.04 0.26 0.01 0.31 0.89 4.56 5.45 15,760 28.00 241 - 25,467 20.33 86,535 405,913 492,448 - - - - - 1.71 209,504 92.13 8,759,388 94.94 9,126,521 2,408 5,208 82 - 1.31 15.49 14.92 8.00 30.00 - 7,698 22.80 50,795 337,211 388,006 - - - 0.09 0.15 0.00 0.25 0.85 3.96 4.81 - 2.20 91.99 95.84 0.03 0.05 0.00 0.08 0.53 3.54 4.07 10,823,277 13.27 100.00 10,237,829 13.79 100.00 9,522,225 14.32 100.00 ■ Woori Investment Bank (1) Sources of Funds 2020 (49th term) 2019 (48th term) 2018 (47th term) (Unit: KRW in millions, %) Category Fund Average balance Interest rate % Average balance Interest rate % Average balance Interest rate Deposits 2,725,135 Borrowings in KRW Others Subtotal Total Equity Provisions Others Subtotal 485,679 97,167 3,307,981 352,675 29,748 204,797 587,220 1.84 0.77 1.35 1.67 - - - 69.96 2,282,715 12.47 111,690 2.49 0 84.92 2,394,405 9.05 0.76 5.26 337,102 29,889 126,364 15.08 493,355 2.24 1.43 0.00 2.21 - - - - 79.05 1,892,535 3.87 0.00 712 0 82.92 1,893,247 11.67 337,102 1.04 4.38 27,894 265,655 17.08 630,651 2.03 1.64 0.00 2.03 - - - - 3,895,201 1.42 100.00 2,887,760 1.83 100.00 2,523,899 1.53 100.00 Funds in KRW Others Total % 74.98 0.03 0.00 75.01 13.36 1.11 10.53 24.99 Note) Based on financial statements (K-IFRS) (2) Applications of Funds 2020 (27th term) 2019 (26th term) 2018 (25th term) Deposits in KRW 156,487 0.68 4.02 157,946 1.73 5.47 167,363 1.64 6.63 (Unit: KRW in millions,%) Category Applications 2020 (49th term) 2019 (48th term) 2018 (47th term) Average balance Interest rate % Average balance Interest rate % Average balance Interest rate % (Unit: KRW in millions, %) Average Balance % Average Balance % Average Balance 1,018,977 316,053 5,702,577 313,244 7,350,851 825,528 8,176,379 12.5% 3.9% 69.7% 3.8% 89.9% 10.1% 100.0% 780,379 150,171 4,564,909 473,248 5,968,707 774,816 6,743,523 11.6% 2.2% 67.7% 7.0% 88.5% 11.5% 100.0% 882,613 253,825 3,589,950 255,192 4,981,580 715,172 5,696,752 % 15.5% 4.4% 63.0% 4.5% 87.4% 12.6% 100.0% Note) Based on consolidated financial statements (K-IFRS) (2) Applications of Funds Category Cash and Deposits Marketable Securities Financial Bonds Lease Assets Investments in Associates and Joint Ventures Properties, Plants and Equipment Intangible Assets Other Assets Total 2020 (27th term) 2019 (26th term) 2018 (25th term) (Unit: KRW in millions,%) Average Balance % Average Balance % Average Balance 355,250 514,208 6,060,089 1,057,140 1,569 6,908 61,238 119,977 8,176,379 4.3% 6.3% 74.1% 12.9% 0.0% 0.1% 0.8% 1.5% 100.0% 323,489 341,417 5,050,958 846,826 2,126 7,131 68,789 102,787 6,743,523 4.8% 5.1% 74.9% 12.6% 0.0% 0.1% 1.0% 1.5% 346,126 330,233 4,239,526 622,248 3,111 4,989 67,884 82,635 100.0% 5,696,752 100.0% % 6.1% 5.8% 74.4% 10.9% 0.1% 0.1% 1.2% 1.4% Marketable securities in KRW 1,318,262 1.86 33.84 802,499 2.74 27.79 540,982 3.33 21.43 Funds in KRW Loans in KRW 1,900,569 Privately placed bonds 318,707 Others Allowance for doubtful accounts in KRW (-) - (16,533) 4.93 4.76 - - 48.79 1,394,034 8.18 0.00 363,269 0 5.30 4.99 0.00 48.27 12.58 0.00 1,071,107 387,406 0 4.95 4.86 0.00 42.44 15.35 0.00 (0.42) (13,821) - -0.48 (11,829) - -0.47 Subtotal 3,677,492 3.66 94.41 2,703,926 4.32 93.63 2,155,028 4.30 85.38 Funds in foreign currencies Deposits in Foreign Currencies Marketable Securities in Foreign Currencies Subtotal Cash Property, plant and equipment for business Others Subtotal Others Total Note) Based on financial statements (K-IFRS) 1,340 - 0.03 1,438 0.04 0.05 1,524 0.15 0.06 2,826 (14.18) 4,166 (9.62) 15 7,186 206,342 213,543 - - - - 0.07 0.11 - 0.18 5.30 5.48 2,623 4,061 0 9,415 170,358 179,772 2.45 1.60 0.00 - - - 0.09 0.14 0.00 0.33 5.90 6.22 2,281 -0.48 3,805 0 9,757 355,308 365,065 -0.23 0.00 - - - 0.09 0.15 0.00 0.39 14.08 14.46 3,895,201 3.44 100.00 2,887,760 4.05 100.00 2,523,899 3.67 100.00 Note) Based on consolidated financial statements (K-IFRS) 114 115 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ■ Woori Asset Trust (1) Sources of Funds Category 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 separate financial statements (K-IFRS) (2) Applications of Funds Category Total Assets Cash and Deposits Marketable Securities Loans Premises and Equipment Other Assets Total (Unit: KRW in millions) 2020 (21st term) 2019 (20th term) 2018 (19th term) (2) Applications of Funds (Unit: KRW in millions,%) Balance 56,396 56,396 7,523 1 37,553 7,514 1,547 - 635 - - 1,620 129,237 185,634 Balance 185,634 148,871 1,405 22,287 4,522 8,549 2020 % 30% 30% 4% 20% 4% 1% - - - 1% 70% 100% 2020 % 100% 80% 1% 12% 2% 5% Balance 45,410 45,410 9,081 1 24,552 4,857 2,443 - 656 - - 3,820 94,429 139,839 Balance 139,839 67,564 655 57,704 3,983 9,933 2019 % 32% 32% 6% 18% 3% 2% - - - 3% 68% 100% 2019 % 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 % 27% 27% 2% 19% 5% - - 1% 55% 100% (Unit: KRW in millions) Balance 113,786 61,514 6,935 35,397 2,539 7,401 2018 % 100% 54% 6% 31% 2% 7% 100 185,634 100% 139,839 100% 113,786 Category Applications Cash and Deposits Securities Available for Sale Financial Assets at Fair Value through Profit or Loss (FVTPL) Financial Assets at Fair Value through Other Comprehensive Income Investments in Associates Derivatives Loans Properties, Plants and Equipment Other Assets Accrued Income Deferred Tax Assets Subtotal Cash and Deposits Securities Available for Sale Financial Assets at Fair Value through Profit or Loss (FVTPL) Financial Assets at Fair Value through Other Comprehensive Income Subtotal Funds in KRW Funds in foreign currencies Total Average Balance 25,832 - 72,097 1,358 3,130 103 541 1,237 6,496 4,759 1,063 110,793 378 - 11,008 % 20.71 - 57.79 1.09 2.51 0.08 0.43 0.99 5.21 88.81 0.30 0.00 8.82 Average Balance 24,757 - 48,619 % 23.10 0.00 45.37 Average Balance 31,621 13,805 17,754 % 32.02 13.98 17.98 11,394 10.63 10,617 10.75 3,240 25 100 848 7,541 5,329 1,639 96,524 - - 6,034 3.02 0.02 0.09 0.79 7.04 90.08 0.00 0.00 5.63 1,230 228 180 246 7,832 5,471 1,774 83,512 4,803 5,318 3,098 1.25 0.23 0.18 0.25 7.93 84.56 4.86 5.38 3.14 2,569 2.06 4,601 4.29 2,032 2.06 13,955 124,748 11.19 100.00 10,635 107,159 9.92 100.00 15,250 98,762 15.44 100.00 Note) Based on consolidated financial statements (K-IFRS) for 2020 and separate financial statements (K-IFRS) for 2019 and 2018 ■ Woori Savings Bank (1) Sources of Funds The average balance of funds sourced by Woori Savings Bank in 2020 was KRW 1,173.6 billion, a y-o-y increase of KRW 62.4 billion. The average balance of funds in Korean won was KRW 1,051.0 billion, which was primarily sourced from deposits from customers to ensure stable liquidity. Note) Based on separate financial statements (K-IFRS) (2) Applications of Funds ■ Woori Asset Management (1) Sources of Funds Category Liabilities Derivatives Other Liabilities (Accrued Income Tax) (Accrued Expense) (Others) Total Equity Sources (Total Liabilities and Equity) 2020 (21st term) 2019 (20th term) 2018 (19th term) (Unit: KRW in millions,%) Average Balance % Average Balance % Average Balance 14,854 - 14,854 1,515 2,658 10,681 109,894 124,748 12 0 100 10 18 72 88 100 4,921 - 4,921 1,506 2,428 987 102,238 107,159 5 0 100 31 49 20 95 100 3,930 14 3,915 1,416 2,099 400 94,832 98,762 % 4 0 100 36 54 10 96 100 Note) Based on consolidated financial statements (K-IFRS) for 2020 and separate financial statements (K-IFRS) for 2019 and 2018 116 The average balance of funds managed by Woori Savings Bank in 2020 was KRW 1,138.8 billion, a y-o-y increase of KRW 62.8 billion. It is being managed consistently to comply with the liquidity regulations and maintain an adequate fund management structure. 5. Off-Balance Sheet Activities ■ Woori Financial Group (1) The guarantees of payment at the end of 2020, 2019 and 2018 are as follows: Category Confirmed Guarantees Guarantees for Loans Acceptances Acceptances for L/G Other Confirmed Guarantees Subtotal End of the 2nd (Current) Term End of the 1st (Previous) Term End of 2018 (Unit: KRW in millions) 103,229 602,014 78,395 6,491,608 7,275,246 89,699 391,688 224,746 6,982,889 7,689,022 125,870 371,525 158,179 6,452,791 7,108,365 117 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Category Unconfirmed Guarantees Guarantees for Local L/C Guarantees for Import L/C Other Unconfirmed Guarantees Subtotal CP Purchase Commitments and Others Total (2) Loan Agreements, etc. End of the 2nd (Current) Term End of the 1st (Previous) Term End of 2018 (2) Employees and Other Matters 187,146 3,025,923 403,652 3,616,721 917,489 11,809,456 193,096 3,081,390 771,378 4,045,864 884,031 12,618,917 305,057 3,322,731 669,677 4,297,465 1,260,587 12,666,417 Woori Bank, a major subsidiary of Woori Financial Group, creates a human resources management plan based on changes in the business environment and the direction of its strategies to be better prepared for foreseeable changes in manpower in the long run. Through ongoing recruitment and CDP control effects, Woori Bank has secured some of the best human resources in the industry, including personal and corporate banking experts and the future leaders of the FinTech business. Meanwhile, as of the end of 2020, Woori Bank’s regular employees consist of business unit and group heads (26%), managers (27%), and clerks or lower-level employees (47%) in a pyramid structure. 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. (Unit: KRW in millions) The main contents of the Financial Holding Companies Act are as follows: Category Loan Agreements Other Agreements (*) End of the 2nd (Current) Term End of the 1st (Previous) Term 112,088,680 7,827,774 103,651,674 5,993,608 End of 2018 97,796,704 5,041,314 (*) The amount of bill of sale for qualified endorsement (sales from bills bought) and the discount from short-term electric credit facilities (purchase) at the end of 2020, 2019 and 2018 include KRW 2,894,688 million, KRW 2,582,274 million and KRW 2,968,190 million, respectively. 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 Bank Category Guarantees Agreements Confirmed Guarantees Unconfirmed Guarantees CP Purchase Commitments and Others Loan Agreements Other Agreements 2020 (187th term) 7,137,891 3,616,721 917,489 74,944,921 5,089,094 (Unit: KRW in millions) 2019 (186th term) 7,689,022 4,045,864 884,031 70,303,900 3,204,654 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 Since Woori Financial Group’s businesses involve providing financial services (banking, credit card, capital, etc.) that do not have an environmentally destructive impact, it is neither currently paying nor likely to have to pay for any environmental restoration or compensation for damages in the future. It has not been subject to administrative measures from the government or environmental authorities, nor is it expected to be in the future. In December 2020, Woori Financial Group declared its plans to end coal finance to emerge as a carbon-neutral financial group in an effort to lead the financial sector in combating climate change, joined the Carbon Disclosure Project (CDP) and endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), in addition to setting for mid- and long-term roadmaps for green management. Woori Bank, a major affiliate of Woori Financial Group, has been designated as a company subject to building management, pursuant to Article 42 (6) of the Framework Act on Low Carbon, Green Growth, and assigned greenhouse (GHG) gas emission and energy consumption reduction targets by the government. It has been strengthening its environmental management and achieving the GHG reduction targets. For more details, please refer to [XI. Other Issues Required for Protecting Investors / 3. Environmental Sanctions, and etc. / E. Green Management Issues]. 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 D. Derivatives and Risk Management Policy (1) Derivatives (Woori Bank) Woori Bank offers derivatives mainly to corporate customers. Since companies are exposed to various risks, such as interest rate hikes and fluctuations in stock prices and exchange rates, there is a need to hedge these risks. Woori Bank offers a wide array of derivatives to companies to meet their hedging needs. Derivatives are also traded to hedge interest rate and foreign exchange risks associated with the bank’s assets and liabilities. The total value of derivatives outstanding amounted to KRW 324,071 billion in 2018, KRW 372,543 billion in 2019, and KRW 355,155 billion in 2020. While banks primarily use derivatives to avoid the risk of loss in relation to the assets held, such transactions are somewhat complicated and can be risky, which is why a limit is placed on the transaction amount and losses that can be incurred so as to prevent excessive losses in advance. Also, when it comes to atypical transactions (structured derivatives) or trading of Hybrid Derivative Products, the Risk Oversight Department dedicated to risk management performs a prior review of potential risks, followed by deliberation by the Risk Management Committee, in order to proceed. In addition, the possibility of losses is minimized by separating the duties of the trading part (front office), risk management part (middle office) and follow-up management part (back office) so that they can keep one another in check. (2) 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. The Group’s risk management principles are as follows: - All business activities must be per formed in consideration of the balance between risk and revenue, within 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 118 119 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 2) Risk Management Organization ① Risk Management Committee 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: ㆍ The Risk Management Committee establishes basic policies and strategies, including a risk management philosophy and risk management principles, for systematic management of risks. - Determination of permissible risk level: ㆍ Each year, the Risk Management Committee determines the overall permissible risk level for the Group and each subsidiary by taking into consideration the economic and financial environment at home and abroad. - Approval of investment limits and maximum permissible loss: ㆍ The amount of risk capital out of all available capital is determined according to the risk tolerance determined annually, and it is allocated to each subsidiary and according to the risk type. - Establishment and revision of risk management regulations and the regulations of the Group Risk Management Council: ㆍ Risk management regulations and the regulations of the Group Risk Management Council are established and implemented for optimal risk management, and they are revised or abolished, as necessary. - Other ㆍ The Risk Management Committee deliberates on matters concerning the risks that accompany important management decisions at the Group level requiring a resolution of the BOD, including changes to the organization, commencement of new businesses and large investments, and gets briefed on the current status and major issues of risk management of the Group. ② Group Risk Management Council 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 ㆍ Matters delegated by the Committee ㆍ Matters requiring resolution of the Council, as specified by the regulations of the Group Risk Management Council ㆍ 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 ㆍ 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) ㆍ Important matters among matters for resolution by the Risk Management Committees of subsidiaries and result of implementation thereof ㆍ Adjustments to the classification of asset quality or allowances for questionable accounts in accordance with criteria set by the Committee ㆍ Matters concerning the introduction of a new product at the Group level ㆍ 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 ㆍ Status of progress and management of matters deliberated or resolved by the Council ㆍ Other matters deemed necessary by the Council ③ Risk Management Department 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. (3) Credit Risk Credit risk refers to the potential financial losses that the Bank may incur when a counterparty becomes insolvent or refuses its financial obligations within the period specified in the contract. The goal of credit risk management is to keep the credit risk exposure to a permissible level and to optimize its rate of return in reflection of the risks. 1) Management of Credit Risk Woori Financial Group measures credit risk by taking into account the possibility of non-performance of contract obligations by a customer or counterparty, exposure to credit risk in relation to a counterparty, a counterparty’s exposure to the risk of insolvency, the rate of loss upon insolvency and other factors. A credit rating assessment model is used to assess the possibility of defaulting by a counterparty, and credit ratings are assessed by applying a quantitative method using financial statements and other data, a statistical method of calculating the credit score, judgment by evaluators, etc. In order to manage credit risk limits, Woori Financial Group calculates the ceiling for credit extension for each joint borrowers, company, industry, etc. based on joint borrower management, total exposure management and portfolio management. Woori Financial Group uses a set of techniques to lower the credit risk of assets by purchasing financial collateral, physical collateral, guarantees, on- balance-sheet items and credit derivatives, which have little correlation with the borrower’s credit status. Woori Financial Group applies the comprehensive method among credit risk reduction techniques, and the amount of credit risk reduction is reflected for eligible financial collateral, trade receivables, guarantees, commercial and residential real estate properties and other collateral that are applicable for the approach applied. Furthermore, the collateral used for credit risk reduction is re-evaluated on a regular basis. 2) 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. (4) Market Risk Management 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. 1) Trading Market Risk Market risk management involves the process of making and applying decisions to avoid, take or reduce risks by identifying the sources of risk for each risk factor, measuring the magnitude of the identified risk sources and evaluating whether the level of market risk assumed is appropriate. 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. 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. The VaR method, which involves using statistical techniques, is designed to estimate potential losses in the portfolio that may be incurred by unfavorable volatility in the market at a certain time in the present or future. The result produced by using this method is an estimated maximum loss at a 99% confidence level, which means that it is statistically 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. 2) Interest Rate Risk In the case of Woori Bank, interest rate risks in the non-trading sectors are measured and managed based on the change in net interest income (△NII ) and change in economic value of equity (△NEVE) according to the interest rate risk in the banking book (IRRBB) introduced in late 2019. △NII represents changes in net interest income that may occur over a certain period of time (e.g. one year) in the future due to changes in interest rates, while △EVE represents fluctuations in the economic value of equity capital that may occur due to changes in interest rates affecting the present values of assets, liabilities and off-balance sheet items. 120 121 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 The subsidiaries of the Group, other than Woori Bank, measure and manage interest rate risk using earnings at risk (EaR) and value at risk (VaR) in association with interest rates. EaR represents the maximum change expected in profit or loss corresponding to the maximum decrease in net interest income that can occur over a certain period of time (e.g. one year) in the future due to changes in unfavorable fluctuations in interest rates. VaR is the maximum expected loss, which represents the maximum decrease in net asset value that can potentially occur at present or a specific point in time in the future due to unfavorable fluctuations in interest rates. (5) 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). (6) 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. (7) 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. In late September 2020, 「Basel III: Finalizing post-crisis reforms」 was introduced for credit risk management. The capital adequacy ratio is calculated by dividing total capital by total risk-weighted assets, based on consolidated financial statements. E. Matters Concerning Overseas Subsidiaries Due to the stagnant growth of the domestic financial market, Woori Bank, a major subsidiary of Woori Financial Group, has been laying the groundwork for global operations by expanding regional networks in Southeast Asia, boasting high growth potential in consideration of NIM, branch and financial inclusivity and economic growth rate. Woori Bank is continually pursuing localization through M&As with local banks (Indonesia, the Philippines and Cambodia) and the conversion of existing branches into local subsidiaries (Vietnam), while seeking to diversify its business portfolio by entering new markets through savings banks and non-banking financial firms. In addition to the existing business segments, Woori Bank is also striving to develop new markets by conducting market surveys to discover new business areas. As of the end of December 2020, Woori Bank has a global network of 447 places of business. Woori Bank, in particular, will continue to expand its global operations based on the strategy to expand its customer base and growth potential with financially sound assets, reinforce its competencies by applying a wide array of business models and bolstering its global digital banking services. It is also noteworthy that the company is in the process of building a company-wide system to support and manage global operations by nurturing global examiners and improving its risk management system, through which it is endeavoring to achieve quantitative and qualitative growth. As of the end of 2020, the status of foreign subsidiaries of the Group are as follows: Capital Adequacy Ratio Asset Quality Profitability Liquidity BIS Capital Adequacy Ratio BIS Tier 1 Capital Ratio Tangible Common Equity Ratio Loss-Risk Weighted Loan Ratio Substandard and Below Ratio Ratio of Allowance for Credit Loss Ratio of Delinquent Loans ROA Expense Ratio to Total Assets Cost to Income Ratio Foreign Currency Liquidity Ratio (Unit: %) 16.13 15.72 12.36 0.83 0.7 70.78 0.66 0.6 2.28 70.48 94.35 17.8 17.58 9.37 3.69 1.5 14.95 1.97 0.17 1.07 74.31 163.61 16.97 16.18 14.1 5.26 1.08 132.33 1.22 0.96 1.79 47.28 63.29 15.72 15.24 12.53 29.11 6.29 26.49 6.75 0.62 3.93 80.45 102.29 26.49 26.26 17.6 0.65 0.26 223 0.28 0.81 1.76 64.44 111.45 28.54 27.76 28.77 0.33 0.26 438.93 0.26 4.17 5.02 46.63 158.44 18.42 18.34 13 17.74 7.23 101.99 7.23 △4.02 1.82 116.49 89.14 44.91 44.75 15.19 13.52 13.32 14.18 - - - - - - 56.36 56.11 27.06 3.61 4.12 36.24 - - 0 1.05 2.59 52.06 782.85 0.86 1.29 50.19 97.42 0.7 0.85 47.53 92.18 Category (Percentage of Ownership) Woori America Bank (100.00%) China Woori Bank (100.00%) Indonesia Woori Saudara Bank (79.88%) Wealth Development Bank (51.00%) Vietnam Woori Bank (100.00%) Woori Finance Cambodia (100.00%) Europe Woori Bank (100.00%) Brazil Woori Bank (100.00%) Russia Woori Bank (100.00%) Hong Kong Woori Investment Bank (100.00%) ■ 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 Infrastructure and an investment company as per the Financial Investment Services and Capital Markets Act. The major shareholder, Woori Bank, has committed 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 2020, 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 tendency, investments will be made gradually with the outstanding commitment under the purchase agreement. The Company is maintaining a robust return on investment (ROI). (KRW 768.4 billion in capital and ROI of 4.64%, as of the end of December 2020 [internal rate of return (IRR) since incorporation under the assumption that the investment principal will be recovered at the end of 2020]). Most of the investment assets are BTL projects, where the payment of the principal and interest is tied to the yield on five-year government bonds, and as such, the returns are likely to fluctuate with the yields of the bonds in question. As of the end of December 2019, the ROI under the same assumption was 4.79%, a slight decline year-over-year, and this was attributable to a decrease in the return on five–year government bonds. Currently, the Company is both making and redeeming investments. Following the recovery schedules for each invested project, the principals 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. 122 123 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 INDEPENDENT AUDITOR’S REPORT (English Translation of a Report Originally Issued in Korean) To the Board of Directors and Shareholders of Woori Financial Group Inc. Auditor’s Responsibilities for the Audit of the Financial Statements Opinion We have audited the accompanying separate financial statements of Woori Financial Group Inc. (the Company), which comprise the separate statement of financial position as of December 31, 2020, and the statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, and notes to the separate financial statements, including a summary of significant accounting policies. In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of Woori Financial Group Inc. as of December 31, 2020, and its separate financial performance and its separate cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). We also have audited, in accordance with Korean Standards on Auditing, the Company's Internal Control over Financial Reporting as of December 31, 2020, based on Conceptual Framework for Designing and Operating Internal Control over Financial Reporting, and our report dated March 12, 2021, expressed an unqualified opinion Basis for Opinion We conducted our audit in accordance with Korean Standards on Auditing. 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 of the Republic of Korea that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Key Audit Matter No key audit matter is identified to be described in this audit report. Emphasis of Matter Without modifying our opinion, we draw attention to Note 3 of the financial statements, which indicates that the outbreak of COVID-19 in 2020 may have a negative impact on the Company’s financial condition and results of operations. Other Matters The separate financial statements of the Company for the year ended December 31, 2019, were audited by Deloitte Anjin LLC auditor who expressed an unqualified opinion on those statements on March 16, 2020. Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such separate financial statements may differ from those generally accepted and applied in other countries. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management 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. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Our objectives are to obtain reasonable assurance about whether the 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 Korean Standards on Auditing 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 financial statements. As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the 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. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of 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 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance 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 with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other 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 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 Sung-Jae Lim, Certified Public Accountant. Samil Pricewaterhouse Coopers Seoul, Korea March 12, 2021 This report is effective as of March 12, 2021, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. 124 125 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF FINANCIAL POSITION WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2020 AND 2019 AS OF DECEMBER 31, 2020 AND 2019 ASSETS Cash and cash equivalents (Notes 5 and 30) Financial assets at fair value through profit or loss (“FVTPL”) (Notes 4, 6, 9 and 17) Financial assets at fair value through other comprehensive income ("FVTOCI") (Notes 4, 7 and 9) Loans and other financial assets at amortized cost (Notes 4, 8, 9 and 30) Investments in subsidiaries (Notes 10 and 30) Premises and equipment (Notes 11 and 30) Intangible assets (Note 12) Net defined benefit asset (Note 15) Current tax assets (Note 27) Deferred tax assets (Note 27) Total assets LIABILITIES Debentures (Notes 4, 9 and 13) Provisions (Note 14) Net defined benefit liability (Note 15) Current tax liabilities (Note 27) Deferred tax liabilities (Note 27) Other financial liabilities (Notes 4, 9, 16, 30 and 31) Other liabilities (Note 16) Total liabilities EQUITY (Note 18) Capital stock Hybrid securities Capital surplus Other equity Retained earnings Total equity Total liabilities and equity December 31, December 31, 2020 2019 (Korean Won in millions) 69,176 7,247 149,614 619,117 21,562,229 12,538 5,282 3,509 307 964 22,429,983 1,147,503 782 - 215,071 - 22,085 570 1,386,011 3,611,338 1,895,322 14,874,084 (1,518) 664,746 21,043,972 22,429,983 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 The accompanying notes are part of this financial statements. WOORI FINANCIAL GROUP INC. WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF COMPREHENSIVE INCOME SEPARATE STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2020 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) FOR THE YEAR ENDED DECEMBER 31, 2020 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO TO DECEMBER 31, 2019 DECEMBER 31, 2019 For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 (Korean Won in millions) Interest income Interest expense Net interest income (Notes 9, 20 and 30) Fees and commissions income Fees and commissions expense Net fees and commissions loss (Notes 21 and 30) Dividend income (Notes 22 and 30) Net gain(loss) on financial instruments at FVTPL (Notes 9 and 23) Reversal(Provision) of impairment losses due to credit loss (Notes 24 and 30) General and administrative expenses (Notes 25 and 30) Operating income Non-operating expense (Note 26) Net income before income tax expense Income tax income(expense) (Note 27) Net income Net loss on valuation of equity securities at FVTOCI Remeasurement loss related to defined benefit plan Items that will not be reclassified to profit or loss: Other comprehensive loss, net of tax Total comprehensive income Earnings per share (Note 28) Basic and diluted earnings per share (Unit: In Korean Won) 10,082 (23,035) (12,953) 805 (16,199) (15,394) 680,375 (920) 116 (56,472) 594,752 (215) 594,537 781 595,318 (280) (607) (887) (887) 594,431 7,741 (7,701) 40 - (15,833) (15,833) 676,000 9,434 (263) (39,941) 629,437 (750) 628,687 (394) 628,293 - (631) (631) (631) 627,662 757 900 The accompanying notes are part of this financial statements. 126 - 5 - - 6 - 127 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF CHANGES IN EQUITY WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2020 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) FOR THE YEAR ENDED DECEMBER 31, 2020 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO TO DECEMBER 31, 2019 DECEMBER 31, 2019 Capital stock Capital surplus Hybrid securities (Korean Won in millions) Other equity Retained earnings Total equity January 11, 2019 (Date of incorporation) Total comprehensive income 3,400,822 14,565,637 Net income Remeasurement loss related to defined benefit plan - - - - - - - 210,516 - - - 309,460 (1,013) - - 3,611,338 14,874,084 - - 997,544 - 997,544 - - 17,966,459 - (631) - - - - (631) 628,293 - - - - (4,363) 623,930 628,293 (631) 519,976 (1,013) 997,544 (4,363) 20,106,265 Transactions with owners Comprehensive stock exchange (Note 1) New stocks issue cost Issuance of hybrid securities Dividends to hybrid securities December 31, 2019 January 01, 2020 Total comprehensive income 3,611,338 14,874,084 997,544 (631) 623,930 20,106,265 Net income Net loss on valuation of equity securities at FVTOCI Remeasurement loss related to defined benefit plan - - - - - - - - - - (280) (607) 595,318 - - 595,318 (280) (607) Transactions with owners Dividends to common stocks Issuance of hybrid securities Dividends to hybrid securities December 31, 2020 - 897,778 - 3,611,338 14,874,084 1,895,322 - - - - - - - - - (1,518) (505,587) - (48,915) 664,746 (505,587) 897,778 (48,915) 21,043,972 The accompanying notes are part of this financial statements. WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF CASH FLOWS WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2020 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 FOR THE YEAR ENDED DECEMBER 31, 2020 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 For the year ended December 31, 2020 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 to net income: Income tax expense(income) Interest income Interest expense Dividend income Adjustments for profit/loss items not involving cash flows: Provision(Reversal) of impairment losses due to credit loss Loss(Gain) on valuation of financial instruments at FVTPL Retirement benefit Depreciation and amortization Changes in operating assets and liabilities: Loans and other financial assets at amortized cost Net defined benefit liability Other financial liabilities Other liabilities Interest income received Interest expense paid Dividends received Income tax paid Net cash provided by operating activities Cash flows from investing activities: Net decrease(increase) on other investment assets Acquisition of investments in subsidiaries Acquisition of financial assets at FVTOCI Acquisition of premises and equipment Acquisition of intangible assets Increase on guarantee deposits for leases (Continued) 595,318 (781) (10,082) 23,035 (680,375) (668,203) (116) 920 3,499 5,449 9,752 (188) (11,329) 7,213 (3,571) (7,875) 13,080 (22,559) 680,375 (397) 670,499 599,491 730,000 (1,687,371) (150,000) (3,074) (3,051) (1,118) (1,114,614) 628,293 394 (7,741) 7,701 (676,000) (675,646) 263 (9,434) 4,899 4,098 (174) (1,365) (1,687) 7,055 4,142 8,145 4,082 (6,097) 676,000 - 673,985 634,603 (1,130,000) (1,370,785) - (6,722) (4,630) (955) (2,513,092) 128 129 - 7 - - 8 - INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF CASH FLOWS WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2020 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2020 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 (CONTINUED) Cash flows from financing activities: Issuance of debentures Issuance of hybrid securities Redemption of lease liabilities New stock issuance cost Dividends paid to hybrid securities Dividends paid Net increase in cash and cash equivalents Cash and cash equivalents, beginning of the period Cash and cash equivalents, end of the period (Note 5) For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 (Korean Won in millions) 199,556 897,778 (2,203) - (48,915) (505,587) 540,629 25,506 43,670 69,176 947,604 997,544 (1,289) (17,337) (4,363) - 1,922,159 43,670 - 43,670 The accompanying notes are part of this financial statements. WOORI FINANCIAL GROUP INC. WOORI FINANCIAL GROUP INC. NOTES TO SEPARATE FINANCIAL STATEMENTS NOTES TO SEPARATE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020 AND 2019 AS OF DECEMBER 31, 2020 AND 2019 1. GENERAL (1) Summary of the parent company Woori Financial Group, Inc. (hereinafter referred to the “Company”) 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 December 31, 2020 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 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 Number of Parent company’s stocks 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% interest in Woori Asset Management Co. (Formerly Tongyang Asset Management Corp.). 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., Ltd. (formerly ABL Global Asset Management Co., Ltd), and added it as a consolidated subsidiary. 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 67.2% interests (excluding treasury stock, 51.0% when including treasury stock) in Woori Asset Trust Co. (formerly Kukje Asset Trust Co.) As of December 10, 2020, the Company acquired 76.8% interests (excluding treasury stock, 74% when including treasury stock) in Woori Financial Capital Co., Ltd. (formerly Aju Capital Co., Ltd.). 130 - 9 - - 10 - 131 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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 5, 2021 after the initial approval for the issuance as of February 5, 2021, and are planned to be finalized at the shareholder’s meeting on March 26, 2021. 1) The new standards and interpretations introduced from the current term and the resulting changes in accounting policies are as follows: 1.1 Amendments to K-IFRS 1103 Business Combination – Definition of a Business To consider the integration of the required activities and assets as a business, the amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs and excludes economic benefits from the lower costs. An entity can apply a concentration test, an optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. The amendment does not have a significant impact on the financial statements. 1.2 Amendments to K-IFRS 1001 Presentation of Financial Statements and K-IFRS 1008 Accounting policies, changes in accounting estimates and errors – Definition of Material The amendments clarify the explanation of the definition of material and amended K-IFRS 1001 and K- IFRS 1008 in accordance with the clarified definitions. Materiality is assessed by reference to omission or misstatement of material information as well as effects of immaterial information, and to the nature of the users when determining the information to be disclosed by the Company. The amendment does not have a significant impact on the financial statements. 1.3 Amendments to K-IFRS 1116 Lease – Practical expedient for COVID-19-Related Rent Exemption, Concessions, Suspension As a practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification. A lessee that makes this election shall account for any change in lease payments resulting from the rent concession the same way it would account for the change applying this Standard if the change were not a lease modification. With implementation of K-IFRS 1116 Lease, the Company has changed accounting policy. The Company has adopted K-IFRS 1116 retrospectively, as permitted under the specific transitional provisions in the standard. There was no cumulative impact on the beginning balance of retained earnings as at January 1, 2020 by retrospectively applying this standard, and the Company did not restate comparatives for the 2019 reporting period. 2) The details of K-IFRS 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: 2.1 Amendments to K-IFRS 1103 'Business Combinations' - Citation of Conceptual Framework Although the definition of assets and liabilities to be recognised was amended to refer to the revised conceptual framework for financial reporting, it added exceptions to apply the IFRS for liabilities and contingent liabilities within the scope of IAS 1037 'Provisions, Contingent Liabilities and Contingent Assets' and IFRS 2121 'Levies' and clarified that contingent assets are not recognised at acquisition date. This amendment will be applied for annual periods beginning on or after January 1, 2022, and early application is permitted. We expect that the amendments to the Standard will have no significant impact on financial statements. 2.2 Amendments to IAS 1037 'Provisions, Contingent Liabilities and Contingent Assets' - Loss-bearing When identifying a loss-bearing contract, it was clarified that the scope of the contract's implementation costs is the allocation of incremental costs for contract execution and other costs directly related to contract performance. This amendment will be applied for the fiscal year beginning on or after January 1, 2022, and early application is permitted. It is expected that the amendments to the Standard will have no significant impact on financial statements. 2.3 Amendments to Korean IFRS 1016 Property, plant and equipment – Proceeds before intended use The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements. 2.4 Annual Improvements to K-IFRS 2018-2020 K-IFRS Annual Improvements 2018-2020 apply for annual periods beginning on or after January 1,2022, and early application is permitted. We expect that the amendments to the Standard will have no significant impact on financial statements. - K-IFRS 1101 'First Adoption of IFRS': Subsidiaries of first-time adopters - K-IFRS 1109 'Financial Instruments': 10% test-related fees for the purpose of derecognising financial liabilities - K-IFRS 1116 'Leases': Lease Incentives - K-IFRS 1041 'Agriculture' : Measuring fair value 2.5 Amendments to Korean IFRS 1001 Presentation of Financial Statements – Classification of Liabilities as Current or Non-current The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability include the transfer of the entity's own equity instruments, however, it would be excluded if an option to settle them by the entity's own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements. The above enacted or amended standards will not have a significant impact on the Company. 132 - 11 - - 12 - 133 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Investments in subsidiaries and associates in separate financial statements (5) Cash and cash equivalents 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 in profit or loss as dividend income when the right to receive dividends is established. (3) Revenue recognition K-IFRS 1115 requires the recognition of revenues based on transaction price allocated to the performance obligation when or as the Company performs the obligation to the customer. Revenues other than those from contracts with customers, such as interest revenue, are measured through the effective interest rate method. 1) Revenues 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. The revenue recognized by these standards is fees and commissions income. 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. 3) Dividend income Dividend income is recognized when the right to receive dividends as a shareholder is confirmed. Dividend income is recognized as an appropriate item of profit or loss in the statement of comprehensive income according to the classification of financial instruments. (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. 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 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. a) 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 b) 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) 134 - 13 - - 14 - 135 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 1.1 Financial assets at FVTPL 1.3 Financial assets at amortized cost 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. 1.2 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 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) 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 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. 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. 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 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. 136 - 15 - - 16 - 137 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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. 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). 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) 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 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 Company 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. 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 accumulated 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. 138 - 17 - - 18 - 139 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (8) Premises and equipment (11) Derivative instruments 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 Equipment and Vehicles Useful life 5 years 5 years 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. The estimated useful life and amortization method of intangible assets with a finite useful life are reviewed at the end of each reporting period. The estimated useful life and amortization method of intangible assets with an indefinite useful life are reviewed at the end of each reporting period to ensure that the asset has an indefinite useful life. 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 1~5 years 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. Derivative instruments are classified as forwards, futures, options, and swaps depending on the types of transactions, and are classified as either trading or hedging at the point of transaction based on its purpose. Derivatives are initially recognized at the fair value of the contract date and are subsequently measured at the fair value of the end of each reporting period. The resulting gain or loss is recognized in net income immediately unless the derivative is designated and effective as a hedging instrument. If derivatives have been designated as hedging instruments and it is effective, the recognition point of gain or loss depends on the characteristics of the hedging relationship. Derivatives with a positive fair value(+) are recognized as financial assets, and derivatives with a negative fair value(-) are recognized as financial liabilities. Derivatives in financial statements are not offset unless they have a legally enforceable right to set-off or intend to set-off. (12) 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. The Company recognizes the expenses incurred in recovering the leased asset to its original state, under the terms of the lease, as a provision at the commencement date of lease or at a specific period of time when the asset is liable as a result of its use. The provision is measured as the best estimate of the expenditure required to recover the asset and is regularly reviewed and adapted to the new circumstances. 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. The balance of provisions is reviewed at the end of each reporting period and adjusted to reflect the best estimate as of the end of the reporting period. (13) Equity instruments issued by the Company 1) Capital and compound financial instruments 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. The compound financial instruments issued by the Company are financial instruments which are neither a financial liability nor an equity instrument as they were designed to contain both equity and debt elements. 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. 2) Hybrid securities 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. 140 - 19 - - 20 - 141 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (14) 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. (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. In addition, the Company appropriately estimates and reflects the amount of corporate tax liabilities based on the analysis of corporate tax laws and the evaluation of many factors, including past experiences. (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. (17) 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. (18) Leases 1) 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. In determining whether a contract transfers control of the use of the identified asset, the Company uses the definition of lease in K-IFRS 1116. 2) Lessee At the commencement date, the Company recognizes a right-of-use asset and a lease liability. The right-of-use asset is initially 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 date 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 142 - 21 - - 22 - 143 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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. operations in various forms both domestically and internationally. The Company will continue to evaluate future prospects related to the duration of COVID-19's economic impact and the government's policies. 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. The Company makes adjustments to reflect the terms of the lease and the characteristics of the lease asset in interest rates obtained from external financial information, and calculates the incremental borrowing rate. 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 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. When lease liability is remeasured, 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. 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 reevaluates the lease term when the option is exercised (or not exercised) or the Company is liable to exercise (or not exercise) the option. Company will change its judgment only when significant events occur that affect the lessee's control and the determination of the lease term, or there is a significant change in the circumstances. In the statement of financial position, the Company 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 Company 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 Company recognizes the lease payments associated with those leases as an expense on a straight-line basis over the lease term. 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 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. Allowance for expected credit losses Stage 1 Credit risk has not significantly increased since initial recognition(*) Expected 12-month credit losses: Expected credit losses due to possible defaults on financial instruments within 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. The outbreak of COVID-19 in 2020 has had a significant impact on the global economy including Korea. Financial and economic shocks may have negative impacts on the Company’s financial condition and results of (4) Defined benefit plan 144 - 23 - - 24 - 145 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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. 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 Company. 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 Company’s management strategy and by determining the Company’s acceptable level of risk. CRO assists the Risk Management Committee and operates the Company Risk Management Council, which is composed of the risk management managers of the subsidiaries, to periodically check and improve the external environment and the Company’s risk burden. The Risk Management Department which is independently structured, controls the risk management matter of the Company 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 goal of credit risk management is to maintain the Company’s credit risk exposure to a permissible degree and to optimize its rate of return considering such credit risk. 1) Credit risk management The Company measures expected loss on assets subject to credit risk management and uses it as a management indicator. 2) Maximum exposure The maximum exposure to credit risk is as follows (Unit: Korean Won in millions): Loans and other financial assets at amortized cost (*) Banks Corporates Financial assets at FVTPL Total Sub-total Derivative assets (*) Cash and cash equivalents are not included. a) Credit risk exposure by geographical areas December 31, 2020 598,398 20,719 619,117 7,247 626,364 December 31, 2019 1,228,918 40,285 1,269,203 9,434 1,278,637 The following tables analyze credit risk exposure by geographical areas (Unit: Korean Won in millions): Loans and other financial assets at amortized cost 146 - 25 - December 31, 2020 Korea December 31, 2019 Korea 619,117 1,269,203 Financial assets at FVTPL Total b) Credit risk exposure by industries December 31, 2020 Korea December 31, 2019 Korea 7,247 626,364 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 as of December 31, 2020 and December 31, 2019 (Unit: Korean Won in millions): Loans and other financial assets at amortized cost Financial assets at FVPTL Total Loans and other financial assets at amortized cost Financial assets at FVPTL Total 3) Credit risk exposure December 31, 2020 Finance and insurance 617,024 7,247 624,271 Others 2,093 - 2,093 Total 619,117 7,247 626,364 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 maximum exposure to credit risk by asset quality, except for financial assets at FVTPL as of December 31, 2020 and December 31, 2019 is as follows (Unit: Korean Won in millions): December 31, 2020 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 619,264 598,545 20,719 20,719 619,264 - - - - - - - - - - - - - - - - - - - - 619,264 598,545 20,719 20,719 619,264 (147) (147) - - (147) 619,117 598,398 20,719 20,719 619,117 Financial assets Loans and other financial assets at amortized cost Banks Corporates General business Total (*1) Credit grade of corporates are AAA ~ BBB. (*2) Credit grade of corporates are A- ~ BBB. (*3) Credit grade of corporates are BBB- ~ C. Financial assets Loans and other financial assets at amortized cost Banks Corporates General business Total 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 1,269,466 1,229,181 40,285 40,285 1,269,466 - - - - - - - - - - - 26 - - - - - - - - - - - 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 1,269,203 147 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (*1) Credit grade of corporates are AAA ~ BBB. (*2) Credit grade of corporates are A- ~ BBB. (*3) Credit grade of corporates are BBB- ~ C. (2) Market risk 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, and the Company’s main 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 re-pricing date, are as follows (Unit: Korean Won in millions): December 31, 2020 Within 3 months (*1) 4 to 6 months 7 to 9 months 10 to 12 months 1 to 5 years Over 5 years Total Asset: Loans and other financial assets at amortized cost (*1) Financial assets at FVTOCI (*2) Sub-total Liability: Debentures Asset: Loans and other financial assets at amortized cost (*1) Liability: Debentures 469,756 - 469,756 - - - - - - - - - - - - - 469,756 149,614 149,614 149,614 619,370 6,100 6,100 6,100 6,100 292,074 1,027,917 1,344,391 December 31, 2019 Within 3 months (*1) 4 to 6 months 7 to 9 months 10 to 12 months 1 to 5 years Over 5 years Total 445,070 733,330 - - - - 1,178,400 5,486 5,486 5,486 5,487 87,780 1,049,863 1,159,588 (*1) The principal and interest cash flows of cash and cash equivalents are included in the cash flows within three months, with 69,206 million won and 43,670 million won as of December 31, 2020 and December 31, 2019, respectively. (*2) Due to the uncertain timing of the sale, it is included in the section for over 5 years in accordance with the expiration of the remaining contract (3) Liquidity risk cash flows analysis (i.e. based on remaining maturity and contract period, etc.). 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): December 31, 2020 Within 3 months 6,100 722 4 to 6 months 6,100 705 10,247 3,304 7 to 9 months 10 to 12 months 6,100 705 - 6,100 704 391 1 to 5 years 292,074 2,768 Over 5 years 1,027,917 - Total 1,344,391 5,604 2,604 - 16,546 17,069 10,109 6,805 7,195 297,446 1,027,917 1,366,541 December 31, 2019 Within 3 months 5,486 335 6,131 11,952 4 to 6 months 5,486 335 2,043 7,864 7 to 9 months 10 to 12 months 5,486 335 - 5,821 5,487 336 183 6,006 1 to 5 years 87,780 249 Over 5 years 1,049,863 - Total 1,159,588 1,590 820 88,849 - 1,049,863 9,177 1,170,355 Debentures Lease liabilities Other financial liabilities Total Debentures Lease liabilities Other financial liabilities Total 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, 2020 Within 3 months 6,100 722 4 to 6 months 6,100 705 7 to 9 months 6,100 705 10 to 12 months 6,100 704 1 to 5 years 292,074 2,768 Over 5 years 1,027,917 - Total 1,344,391 5,604 10,247 3,304 - 391 2,604 - 16,546 17,069 10,109 6,805 7,195 297,446 1,027,917 1,366,541 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 5,487 336 183 6,006 10 to 12 months 1 to 5 years Over 5 years 1,049,863 - Total 1,159,588 1,590 87,780 249 820 88,849 - 1,049,863 9,177 1,170,355 Debentures Lease liabilities Other financial liabilities Total Debentures Lease liabilities Other financial liabilities Total Liquidity risk refers to the risk that the Company may encounter difficulties in meeting obligations from its financial liabilities. (4) Capital management 1) Liquidity risk management Liquidity risk management is to prevent damages from potential liquidity shortages with effective risk management that could arise from 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 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 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 minimum requirements: Common Equity Tier 1 capital ratio of 8.0% and 7.0%, a Tier 1 capital ratio of 9.5% and 8.5%, and a minimum 148 - 27 - - 28 - 149 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 total capital ratio of 11.5% and 10.5% as of December 31, 2020, and 2019, respectively. 5. STATEMENTS OF CASH FLOWS Details of the Company’s capital adequacy ratio are as follows (Unit: Korean Won in millions): (1) Details of cash and cash equivalents 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, 2020 December 31, 2019 19,828,094 3,533,648 4,086,035 27,447,777 178,114,590 6,086,905 14,067,185 198,268,680 10.00% 11.78% 13.84% 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% Demand deposits Fixed deposits Total December 31, 2020 December 31, 2019 19,176 50,000 69,176 43,670 - 43,670 (2) Significant transactions of investing activities and financing activities not involving cash inflows and outflows are as follows (Unit: Korean Won in millions): Changes in other comprehensive income related to valuation of financial assets at FVTOCI Increase in account payables related to acquisition of premises and equipment Increase in account payables related to acquisition of intangible assets Changes in right-of-use assets due to new contract Changes in right-of-use assets due to renewal of contract Changes in lease liabilities due to new contract Changes in lease liabilities due to renewal of contract Comprehensive stock transfer For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 (280) 60 18 1,476 4,935 1,360 4,829 - - - - 3,439 - 2,812 - 18,502,760 (3) Adjustments of liabilities from financing activities for the year ended December 31, 2020 and for the period from January 11, 2019 (date of incorporation) to December 31, 2019 are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 Not involving cash inflows and outflows Debentures Lease liabilities Total Beginning Cash flow Amortization Others (*) 947,679 1,568 949,247 199,556 (2,203) 197,353 268 29 297 - 6,145 6,145 Ending 1,147,503 5,539 1,153,042 (*) Changes in lease liabilities due to new and renewed contracts include 1,360 million won and 4,829 million won, respectively. For the period from January 11,2019 (date of incorporation) to December 31, 2019 Not involving cash inflows and outflows Debentures Lease liabilities Total Beginning Cash flow Amortization Others (*) Ending - - - 947,604 (1,289) 946,315 75 45 120 - 2,812 2,812 947,679 1,568 949,247 (*) Changes in lease liabilities due to new contracts include 2,812 million won. 150 - 29 - - 30 - 151 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 6. FINANCIAL ASSETS AT FVTPL (3) Changes in the allowance for credit losses and gross carrying amount of due from banks are as follows (Unit: (1) Details of financial assets at FVTPL as of December 31, 2020 and December 31, 2019 are as follows (Unit: Korean Won in millions): Financial assets at fair value through profit or loss mandatorily measured at fair value 7,247 9,434 December 31, 2020 December 31, 2019 (2) Financial assets at fair value through profit or loss mandatorily measured at fair value are as follows (Unit: Korean Won in millions): Derivatives assets December 31, 2020 December 31, 2019 7,247 9,434 (3) Financial assets at FVTPL designated as upon initial recognition is nil among financial assets at FVTPL as of December 31, 2020 and December 31, 2019. 7. FINANCIAL ASSETS AT FVTOCI (1) Details of financial assets at FVTOCI as of December 31, 2020 and December 31, 2019 are as follows (Unit: Korean Won in millions): Hybrid securities December 31, 2020 December 31, 2019 149,614 (2) Details of equity securities designated as financial assets at FVTOCI as of December 31, 2020 and December 31, 2019 are as follows (Unit: Korean Won in millions): Purpose of acquisition December 31, 2020 December 31, 2019 Investment for political purpose 149,614 - - 8. LOANS AND OTHER FINANCIAL ASSETS AT AMORTIZED COST (1) Details of loans and other financial assets at amortized cost as of December 31, 2020 and December 31, 2019 are as follows (Unit: Korean Won in millions): Due from banks Other financial assets Total December 31, 2020 December 31, 2019 399,853 219,264 619,117 1,129,738 139,465 1,269,203 (2) Details of due from banks are as follows (Unit: Korean Won in millions): Due from banks in local currency: Due from depository banks Loss allowance Total December 31, 2020 December 31, 2019 400,000 (147) 399,853 1,130,000 (262) 1,129,738 Korean Won in millions): 1) Allowance for credit losses For the year ended December 31, 2020 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 allowance for credit loss Ending balance (262) - - - 115 (147) - - - - - - - - - - - - (262) - - - 115 (147) 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 Provision of allowance for credit loss Ending balance - - - - (262) (262) - - - - - - - - - - - - - - - - (262) (262) 2) Gross carrying amount For the year ended December 31, 2020 Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net increase (decrease) Ending balance Stage 1 1,130,000 - - - (730,000) 400,000 Stage 2 Stage 3 - - - - - - Total 1,130,000 - - - (730,000) 400,000 - - - - - - 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 (decrease) Ending balance Stage 1 - - - - 1,130,000 1,130,000 Stage 2 Stage 3 - - - - - - Total - - - - 1,130,000 1,130,000 - - - - - - (4) Details of other financial assets are as follows (Unit: Korean Won in millions): Receivables Accrued income Lease deposits Allowance for credit losses Total December 31, 2020 December 31, 2019 215,819 1,419 2,026 - 219,264 134,891 3,641 934 (1) 139,465 152 - 31 - - 32 - 153 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (5) Changes in the allowances for credit losses and gross carrying amount of other financial assets are as follows 9. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (Unit: Korean Won in millions): 1) Allowance for credit losses For the year ended December 31, 2020 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 allowance for credit loss Ending balance (1) - - - 1 - - - - - - - - - - - - - (1) - - - 1 - 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 Provision of allowance for credit loss Ending balance - - - - (1) (1) - - - - - - - - - - - - - - - - (1) (1) 2) Gross carrying amount For the year ended December 31, 2020 Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net increase (decrease) Ending balance Stage 1 139,466 - - - 79,798 219,264 Stage 2 Stage 3 - - - - - - Total 139,466 - - - 79,798 219,264 - - - - - - For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Stage 1 Stage 2 Stage 3 Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net increase (decrease) Ending balance - - - - 139,466 139,466 - - - - - - Total - - - - 139,466 139,466 - - - - - - (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—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 2 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 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 and liabilities measured at fair value are as follows (Unit: Korean Won in millions): Financial assets: Financial assets at FVTPL Derivative assets Financial assets at FVTOCI Hybrid securities Financial assets: Financial assets at FVTPL Derivative assets Level 1 December 31, 2020 Level 3 Level 2 Total - - - - 7,247 7,247 149,614 149,614 Level 1 Level 2 Level 3 Total December 31, 2019 - - 9,434 9,434 154 - 33 - - 34 - 155 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Financial assets measured at FVTPL and financial assets measured at FVTOCI 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 Company determines the fair value using valuation methods. Valuation methods and input variables for each type of financial instruments are as follows: Derivatives The fair value is measured considering the Values of underlying assets, Valuation methods Input variables price and volatility of the underlying assets using the Binomial Tree, a commonly used technique in the market Volatility, Risk-free market return, Corporate bond yield rate Hybrid securities The fair value is measured using the Hull and White model and the Monte Carlo Simulations. YTM Matrix, Additive spread by grade, Risk spread by entity, Effective Credit rating, Issuing information by item, Interest rate volatility estimate 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 Option valuation model and others Type Equity related Derivative assets Hybrid securities Hull and White model and others Hybrid securities related Significant unobservable inputs Value of underlying assets and volatility Interest rate (YTM) Range Impact of changes in significant unobservable inputs on fair value measurement 22.49% ~ 27.49% Variation of fair value increases as value of underlying assets and volatility increases. Interest rate 0.42 %~ 1.83% Market rate 1.84% ~ 4.60% Variation of fair value increases as variation of interest rate (YTM) increases. The fair value of financial assets classified as level 3 uses external valuation figures. (3) Changes in financial assets and liabilities measured at fair value classified into Level 3 are as follows. (Unit: Korean Won in millions): For the year ended December 31, 2020 Beginning balance Net Income Other comprehensive income Purchases/ issuances Disposals/ settlements Transfer to or out of Level 3 Ending balance Financial assets: Financial assets at FVTPL Derivative assets Financial assets at FVTOCI Hybrid securities Financial assets: Financial assets at FVTPL Derivative assets 9,434 (2,187) - - - - (386) 150,000 - - - 7,247 - 149,614 For the period from January 11, 2019(date of incorporation) to December 31, 2019 Beginning balance Net Income Other comprehensive income Purchases/ issuances Disposals/ settlements Transfer to or out of Level 3 Ending balance - 9,434 - - - - 9,434 (4) Sensitivity analysis results on reasonable fluctuation of the significant unobservable input variables for the fair value of Level 3 financial instruments are as follows. The sensitivity analysis on financial instruments shows how changes in unobservable inputs affect changes in fair value of the instruments through favorable and unfavorable changes. 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 equity related derivatives of which fair value changes are recognized as net income and hybrid securities of which fair value changes are recognized as other comprehensive income among level 3 financial instruments. 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 FVTPL Derivative assets (*1) Financial assets at FVTOCI Hybrid securities (*2) Net income Favorable Unfavorable Other comprehensive income (loss) Unfavorable Favorable December 31, 2020 724 - (724) - - 6,647 - (6,365) (*1) Fair value changes of equity related derivatives are calculated by increasing or decreasing stock price volatility rate of underlying assets and correlation, which are major unobservable variables, by 10%, respectively. (*2) Fair value changes of hybrid securities are calculated by increasing or decreasing market rate, which is the major unobservable variable, by 1%, respectively. Financial assets: Financial assets at fair value through profit or loss mandatorily measured at fair value Derivative assets (*) December 31, 2019 Net income Favorable Unfavorable 943 (943) (*) Fair value changes of equity related derivatives are calculated by increasing or decreasing stock price volatility rate of underlying assets and correlation, which are major unobservable variables, by 10%, respectively. (5) Fair value and carrying amount of financial 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, 2020 Fair value Level 1 Level 2 Level 3 Total Carrying amount - - - - 619,117 619,117 619,117 1,186,034 - - 16,546 1,186,034 16,546 1,147,503 16,546 (*) The carrying amount is disclosed at fair value considering the carrying amount as an approximation of fair value. 156 - 35 - - 36 - 157 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 December 31, 2019 Fair value Level 1 Level 2 Level 3 Total Carrying amount Financial assets: Loans and other financial assets at amortized cost (*) Financial liabilities: Debentures Other financial liabilities (*) ` - - - - 1,269,203 1,269,203 1,269,203 951,387 - - 9,177 951,387 9,177 947,679 9,177 (*) The carrying amount is 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 and input variables for the fair value of financial 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. Input variables Risk-free market rate, etc. (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 Financial assets at FVTPL December 31, 2020 Financial assets at FVTOCI Financial assets at amortized cost Deposits Hybrid securities Derivative assets Other financial assets Total - - 7,247 - 7,247 - 149,614 - - 149,614 399,853 - - 219,264 619,117 Financial assets Deposits Derivative assets Other financial assets Total Financial assets at FVTPL - 9,434 - 9,434 December 31, 2019 Financial assets at amortized cost 1,129,738 - 139,465 1,269,203 Total 399,853 149,614 7,247 219,264 775,978 Total 1,129,738 9,434 139,465 1,278,637 Financial liabilities Debentures Other financial liabilities Total December 31, 2020 Financial liabilities at amortized cost December 31, 2019 Financial liabilities at amortized cost 1,147,503 16,546 1,164,049 947,679 9,177 956,856 (7) Income or expense from financial instruments by category Income or expense from financial assets and liabilities by each category for the year ended December 31, 2020 and for the period from January 11, 2019 (date of incorporation) to December 31, 2019 are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 Interest Income(expense) Reversal (Provision) of credit loss Financial assets at FVTPL Financial assets at FVTOCI Loans and other financial assets at amortized cost (*) Financial liabilities at amortized cost Total - - 10,082 (22,992) (12,910) - - 116 - 116 (*) 2,910 million won interest income of cash and cash equivalents are included. Others Total (920) 2,580 (920) 2,580 - 10,198 - 1,660 (22,992) (11,134) Financial assets at FVTPL Loans and other financial assets at amortized cost (*) Financial liabilities at amortized cost Total Interest Income(expense) - 7,741 (7,644) 97 (*) 4,126 million won interest income of cash equivalents is included. For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Reversal (Provision) of credit loss Others Total - 9,434 (263) - (263) - - 9,434 9,434 7,478 (7,644) 9,268 158 - 37 - - 38 - 159 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 10. INVESTMENTS IN SUBSIDIARIES (2) Changes in the carrying value of investments in subsidiaries are as follows (Unit: Korean Won in millions): (1) Details of Investments in subsidiaries are as follows (Unit: Korean Won in millions and number of shares): Beginning balance For the year ended December 31, 2020 Disposal Acquisition Ending balance Subsidiaries Woori Bank Woori Card Co., Ltd. Woori Financial Capital Co., Ltd. Woori Investment Bank Co., Ltd. Woori Asset Trust Co., Ltd Woori Asset Management Corp. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Location Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea December 31, 2020 Capital stock 3,581,400 896,300 287,700 437,100 15,300 20,000 5,000 10,000 30,000 20,000 24,500 3,000 Main business Finance Finance Finance Other credit finance Finance Finance Credit information Finance Finance Finance System software development & maintenance Other service business Number of shares Percentage of ownership (%) (*2) December 31, 2019 Percentage of ownership (%) (*2) Number of shares Subsidiaries (*1) Woori Bank Woori Card Co., Ltd. Woori Financial Capital Co., Ltd. Woori Investment Bank Co., Ltd. Woori Asset Trust Co., Ltd Woori Asset Management Corp. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. 716,000,000 179,266,200 42,605,000 513,162,392 1,560,000 2,920,000 1,008,000 2,000,000 6,000,000 4,000,000 4,900,000 600,000 Financial statements date of use December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 December 31, 2020 100.0 100.0 76.8 58.7 67.2 73.0 100.0 100.0 100.0 100.0 100.0 100.0 676,000,000 179,266,200 - 403,404,538 1,560,000 2,920,000 1,008,000 2,000,000 6,000,000 4,000,000 4,900,000 600,000 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 100.0 100.0 - 59.8 67.2 73.0 100.0 100.0 100.0 100.0 100.0 100.0 (*1) Only subsidiaries invested directly by the Company are included. (*2) The percentage is based on the effective shareholding rate relative to the number of stocks outstanding. Woori Bank Woori Card Co., Ltd. Woori Financial Capital Co., Ltd. (*) Woori Investment Bank Co., Ltd. Woori Asset Trust Co., Ltd Woori Asset Management Corp. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Total 17,921,151 1,118,367 - 392,795 224,198 122,449 16,466 13,939 7,797 33,000 21,754 1,000,000 - 633,758 54,878 - - - - - - - 1,677 19,873,593 - 1,688,636 - - - - - - - - - - - - - 18,921,151 1,118,367 633,758 447,673 224,198 122,449 16,466 13,939 7,797 33,000 21,754 1,677 21,562,229 (*) After the Company acquiring 76.8% of Aju Capital Co., Ltd. in December 2020, Aju Capital Co. changed its name to Woori Financial Capital Co., Ltd. For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Woori Bank (*1) Woori Card Co., Ltd. (*2) Woori Investment Bank Co., Ltd. (*2) Woori Asset Trust Co., Ltd (*3) Woori Asset Management Corp. (*4) Woori Credit Information Co., Ltd. (*1) Woori Fund Service Co., Ltd. (*1) Woori Private Equity Asset Management Co., Ltd. (*1) Woori Global Asset Management Co., Ltd. (*5) Woori FIS Co., Ltd. (*1) Woori Finance Research Institute Co., Ltd. (*1) Total Beginning balance (date of incorporation) 17,921,151 - - - - 16,466 13,939 7,797 - 21,754 1,677 17,982,784 Acquisition Disposal Ending balance - 1,118,367 392,795 224,198 122,449 - - - 33,000 - - 1,890,809 - - - - - - - - - - - - 17,921,151 1,118,367 392,795 224,198 122,449 16,466 13,939 7,797 33,000 21,754 1,677 19,873,593 (*1) Acquired by the comprehensive stock transfer at the date of incorporation. (*2) Woori Card Co., Ltd. and Woori Investment Bank Co., Ltd. were transferred from second-tier subsidiaries to subsidiaries in September 2019. (*3) After the Company acquiring 67.2% of Kukje Trust Co. stakes, Kukje Trust Co. changed its name to Woori Asset Trust Co., Ltd. in December 2019. (*4) After the Company acquiring 73% of Tongyang Asset Management Corporation stakes, Tongyang Asset Management Corporation changed its name to Woori Asset Management Corporation in August 2019. (*5) After obtaining approval from the Financial Services Commission to change the major shareholder of ABL Global Asset Management Co., Ltd. in July 2019, the remaining payment was completed in August 2019. After the acquisition, the company name was changed to Woori Global Asset Management Co., Ltd. 160 - 39 - - 40 - 161 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 11. PREMISES AND EQUIPMENT (4) Details of right-of-use assets as of December 31, 2020 and December 31, 2019 are as follows (Unit: Korean (1) Details of premises and equipment as of December 31, 2020 and December 31, 2019 are as follows (Unit: Korean Won in millions): Premises and equipment(owned) Right-of-use asset Total Premises and equipment(owned) Right-of-use asset Total Building December 31, 2020 Equipment and Vehicles Leasehold improvements - 4,936 4,936 - 1,436 1,436 Building 3,779 590 4,369 3,233 - 3,233 December 31, 2019 Equipment and Vehicles Leasehold improvements 3,767 384 4,151 1,796 - 1,796 Total 7,012 5,526 12,538 Total 5,563 1,820 7,383 (2) Details of premises and equipment (owned) as of December 31, 2020 and December 31, 2019 are as follows (Unit: Korean Won in millions): Equipment and Vehicles Leasehold improvements Total December 31, 2020 Acquisition cost Accumulated depreciation Net carrying amount 5,572 (1,793) 3,779 4,283 (1,050) 3,233 Equipment and Vehicles Leasehold improvements Total December 31, 2019 Acquisition cost Accumulated depreciation Net carrying amount 4,538 (771) 3,767 2,184 (388) 1,796 (3) Details of changes in premises and equipment (owned) are as follows (Unit: Korean Won in millions): Beginning balance Acquisitions Depreciation Ending balance Beginning balance Acquisitions Depreciation Ending balance Equipment and Vehicles For the year ended December 31, 2020 Leasehold improvements Total 3,767 1,034 (1,022) 3,779 1,796 2,100 (663) 3,233 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Leasehold improvements Equipment and Vehicles Total - 4,538 (771) 3,767 - 2,184 (388) 1,796 - 6,722 (1,159) 5,563 9,855 (2,843) 7,012 6,722 (1,159) 5,563 5,563 3,134 (1,685) 7,012 Won in millions): Acquisition cost Accumulated depreciation Net carrying amount Acquisition cost Accumulated depreciation Net carrying amount Building December 31, 2020 Equipment and Vehicles 8,703 (3,767) 4,936 2,871 (1,435) 1,436 Building 1,085 (495) 590 December 31, 2019 Equipment and Vehicles 568 (184) 384 Total Total 9,788 (4,262) 5,526 3,439 (1,619) 1,820 (5) Details of changes in right-of-use assets for the year ended December 31, 2020 and for the period from January 11, 2019 (date of incorporation) to December 31, 2019 are as follows (Unit: Korean Won in millions): Beginning balance New contracts Changes in contract Termination Depreciation Ending balance Beginning balance New contracts Depreciation Ending balance Building For the year ended December 31, 2020 Equipment and Vehicles Total 1,436 896 4,936 - (2,332) 4,936 384 580 - (39) (335) 590 1,820 1,476 4,936 (39) (2,667) 5,526 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Equipment and Vehicles Building Total - 2,871 (1,435) 1,436 - 568 (184) 384 - 3,439 (1,619) 1,820 12. INTANGIBLE ASSETS (1) Details of intangible assets are as follows (Unit: Korean Won in millions): Software Development cost Membership deposit Total December 31, 2020 Acquisition cost Accumulated amortization Net carrying amount 3,097 (1,832) 1,265 2,231 (585) 1,646 2,371 - 2,371 December 31, 2019 7,699 (2,417) 5,282 Acquisition cost Accumulated amortization Net carrying amount Software Development cost Total 2,729 (1,144) 1,585 1,901 (176) 1,725 4,630 (1,320) 3,310 162 - 41 - - 42 - 163 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Details of changes in intangible assets are as follows (Unit: Korean Won in millions): 14. PROVISIONS For the year ended December 31, 2020 Software 1,585 368 (688) 1,265 Development cost 1,725 330 (409) 1,646 Membership deposit - 2,371 - 2,371 Total 3,310 3,069 (1,097) 5,282 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Software Development cost Total - 2,729 (1,144) 1,585 - 1,901 (176) 1,725 - 4,630 (1,320) 3,310 Beginning balance Acquisitions Amortization Ending balance Beginning balance Acquisitions Amortization Ending balance 13. DEBENTURES Details of debentures are as follows (Unit: Korean Won in millions): Face value of bonds: General bonds Subordinated bonds Sub-total Deducted item: Discounts on bonds Total December 31, 2020 December 31, 2019 Interest rate (%) Amount Interest rate (%) Amount 1.23 2.13 ~ 2.55 200,000 950,000 1,150,000 - 2.13 ~ 2.55 (2,497) 1,147,503 - 950,000 950,000 (2,321) 947,679 (1) Details of provisions are as follows (Unit: Korean Won in millions): Asset retirement obligation 782 600 December 31, 2020 December 31, 2019 (2) Changes in asset retirement obligation are as follows (Unit: Korean Won in millions): Beginning balance Increase Amortization Ending balance For the year ended December 31,2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 600 168 14 782 - 588 12 600 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 assets used as offices as of December 31, 2020, discounted by appropriate discount rate. The restoration cost is expected to occur by the end of the lease period of each office, and the Company used the average amount of the major subsidiaries’ actual recovery cost and the inflation rate for the past 3 years in order to estimate future recovery cost. 15. NET DEFINED BENEFIT LIABILITY(ASSET) The Company’s pension plan is based on the defined benefit retirement pension plan. 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 into account of projected earnings' increase, using actuarial assumptions 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 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. 164 - 43 - - 44 - 165 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (1) Details of net defined benefit liability(asset) are as follows (Unit: Korean Won in millions): Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability(asset) December 31, 2020 December 31, 2019 20,083 (23,592) (3,509) 14,174 (10,692) 3,482 (2) Changes in the carrying value of defined benefit obligation are as follows (Unit: Korean Won in millions): Beginning balance Transfer-in / out Recruit / Transfer in Current service cost Interest cost Remeasurements Financial assumption Demographic assumptions Experience adjustment Retirement benefit paid Others Ending balance For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 14,174 2,441 1,266 2,127 410 298 - 454 (1,007) (80) 20,083 - 8,276 3,360 1,415 253 (457) 542 762 (54) 77 14,174 (3) Changes in the plan assets are as follows (Unit: Korean Won in millions): Beginning balance Transfer-in / out Interest income Remeasurements Employer’s contributions Retirement benefit paid Ending balance For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 10,692 4,155 304 (86) 8,760 (233) 23,592 - 8,877 129 (24) 1,710 - 10,692 (4) The fair value of plan assets as of December 31, 2020 and December 31, 2019 is as follows (Unit: Korean Won in millions): Cash and due from banks December 31, 2020 December 31, 2019 23,592 10,692 Meanwhile, the actual revenue of the current and prior term plan assets is 218 million won and 105 million won, respectively. The contribution expected to be paid in the fiscal year beginning after the reporting period is 2,148 million won. (5) The amount recognized in profit or loss and total comprehensive income related to the defined benefit plan for the year ended December 31, 2020 and for the period from January 11, 2019 (date of incorporation) to December 31, 2019 is as follows (Unit: Korean Won in millions): Current service cost Recruit / Transfer in Net interest expense Cost recognized in net income Remeasurements (*) Cost recognized in total comprehensive income (*) The amount is before income tax effect. For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 2,127 1,266 106 3,499 838 4,337 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, 2020 2.48% 5.50% Issued by Korea Insurance Development Institute Issued by Korea Insurance Development Institute 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 10.84 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, 2020 December 31, 2019 (1,909) 2,222 2,134 (1,876) (1,367) 1,596 1,535 (1,345) 16. OTHER FINANCIAL LIABILITIES AND OTHER LIABILITIES Other financial liabilities and other liabilities are as follows (Unit: Korean Won in millions): Other financial liabilities: Accounts payable Accrued expenses Lease liabilities Other miscellaneous financial liabilities Sub-total Other liabilities: Other miscellaneous liabilities Total December 31, 2020 December 31, 2019 6,102 10,444 5,539 - 22,085 570 22,655 2,424 6,651 1,568 102 10,745 4,142 14,887 166 - 45 - - 46 - 167 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 17. DERIVATIVES (4) Hybrid securities Derivative assets and derivative liabilities are as follows (Unit: Korean Won in millions): The bond-type hybrid securities classified as owner’s equity are as follows (Unit: Korean Won in millions): December 31, 2020 December 31, 2019 Nominal amount Assets For trading Nominal amount Assets For trading Equity Forwards 130,599 7,247 117,535 9,434 Derivatives held for trading are classified into financial assets at FVTPL in the statements of financial position (seeing Note 6). 18. EQUITY (1) Details of equity as of December 31, 2020 and December 31, 2019 are as follows (Unit: Korean Won in millions): Capital Hybrid securities Capital surplus Accumulated other comprehensive income Retained earnings (*1) (*2) Total December 31, 2020 December 31, 2019 3,611,338 1,895,322 14,874,084 (1,518) 664,746 21,043,972 3,611,338 997,544 14,874,084 (631) 623,930 20,106,265 (*1) The regulatory reserve for credit loss in retained earnings amounted to 692 million won as of December 31, 2020 in accordance with the relevant regulation. (*2) The earned surplus reserve in retained earnings amounted to 62,830 million won as of December 31, 2020 in accordance with the Article 53 of the Financial Holding Company Act. (2) The number of authorized shares and others of the Company are as follows: Shares of common stock authorized Par value Shares of common stock issued Capital stock December 31, 2020 December 31, 2019 4,000,000,000 Shares 5,000 Won 722,267,683 Shares 3,611,338 million won 4,000,000,000 Shares 5,000 Won 722,267,683 Shares 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 for the period from January 11, 2019, to December 31, 2019, which changed the total number of issued shares from 680,164,306 as of the date of establishment to 722,267,683 as of December 31, 2020. Issue date Maturity Interest rate (%) December 31, 2020 December 31, 2019 Securities in local currency Securities in local currency Securities in local currency Securities in local currency Securities in local currency 2019-07-18 2019-10-11 2020-02-06 2020-06-12 2020-10-23 - - - - - Issuance cost Total 3.49 3.32 3.34 3.23 3.00 500,000 500,000 500,000 500,000 400,000 300,000 200,000 (4,678) 1,895,322 - - - (2,456) 997,544 The hybrid securities mentioned above do not have maturity date but are redeemable 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): Net gain (loss) on valuation of financial assets at FVTOCI Remeasurements of defined benefit plan Total For the year ended December 31, 2020 Beginning balance Increase (decrease) Income tax effect Ending balance - (631) (631) (386) (838) (1,224) 106 231 337 (280) (1,238) (1,518) For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Remeasurements of defined benefit plan (6) Regulatory Reserve for Credit Loss Beginning balance - Increase (decrease) (871) Income tax effect Ending balance (631) 240 In accordance with Article 26 ~ 28 of the Financial holding company Supervision Regulations, the Company 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 for credit loss Ending balance December 31, 2020 692 394 1,086 December 31, 2019 - 692 692 168 - 47 - - 48 - 169 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 2) Provision of regulatory reserve for credit loss, adjusted net income after the provision of regulatory reserve and others 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 before regulatory reserve Provision of regulatory reserve for credit loss Adjusted net income after the provision of regulatory reserve Dividends to hybrid securities Adjusted net income after regulatory reserve and dividends to hybrid securities Adjusted EPS after regulatory reserve and dividends to hybrid securities (Unit: Korean Won) For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 595,318 394 594,924 (48,915) 546,009 756 628,293 692 627,601 (4,363) 623,238 899 (7) Statements of appropriations of retained earnings are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Unappropriated retained earnings: Unappropriated retained earnings carried over from prior years Dividend on hybrid equity securities Net income Appropriation of retained earnings: Earned profit reserves Regulatory reserve for credit loss Cash dividend (dividend per share (%)) (2020: 360 won (7.2%)) (2019: 700 won (14.0%)) Unappropriated retained earnings to be carried forward 54,821 (48,915) 595,318 601,224 59,540 394 260,016 319,950 281,274 - (4,363) 628,293 623,930 62,830 692 505,587 569,109 54,821 The appropriation of retained earnings for the year ended December 31,2020, is expected to be appropriated at the shareholders’ meeting on March 26, 2021. The appropriation date for the year ended December 31, 2019, was March 25, 2020. (8) Details of treasury stocks are as follows (Unit: Shares, Korean Won in millions): December 31, 2020 Number of shares Book value 2 - - 2 December 31, 2019 Number of shares - 2 - 2 - - - - Book value - - - - Beginning Repurchase Retirement Ending 19. DIVIDENDS Dividends per share and the total dividends for the fiscal year ending December 31, 2019 were 700 won and 505,587 million won, respectively, approved at the regular general shareholders' meeting held on March 25, 2020. Dividends per share and the total dividends for the fiscal year ending December 31, 2020 are 360 won and 260,016 million won, respectively. It will be proposed at the regular general shareholders' meeting scheduled on March 26, 2021. The financial statements of the current term do not include such outstanding dividends. 20. NET INTEREST INCOME (1) Interest income recognized is as follows (Unit: Korean Won in millions): Interest on due from banks Other interest income Total For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 10,054 28 10,082 7,723 18 7,741 (2) Details of interest expense recognized are as follows (Unit: Korean Won in millions): Interest on borrowings Interest on debentures Other interest expense Interest on lease liabilities Total For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 - 22,992 14 29 23,035 495 7,149 12 45 7,701 21. NET FEES AND COMMISSIONS INCOME (1) Details of fees and commissions income incurred are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Fees and commissions income 805 - (2) Details of fees and commissions expense incurred are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 8,858 7,341 16,199 8,202 7,631 15,833 Fees and commissions paid Others Total 22. DIVIDEND INCOME Details of dividend income recognized are as follows (Unit: Korean Won in millions): Dividend income recognized from investments in subsidiaries Dividend income recognized from FVTOCI Total For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 677,795 2,580 680,375 676,000 - 676,000 170 - 49 - - 50 - 171 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 23. NET GAIN OR LOSS ON FINANCIAL INSTRUMENTS AT FVTPL 25. GENERAL AND ADMINISTRATIVE EXPENSES (1) Details of gain or loss related to net gain or loss on financial instruments at FVTPL are as follows (Unit: (1) Details of general and administrative expenses recognized are as follows (Unit: Korean Won in millions): Korean Won in millions): Gains and losses on financial instruments at fair value through profit or loss mandatorily measured at fair value For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 (920) 9,434 (2) Details of net gain or loss on financial instrument at FVTPL are as follows (Unit: Korean Won in millions): Derivatives Equity forward Gain on (for trading) transactions and valuation Loss on transactions and valuation For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 1,266 (2,186) (920) 9,434 - 9,434 24. REVERSAL(PROVISION) FOR IMPAIRMENT LOSSES DUE TO CREDIT LOSS Details of reversal(provision) for impairment losses due to credit loss recognized are as follows (Unit: Korean Won in millions): Reversal(Provision) for impairment losses due to credit loss on loans and other financial assets at amortized cost For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 116 (263) Employee benefits Short-term employee benefits Salaries Employee fringe benefits Retirement benefit service costs Share based payments 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 For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 26,533 8,090 3,499 1,557 39,679 5,449 1,120 375 3,127 2,937 642 1,190 186 51 54 196 212 980 220 54 11,344 56,472 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 39,941 172 - 51 - - 52 - 173 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Share-based payment 26. NON-OPERATING INCOME (EXPENSES) Details of performance condition share-based payment granted to executives as of December 31, 2020 and 2019 are as follows. 1) Performance condition share-based payment Subject to Type of payment Vesting period Date of payment Fair value (*1) Valuation method Expected dividend rate Expected maturity date Number of shares remaining As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 Number of shares granted (*2) Subject to Type of payment Vesting period Date of payment Fair value (*1) Valuation method Expected dividend rate Expected maturity date Number of shares remaining Number of shares granted (*2) As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 Shares granted for the year 2019 Cash-settled January 11, 2019 ~ December 31, 2022 2023-01-01 9,162 Won Black-Scholes Model 4.13% 2 years 77,728 shares 77,728 shares 77,728 shares 77,728 shares Shares granted for the year 2020 Cash-settled January 1, 2020 ~ December 31, 2023 2024-01-01 8,792 Won Black-Scholes Model 4.13% 3 years 189,270 shares - 189,270 shares - (1) Details of non-operating income and expenses recognized are as follows (Unit: Korean Won in millions): Other non-operating income Other non-operating expense Total For the year ended December 31, 2020 185 (400) (215) 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 year ended December 31, 2020 185 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): Donations For the year ended December 31, 2020 400 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 5 (755) (750) 5 755 (*1) As the amount of payment varies according to the base price (the arithmetic average of the weighted average stock price of transactions in the past one week, the past one month, and the past two months) at the date of payment, the fair value is calculated and used to measure the liability according to the Black Shawls model based on the base price at the time of each settlement. (*2) 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 Company 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, 2020 and December 31, 2019 the book value of the liabilities related to the performance condition share-based payments recognized by the Company is 2,376 million won and 819 million won. 174 - 53 - - 54 - 175 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 27. INCOME TAX EXPENSE (INCOME) (1) Details of income tax expense (income) are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Current tax expense: Current tax expense with respect to the current period Sub-total Deferred tax expense (income) Change in deferred tax assets (liabilities) due to temporary differences Income tax expense directly attributable to equity Income tax expense (income) Sub-total - - (1,118) 337 (781) (781) - - 154 240 394 394 (2) The relationship between income before income tax expense deduction and income tax expense in the current comprehensive income statement is as follows (Unit: Korean Won in millions): Net income before income tax expense Tax calculated at statutory tax rate (*1) Adjustments: Effects of income that is exempt from taxation Effect of expenses that are not deductible in determining taxable profit Effect of corporate tax due to consolidate tax plans Others Sub-total Income tax expense (income) Effective tax rate (*2) For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 594,537 153,136 (178,635) 420 24,370 (72) (153,917) (781) - 628,687 165,527 (179,186) 1,190 15,839 24 (162,133) 394 0.1% (*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. (*2) It is tax income for the year ended December 31, 2020, so the annual effective tax rate was not calculated. (3) Details of changes in deferred income tax assets and liabilities are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 Beginning balance Recognized as income (expense) Recognized as other comprehensive income (expense) Ending Balance - (2,594) 72 1,622 (729) 165 225 1,085 (154) - 601 (32) (59) (836) 50 428 629 781 106 - - 207 24 - - - 337 106 (1,993) 40 1,770 (1,541) 215 653 1,714 964 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Recognized as other comprehensive income (expense) Recognized as income (expense) Ending Balance Beginning balance - - - - - - - - (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) Gain (loss) related to securities 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(liabilities) in total 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(liabilities) in total 176 - 55 - - 56 - 177 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (4) Unrealizable temporary differences are as follows (Unit: Korean Won in millions): (2) The weighted average number of common shares outstanding is as follows: (Unit: number of shares, days) Deductible temporary differences Taxable temporary differences Total For the year ended December 31, 2020 4,474 (7,917,618) (7,913,144) 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 4,474 million won associated with investments in subsidiaries as of December 31, 2020, because it is not probable that the temporary differences will be reversed in the foreseeable future. No deferred income tax liability has been recognized for the taxable temporary difference of 7,917,618 million won associated with investment in subsidiaries as of December 31, 2020, 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): Net gain (loss) on valuation of financial assets at FVTOCI Remeasurements of defined benefit plan Total December 31, 2020 December 31, 2019 106 471 577 - 240 240 (6) Current tax assets and liabilities are as follows (Unit: Korean Won in millions) Current tax assets Current tax liabilities December 31, 2019 December 31, 2019 307 215,071 - 133,526 28. EARNINGS PER SHARE (“EPS”) (1) 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 (Unit: million shares) Basic EPS (Unit: Korean Won) For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 595,318 (48,915) 546,403 722 757 628,293 (4,363) 623,930 694 900 For the year ended December 31, 2020 Number of shares Dates Accumulated number of shares outstanding during period Period Common shares issued at the beginning of the period Treasury stock 2020-01-01 ~ 2020-12-31 2020-01-01 ~ 2020-12-31 722,267,683 (2) 366 366 Sub-total (①) Weighted average number of common shares outstanding (②=(①/366) 264,349,971,978 (732) 264,349,971,246 722,267,681 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 issued at the beginning date of incorporation of the period 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 EPS is equal to basic EPS because there is no dilution effect for the year ended December 31, 2020 and for the period from January 11, 2019 (date of incorporation) to December 31, 2019. 29. CONTINGENT LIABILITIES AND COMMITMENTS (1) Litigation case As of December 31, 2020 and December 31, 2019, the Company has no litigation case in progress. (2) Details of loan commitments with financial institutions are as follows (Unit: Korean Won in millions): December 31, 2020 December 31, 2019 Loans Financial institutions Line of credit Loan balance Line of credit Loan balance Standard Chartered Bank Korea Ltd. Kookmin Bank Total 65,000 35,000 100,000 - - - 65,000 35,000 100,000 - - - (3) The Company 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 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. In regards to this acquisition, the Company recognized 7,247 million won and 9,434 million won as derivative assets as of December 31, 2020 and December 31, 2019 (seeing Note 17). 178 - 57 - - 58 - 179 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 30. RELATED PARTY TRANSACTIONS (2) Gain or loss from transactions with related parties are as follows (Unit: Korean Won in millions): Related parties of the Company as of December 31, 2020 and December 31, 2019, and assets and liabilities recognized, guarantees and commitments, major transactions with related parties and compensation to key management for the year ended December 31, 2020 and for the period from January 11, 2019 (date of incorporation) to December 31, 2019 are as follows: (1) Assets and liabilities from transactions with related parties are as follows (Unit: Korean Won in millions): Related party Title of account December 31, 2020 December 31, 2019 Subsidiaries Woori Bank Woori Card Co., Ltd. Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Cash and cash equivalents Other financial assets Allowance for credit losses Other financial liabilities Other financial assets Other financial liabilities Other financial assets Other financial liabilities Other financial assets Other financial liabilities Woori Credit Information Co., Ltd. Other financial assets Woori Fund Service Co., Ltd. Associates of subsidiaries W Service Networks Co., Ltd. Other financial assets Other financial liabilities 69,176 598,505 (147) 7,718 17,983 299 1,538 259 37 1,465 517 643 122 43,670 1,229,181 (263) 601 37,754 267 1,386 190 21 1,320 568 556 64 Related party Title of account For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Subsidiaries (*1) Woori Bank Interest income Fees and commissions income Dividend income Interest expenses (*2) Fees and commissions expense Reversal(Provision) of impairment loss due to credit loss General and administrative expenses (*2) Woori Card Co., Ltd. Dividend income Woori FIS Co., Ltd. General and administrative expenses Woori Finance Research Fees and commissions Institute Co., Ltd. expenses Woori Credit Information Co., Ltd. Dividend income Woori Fund Service Co., Ltd. Woori Asset Trust Co., Ltd Associates of subsidiaries W Service Networks Co., Ltd. Dividend income Dividend income General and administrative expenses 10,082 805 676,000 17 13 116 3,403 2,580 2,670 6,190 494 521 780 7,741 - 676,000 35 4 (262) 2,365 - 1,492 5,400 - - - 1,347 775 (*1) The Company issued debentures of 200,000 million won during the period, of which 40,000 million won was underwritten by Woori Investment Bank and paid 40 million won as acquisition fee which is included in the discount on debentures issued. In addition, 29,000 million won out of 200,000 million won in hybrid securities issued during the current term was acquired by Woori Investment Bank and paid 44 million won as acquisition fees, which is included in the cost of issuing hybrid securities. (*2) The depreciation of right-of-use assets and interest expense of lease liabilities arising from lease transactions during the current term are included. (3) The details of the right-of-use assets and lease liabilities due to lease transactions with related parties as of December 31, 2020 and December 31, 2019 are as follows (Unit: Korea Won in millions): Related parties Subsidiaries Woori Bank Title of account December 31, 2020 Right-of-use assets Lease liabilities (*) December 31, 2019 1,436 1,164 4,936 4,920 180 - 59 - - 60 - 181 (*) Cash outflows of lease liabilities redemption for the year ended December 31, 2020 and for the period from January 11, 2019 (date of incorporation) to December 31, 2019 are 1,817 million won and 1,115 million won, respectively. INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (4) The details of loan and borrowing transactions with related parties for the year ended December 31, 2020 and for the period from January 11, 2019 (date of incorporation) to December 31, 2019 are as follows (Unit: Korea Won in millions): Related parties (*1) Subsidiaries Woori Bank Title of account Due from banks (*2) For the year ended December 31, 2020 Beginning balance Increase Decrease Ending balance 1,130,000 3,800,000 4,480,000 450,000 (*1) Woori Investment Bank acquired 40,000 million won out of 200,000 million won in non-guaranteed bonds issued during the year ended December 31, 2020 and sold the entire amount to the market on the date of issuance. Of the 200,000 million won in hybrid securities issued during the current term, 29,000 million won was acquired by Woori Investment Bank and sold all to the market on the date of issuance. (*2) Excludes due from banks without withdrawal limitations. Related parties Subsidiaries Woori Bank Title of account Due from banks (*) (*) Excludes due from banks without withdrawal limitations. For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Beginning balance Increase Decrease Ending balance - 2,730,000 1,600,000 1,130,000 (5) The details of equity-related transactions with related parties are as follows (Unit: Korean Won in million) For the year ended December 31, 2020 Related parties Subsidiaries Woori Bank Woori Card Co., Ltd. Woori Investment Bank Co., Ltd. Associates Well to Sea No. 3 Private Equity Fund Contribution 1,000,000 - 54,878 - Designated to preferred buyers of Woori Financial Capital Co., Ltd. (formerly Aju Capital Co., Ltd.) 60,158 - Consideration of the acquisition of Woori Financial Capital Co., Ltd. (formerly Aju Capital Co., Ltd.) - - - - - 572,333 Acquisition of hybrid securities - 150,000 - - (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): Related parties December 31, 2020 December 31, 2019 Warranty Subsidiaries Woori Card Co., Unused loan commitment Ltd. 131 495 (7) Compensation for key management is as follows (Unit: Korean Won in millions): Short-term employee salaries Retirement benefit service costs Share-based compensation Total For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 6,259 230 1,205 7,694 3,863 419 529 4,631 Key management includes registered executives and non-registered executives. The Company has not recognized any outstanding assets, allowance and related impairment loss due to credit losses from transaction with key management as of December 31, 2020 and December 31, 2019. Liabilities related to key management compensation are 4,209 million won and 1,805 million won as of December 31, 2020 and December 31, 2019, respectively. 31. 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 Total December 31, 2020 December 31, 2019 2,836 2,768 5,604 1,341 249 1,590 (2) Total cash outflows from lease are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Cash outflows from lease 2,335 1,289 (3) Details of lease payments that are not included in the measurement of lease liabilities due to the fact that they are leases for which the underlying asset is of low value are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Lease payments for which the underlying asset is of low value 132 95 There are no lease payments not included in the lease liabilities measurement, resulting from short-term leases for the year ended December 31, 2020 and for the period from January 11, 2019 (date of incorporation) to December 31, 2019. 32. EVENTS AFTER THE REPORTING PERIOD On March 5, 2021, the Company entered into a stock sale agreement to acquire 100% interests of Woori Savings Bank (common stock 12,160,398 shares) from one of the subsidiaries, Woori Financial Capital Co., Ltd. 182 - 61 - - 62 - 183 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 REPORT ON INDEPENDENT AUDITOR’S AUDIT OF INTERNAL CONTROL OVER FINANCIAL REPORTING (English Translation of a Report Originally Issued in Korean) To the Board of Directors and Shareholders of Woori Financial Group Inc. Definition and Inherent Limitations of Internal Control over Financial Reporting Opinion on Internal Control over Financial Reporting We have audited Woori Financial Group Inc.(the Company)’s Internal Control over Financial Reporting as at December 31, 2020, based on Conceptual Framework for Designing and Operating Internal Control over Financial Reporting. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as at December 31, 2020, based on Conceptual Framework for Designing and Operating Internal Control over Financial Reporting. We also have audited, in accordance with Korean Standards on Auditing, the separate financial statements of the Company, which comprise the separate statement of financial position as at December 31, 2020, and the separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flow for the year then ended, and notes to the separate financial statements including a summary of significant accounting policies, and our report dated March 12, 2021 expressed unqualified opinion. Basis for Opinion on Internal Control over Financial Reporting We conducted our audit in accordance with Korean Standards on Auditing. Our responsibility under these standards are further described in the Auditor’s Responsibilities for the Audit of Internal Control over Financial Reporting section of our report. We are independent of the Company in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of internal control over financial reporting and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management and Those Charged with Governance for Internal Control over Financial Reporting Management is responsible for designing, implementing and maintaining effective internal control over financial reporting, and for its assessment about the effectiveness of internal control over financial reporting, included in the accompanying Operating Status Report of Internal Control over Financial Reporting. Those charged with governance have the responsibilities for overseeing internal control over financial reporting. Auditor’s Responsibilities for the Audit of Internal Control over Financial Reporting Our responsibility is to express opinion on the Company’s internal control over financial reporting based on our audit. We conducted the audit in accordance with Korean Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting involves performing procedures to obtain audit evidence about whether a material weakness exists. The procedures selected depend on the auditor’s judgment, including the assessment of the risks that a material weakness exists. An audit includes obtaining an understanding of internal control over financial reporting and testing and evaluating the design and operating effectiveness of internal control over financial reporting based on the assessed risk. An entity’s internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliable financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea. An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and those charged with governance; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any assessment of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The engagement partner on the audit resulting in this independent auditor’s report is Sung-Jae Lim, Certified Public Accountant. Samil Pricewaterhouse Coopers Seoul, Korea March 12, 2021 This report is effective as of March 12, 2021, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the Company’s internal control over financial reporting thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. 184 185 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 OPERATING STATUS REPORT OF INTERNAL CONTROL OVER FINANCIAL REPORTING INDEPENDENT AUDITOR’S REPORT (English Translation of a Report Originally Issued in Korean) To the Board of Directors and Audit Committee of Woori Financial Group Inc. To the Board of Directors and Shareholders of Woori Financial Group Inc. We, as the Chief Executive Officer (“CEO”) and Internal Control over Financial Reporting(“ICFR”) Officer of Woori Financial Group Inc. (the “Company”), assessed operating status of the Company’s Internal Control over Financial Reporting for the year ended December 31, 2020. The Company’s management, including ourselves, is responsible for designing and operating ICFR. We assessed whether the Company effectively designed and operated its ICFR to prevent and detect errors or frauds which may cause a misstatement in financial statements to ensure preparation and disclosure of reliable financial information. We used the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’ established by the Operating Committee of Internal Control over Financial Reporting in Korea (the “ICFR Committee”) as the criteria for design and operation of the Company’s ICFR. We also conducted an assessment of ICFR based on the ‘Management Guideline for Evaluating and Reporting Effectiveness of Internal Control over Financial Reporting’ established by the ICFR Committee. Based on our assessment, we concluded that the Company’s ICFR is designed and operated effectively as of December 31, 2020, in all material respects, in accordance with the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’. We certify that this report does not contain any untrue statement of a fact, or omit to state a fact necessary to be presented herein. We also certify that this report does not contain or present any statements which might cause material misunderstandings, and we have reviewed and verified this report with sufficient care. February 25, 2021 Tae Seung Sohn, Chief Executive Officer Sung Wook Lee, Internal Control over Financial Reporting Officer Opinion We have audited the accompanying consolidated financial statements of Woori Financial Group Inc. and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statement of financial position as at December 31, 2020, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2020, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). Basis for Opinion We conducted our audit in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the consolidated financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Key Audit Matter 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 opinion thereon, and we do not provide a separate opinion on these matters. Expected Credit Losses on Loans Measured at Amortized Cost Why it is determined to be a key audit matter: The impairment guidance under Korean IFRS 1109 Financial Instruments requires determination of significant increases in credit risk and measurement of expected credit losses using forward-looking information and others. Accordingly, the Group developed a measurement model that encompasses probability of default, loss given default and forward looking information utilizing various types of information, which requires a higher level of management’s interpretation and judgment. The Group measures expected credit losses on loans measured at amortized cost based on both individual and collective assessments. Individual assessment of expected credit losses is performed based on estimation of future forecast cash flow with a relatively high degree of management’s estimation and judgment, and collective assessment of expected credit losses involves a variety of complex variables and assumptions that require management’s estimation and judgment. Due to these facts, expected credit losses of loans measured at amortized costs are determined as a key audit matter. In addition, the Group considered that loans subject to payment deferral or interest deferral under the government’s COVID-19 relief package posed significantly higher credit risks leading to its assessment of more likelihood of default. Such estimation on expected credit losses involved higher degree of judgment. As described in Note 10, loans measured at amortized cost subject to individual or collective assessments amount to 304,702,706 million won, with allowances for credit losses of 1,908,524 million won as of December 31, 2020. Significantly affected subsidiary is Woori Bank. How our audit addressed the key audit matter: (1) Assessment of expected credit losses on an individual basis We obtained an understanding and evaluated the processes and controls relating to the assessment of expected credit losses on an individual basis. In particular, we focused our effort on the assumptions used in estimating future cash flows. We evaluated whether management’s estimation was reasonable and we assessed the key assumptions in the cash flow projection including growth rate of entities subject to individual assessment and collateral valuation. As part of these procedures, we assessed whether sales growth rate, operating income ratio, and assumptions on investment activities were consistent with historical operating performance and current market conditions. Additionally, we assessed the appropriateness of collateral valuation by conducting our own research on recent property prices and engaged independent appraisal specialists in assessing reasonableness of appraisal reports, models and methodologies used by management. 186 187 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Assessment of expected credit losses on a collective basis We obtained an understanding and evaluated the processes and controls relating to management’s calculation of expected credit losses on a collective basis in accordance with impairment requirements under Korean IFRS 1109 Financial Instruments. As explained in Note 2, management assessed credit ratings to recognize lifetime expected credit losses on loans with significant increase in credit risk and impaired loans. Other than these cases, management recognized 12-months of expected credit losses. To calculate expected credit losses, management applied forward-looking information, probability of default and loss given default estimated through its internal procedures and controls implemented for various assumptions. We assessed the design and operating effectiveness of controls relating to credit ratings that reasonably reflected both qualitative and quantitative information. Our testing over the accuracy and reliability of the information included agreeing qualitative and quantitative information with relevant evidence. As part of an audit in accordance with Korean Standards on Auditing, 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, 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 entity’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by We reviewed the appropriateness of management policies and procedures to determine significant increases in credit risk, and tested reasonableness of expected credit loss model applied by each of the three stages(Stage 1, 2 and 3) depending on how significantly credit risk was increased. management. We used risk specialists to test the appropriateness of management’s methodologies of reflecting forward-looking information in the estimation of expected credit loss by adjusting the probability of default and loss given default after statistically analyzing the correlation between forward-looking information and probability of default or loss given default. Moreover, we tested the reasonableness and mathematical accuracy of the result through recalculation and examination of supporting data. We reviewed the methodologies used by management to verify that probability of default and loss given default were calibrated using sufficient and reasonable historical data. We determined that the default and loss data used were appropriately gathered and applied in accordance with internal control procedures. In addition, we tested reasonableness and accuracy of probability of default and loss given default through procedures including recalculation, and tested management’s default and loss data by agreeing them with relevant evidence. Furthermore, we tested reasonableness of stage allocation of loans subject to COVID-19 payment relief attributable to significant increase in credit risk. We also tested key assumptions used in calculation of probability of default and required disclosures. We verified accuracy and completeness of aggregation of loans subject to the deferral, and accuracy of calculation of loss allowances. Emphasis of Matter Without modifying our opinion, we draw attention to Note 3 of the financial statements, which indicates that the outbreak of COVID-19 in 2020 may have a negative impact on the Group’s financial condition and results of operations. Other Matters The consolidated financial statements of the Group for the year ended December 31, 2019, were audited by Deloitte Anjin LLC auditor who expressed an unqualified opinion on those statements on March 16, 2020. Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management 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. Those charged with governance are 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 Korean Standards on Auditing 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. • Conclude on the appropriateness of 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 remain solely responsible for our audit opinion. We communicate with those charged with governance 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 with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other 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 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 Sung-jae Lim, Certified Public Accountant. Samil Pricewaterhouse Coopers Seoul, Korea March 12, 2021 This report is effective as of March 12, 2021, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. 188 189 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2020 AND 2019 AS OF DECEMBER 31, 2020 AND 2019 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 and 18) Premises and equipment (Notes 15 and 18) Intangible assets (Note 16) Assets held for 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 fair value through profit or loss (“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 EQUITY Owners’ equity (Note 28) Capital stock Hybrid securities Capital surplus Other equity Retained earnings Non-controlling interests Total equity Total liabilities and equity December 31, 2020 December 31, 2019 (Korean Won in millions) 9,990,983 6,392,566 14,762,941 8,069,144 30,028,929 17,020,839 320,106,078 993,291 387,464 3,287,198 792,077 60,002 5,658 75,655 46,088 174,820 1,348,994 399,081,017 6,813,822 291,477,279 20,745,466 37,479,358 501,643 52,237 370,718 160,250 64,769 14,215,817 473,813 372,355,172 3,611,338 1,895,366 626,111 (2,347,472) 19,268,265 23,053,608 3,672,237 26,725,845 399,081,017 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 3,611,338 997,544 626,295 (2,249,322) 18,524,515 21,510,370 3,981,962 25,492,332 361,980,724 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 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 (Notes 11, 32 and 41) Net gain on financial instruments at FVTPL (Notes 11, 33 and 41) Net gain on financial assets at FVTOCI (Notes 11 and 34) Net gain arising on financial assets at amortized cost (Note 11) Impairment losses due to credit loss (Notes 35 and 41) General and administrative expense (Notes 36 and 41) Other net operating expense (Notes 11, 26, 36 and 41) Operating income Share of gain of joint ventures and associates (Note 13) Other non-operating expense Non-operating expense (Note 37) Net income before income tax expense Income tax expense (Note 38) Net income Net gain(loss) on valuation of equity securities at FVTOCI Changes in capital due to equity method Remeasurement gain(loss) related to defined benefit plan Items that will not be reclassified to profit or loss: Net gain on valuation of debt securities at FVTOCI Changes in capital due to equity method Net gain(loss) on foreign currency translation of foreign operations Net gain(loss) on valuation of cash flow hedge Items that may be reclassified to profit or loss: 2020 2019 (Korean Won in millions) 9,523,853 48,612 437,527 9,037,714 (3,525,341) 5,998,512 1,694,016 (679,977) 1,014,039 138,543 421,709 24,138 44,443 (784,371) (3,956,181) (820,438) 2,080,394 101,077 (180,220) (79,143) 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 (374,244) (3,766,077) (302,581) 2,799,976 83,997 (160,924) (76,927) 2,001,251 2,723,049 (486,002) (685,453) 1,515,249 2,037,596 47,246 (2,065) 9,783 54,964 12,114 (233) (153,472) 4,420 (137,171) (58,129) - (34,648) (92,777) 43,988 613 101,781 (1,823) 144,559 Other comprehensive income (loss), net of tax (82,207) 51,782 The accompanying notes are part of this consolidated financial statements. Total comprehensive income 1,433,042 2,089,378 (Continued) 190 191 - 7 - - 8 - INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (CONTINUED) WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 Net income attributable to: Net income attributable to owners Net income attributable to non-controlling interests Total comprehensive income attributable to: Comprehensive income attributable to owners Comprehensive income attributable to non-controlling interests 2020 2019 (Korean Won in millions) 1,515,249 1,307,266 207,983 1,433,042 1,233,097 199,945 2,037,596 1,872,207 165,389 2,089,378 1,914,393 174,985 Earnings per share (Note 39) Basic and diluted earnings per share (Unit: In Korean Won) 1,742 2,727 The accompanying notes are part of this consolidated financial statements. January 1, 2019 Total comprehensive income Net income Net loss on valuation of financial instruments at FVTOCI Net gain(loss) 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 Transactions with owners Dividends to common stocks Acquisition of subsidiaries New stocks issue cost Net increase of treasury stocks Issuance of hybrid securities Dividends to hybrid securities Redemption of hybrid securities Exchange of non-controlling interests in hybrid securities Changes in subsidiaries’ capital Appropriation of retained earnings Other changes in consolidated capital December 31, 2019 January 1, 2020 Total comprehensive income Net income Net gain(loss) on valuation of financial instruments at FVTOCI Net gain(loss) due to disposal of equity securities at FVTOCI Changes in capital due to equity method Gain on foreign currency translation of foreign operations Gain on valuation of cash flow hedge Remeasurement gain related to defined benefit plan Transactions with owners Dividends to common stocks Issuance of hybrid securities Dividends to hybrid securities Redemption of hybrid securities Changes in subsidiaries’ capital Changes in non-controlling interests related to business combination December 31, 2020 Capital Stock Hybrid securities Capital surplus 3,381,392 3,161,963 285,889 Retained earnings Other equity (Korean Won in millions) (2,213,970) Owners’ equity in total Non- controlling interests Total equity 17,124,657 21,739,931 213,113 21,953,044 - - - - - - - - - - - - - - - - - 1,153 - - - - 1,872,207 1,872,207 165,389 2,037,596 (14,101) - (14,101) (40) (14,141) 29,368 613 91,748 (1,823) (34,251) (29,368) - - 1,766 - - - 1,766 - - - 91,748 (1,823) 10,033 - 101,781 (1,823) (34,251) (397) (34,648) - 229,946 - - - - - - - - - 997,544 - - - 351,663 (12,848) - - - - - - - 4,245 - - (277) (437,626) - - - - (4,362) - (437,626) 581,609 (12,848) 4,245 997,544 (4,362) (277) (2,014) 69,534 - - 658,470 (134,421) (159,618) (439,640) 651,143 (12,848) 4,245 1,656,014 (138,783) (159,895) - (3,161,963) - - - - - - 997,544 3,611,338 - 438 - - 626,295 - - 368 (111,242) (2,249,322) - (3,161,963) 438 - (368) - (111,867) (625) 18,524,515 21,510,370 3,161,963 (50) - - 3,981,962 - 388 - (111,867) 25,492,332 3,611,338 997,544 626,295 (2,249,322) 18,524,515 21,510,370 3,981,962 25,492,332 - - - - - - - - - - - - - - - - - - - - - - - - - - - 897,822 - - - - - - - (184) - 1,307,266 1,307,266 207,983 1,515,249 59,417 2,664 (2,298) (145,376) 4,306 9,782 - - - (31,252) 4,607 - 59,417 (57) 59,360 (2,664) - - (2,298) - - - (2,298) - - - (145,376) 4,306 (8,096) 114 (153,472) 4,420 9,782 1 9,783 (505,587) - (48,915) - (6,350) (505,587) 897,822 (48,915) (31,252) (1,927) (2,071) - (162,362) (555,744) 45,684 (507,658) 897,822 (211,277) (586,996) 43,757 - 3,611,338 - 1,895,366 - 626,111 - (2,347,472) - - 19,268,265 23,053,608 164,823 3,672,237 164,823 26,725,845 192 193 The accompanying notes are part of this consolidated financial statements. - 9 - - 10 - INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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, 2020 AND 2019 FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 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, 2020 AND 2019 (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (CONTINUED) 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: Loss on valuation of financial instruments at FVTPL Loss on financial assets at FVTOCI Impairment loss due to credit loss Loss on other provisions Retirement benefit Depreciation and amortization Net gain on foreign currency translation Loss on derivatives (designated for hedge) Loss on fair value hedge Loss on valuation of investments in joint ventures and associates 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 instruments at FVTPL Gain on financial assets at FVTOCI Gain on other provisions Gain on derivatives (designated for hedge) Gain on fair value hedge 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 Profit from bargain purchase Other income 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 Interest income received Interest expense paid Dividends received Income tax paid Net cash inflow from operating activities (Continued) 194 2020 2019 (Korean Won in millions) 1,515,249 2,037,596 486,002 (9,523,853) 3,525,341 (138,543) (5,651,053) 685,453 (10,576,770) 4,683,064 (107,959) (5,316,212) 44,863 787 784,371 232,680 174,628 535,548 191,504 82,746 68,508 24,525 2,717 8,763 2,151,640 - 24,925 2,450 67,395 9,646 125,602 3,470 9,715 172 67,427 20,600 331,402 (875,076) (22,763,192) (89,918) 27,378,173 (184,112) (214,741) (2,694,701) (8,150) 548,283 9,558,119 (4,008,001) 138,562 (315,422) 5,373,258 3,605,975 - 1,375 374,244 129,682 165,125 505,718 - 3,686 86,214 19,778 3,433 28,295 1,317,550 246,175 12,390 3,302 126,651 231 103,775 - 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 Cash flows from investing activities: Cash in-flows from investing activities: Disposal of financial instruments 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 Net increase of other assets Cash out-flows from investing activities: Net cash in-flows of business combination Acquisition of financial instruments 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 outflow from investing activities Cash flows from financing activities: Cash in-flows from financing activities: Net increase in borrowings Issuance of debentures Net increase of other liabilities Issuance of hybrid securities Retirement of treasury stocks Paid-in capital increase on non-controlling interests Cash out-flows from financing activities: Net cash out-flows from hedging activities Redemption of debentures Redemption of lease liabilities New stock issue cost Acquisition of treasury stocks Dividends paid Redemption of hybrid stocks Dividends paid to hybrid securities Dividends paid to non-controlling interest Paid-in capital decrease on non-controlling interests Net cash inflow from financing activities 2020 2019 (Korean Won in millions) 6,605,483 20,527,695 5,661,472 410,940 353 22,828 634 26,642 33,256,047 313,058 8,082,824 23,044,741 2,380,448 550,619 76,588 149,341 114,854 34,712,473 (1,456,426) 2,033,851 23,082,798 3,971 897,822 - 45,749 26,064,191 5,409 22,168,962 204,794 - - 505,587 598,850 211,277 2,071 - 23,696,950 2,367,241 11,357,056 14,303,197 8,709,947 30,098 193 13,343 939 - 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) 3,081,757 25,510,713 - 1,656,014 760,101 - 31,008,585 5,520 23,651,950 217,867 17,337 184,164 437,626 160,000 161,052 2,014 50 24,837,580 6,171,005 Net increase (decrease) in cash and cash equivalents 4,516,790 (546,787) Cash and cash equivalents, beginning of the period 6,392,566 6,747,894 Effects of exchange rate changes on cash and cash equivalents (918,373) 191,459 Cash and cash equivalents, end of the period (Note 6) 9,990,983 6,392,566 The accompanying notes are part of this consolidated financial statements. 195 - 11 - - 12 - INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020 AND 2019 AS OF DECEMBER 31, 2020 AND 2019 1. GENERAL (1) Summary of the Parent company Woori Financial Group, Inc. (hereinafter referred to the “Parent company”) 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 (hereinafter referred to the “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 Parent company is located at 51, Sogong-ro, Jung-gu, Seoul, Korea, and the capital is 3,611,338 million won as of December 31, 2020 while the Korea Deposit Insurance Corp. (“KDIC”), the Parent company’s largest shareholder, owns 124,604,797 shares (17.25%) of the Parent 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 between the Parent 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 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 Number of Parent company’s stocks 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., Ltd. 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 Parent 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 Parent company 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. The Group acquired 76.8% (excluding treasury stocks, 74.0% interest including treasury stocks) stake in Woori Financial Capital Co., Ltd. (formerly Aju Capital Co., Ltd.) on December 10, 2020. 196 - 13 - (2) Details of the Parent company and subsidiaries (hereinafter ‘Group’) as of December 31, 2020 and 2019 are as follows: Subsidiaries Held by Woori Financial Group Inc. Woori Bank Woori Card Co., Ltd. Woori Financial Capital Co., Ltd. Woori Investment Bank Co., Ltd. (*7) Woori Asset Trust Co., Ltd. Woori Asset Management Corp. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. Woori FIS Co., Ltd. Main business Bank Finance Finance Other credit finance business Real estate trust Finance Credit information Finance Finance Finance System software development & maintenance Woori Finance Research Institute Co., Ltd. Other service business Held by Woori Bank 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. (*1)(*5) 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) 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 Jeonju Iwon Ltd. (*2) Wonju I one Inc. (*2) Heitz Third Co., Ltd. (*2) Woorihansoop 1st Co., Ltd. (*2) Electric Cable First Co., Ltd. Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization (*2)(*5) Woori International First Co., Asset securitization Ltd. (*2) Woori WEBST 1st Co., Ltd. Asset securitization (*2)(*5) 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)(*5) Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Percentage of ownership (%) December 31, 2020 December 31, 2019 Financial statements date of use Location 100.0 100.0 76.8 58.7 67.2 73.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 79.9 100.0 99.9 100.0 Korea 100.0 Korea - Korea December 31 December 31 December 31 59.8 Korea 67.2 Korea 73.0 Korea December 31 December 31 December 31 100.0 Korea 100.0 Korea December 31 December 31 100.0 Korea December 31 100.0 Korea December 31 100.0 Korea December 31 100.0 Korea December 31 100.0 America December 31 Hong 100.0 Kong 100.0 China 100.0 Russia December 31 December 31 December 31 79.9 Indonesia December 31 December 31 December 31 100.0 Brazil 99.9 Korea - 100.0 Cambodia - 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 - 100.0 Myanmar December 31 51.0 Philippines December 31 December 31 100.0 Vietnam 100.0 Cambodia December 31 December 31 100.0 Germany December 31 0.0 Korea December 31 0.0 Korea 15.0 Korea 0.0 Korea 0.0 Korea December 31 December 31 December 31 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea December 31 December 31 December 31 December 31 December 31 0.0 Korea - 0.0 Korea December 31 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea - December 31 December 31 December 31 December 31 0.0 Korea - - 14 - 197 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Subsidiaries 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 2nd Co., Ltd. (*5) Woori Sinnonhyeon 1st Inc. (*2) Woori K 1st Co., Ltd. (*2) Uri S 1st Co., Ltd. (*2) Smart Casting Inc. (*2)(*5) Uri Display 3rd Co., Ltd. (*2) 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)(*5) 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) Woori Steel 1st Co., Ltd (*2) Woori-HWC 1st Co., Ltd. SPG the 1st Co., Ltd. Woori Park I 1st co., Ltd (*2) Woori HC 3rd Co., Ltd. (*2). Woori DS 1st co., Ltd (*2) Woori HC 4th Co., Ltd. (*2). Woori SKR 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 (*5) Multi Asset Global Real Estate Investment Trust No. 5-2 (*3) Igis Australia Investment Trust No. 209-1 (*3) INMARK Spain Private Placement Real Estate Investment Trust No. 26-2 (*3) Woori G Japan Investment Trust No. 1-2 (*3) IGIS Global Private Placement Real Estate Fund No. 316-1 (*3) Principal Guaranteed Trust (*4) 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 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 Securities investment and others Trust Percentage of ownership (%) December 31, 2020 December 31, 2019 Financial statements date of use Location 0.0 0.0 Korea December 31 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 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 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 0.0 Korea December 31 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea December 31 December 31 December 31 December 31 Marshall islands 0.0 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 Korea 0.0 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 31 100.0 100.0 Korea December 31 98.5 98.5 Korea December 31 97.3 97.3 England December 31 - 75.0 Korea - 99.0 99.4 97.7 98.8 99.3 0.0 99.0 Korea December 31 99.4 Korea December 31 - Korea December 31 - Korea December 31 99.3 Korea 0.0 Korea December 31 December 31 Percentage of ownership (%) December 31, 2020 December 31, 2019 Financial statements date of use Location Main business Trust 0.0 0.0 Korea December 31 Subsidiaries Principal and Interest Guaranteed Trust (*4) Held by Multi Asset Global Real Estate Investment Trust No. 5-2: MAGI No.5 LuxCo S.a.r.l. (*3) Held by MAGI No.5 LuxCo S.a.r.l.: ADP 16 Brussels (*2) Asset securitization Asset securitization 54.6 0.0 Luxembou rg 54.6 December 31 0.0 Belgium December 31 Held by Woori Card Co., Ltd.: TUTU Finance –WCI Myanmar Co., Ltd. Woori Card one of 2017-1 Securitization Specialty Co., Ltd. (*2)(*5) Woori Card one of 2017-2 Securitization Specialty Co., Ltd. (*2) Woori Card one of 2018-1 Securitization Specialty Co., Ltd. (*2) Woori Card 2019-1 Asset Securitization Specialty Co., Ltd. (*2) Woori Card 2020-1 Asset Securitization Specialty Co., Ltd. (*2) Held by Woori Financial Capital Co., Ltd. Woori Savings Bank ACE Auto Invest the 46th Securitization Specialty Co., Ltd. (*2) ACE Auto Invest the 47th Securitization Specialty Co., Ltd. (*2) ACE Auto Invest the 48th Securitization Specialty Co., Ltd. (*2) ACE Auto Invest the 49th Securitization Specialty Co., Ltd. (*2) Specified Money Market Trust Held by Woori Investment Bank Co., Ltd.: Dongwoo First Securitization Specialty Co., Ltd. (*2)(*5) 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) WS2003 Securitization Specialty Co., Ltd. (*2) WS2006 Securitization Specialty Co., Ltd. (*2) WJ2008 Securitization Specialty Co., Ltd. (*2) One Punch Korea the 1st Co., Ltd. (*2). Finance 100.0 100.0 Myanmar December 31 Asset securitization - 0.5 Korea - Asset securitization 0.5 0.5 Korea December 31 Asset securitization 0.5 0.5 Korea December 31 Asset securitization 0.5 0.5 Korea December 31 Asset securitization 0.5 - Korea December 31 Bank 100.0 - Korea December 31 Asset securitization Asset securitization Asset securitization 1.0 1.0 1.0 - Korea December 31 - Korea December 31 - Korea December 31 Asset securitization Trust 1.0 100.0 - Korea - Korea December 31 December 31 Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization - 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 0.0 5.0 Korea - 5.0 Korea December 31 5.0 Korea December 31 5.0 Korea December 31 5.0 Korea December 31 5.0 Korea December 31 5.0 Korea December 31 - Korea December 31 - Korea December 31 - Korea December 31 0.0 Korea December 31 198 - 15 - - 16 - 199 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Percentage of ownership (%) December 31, 2020 December 31, 2019 Financial statements date of use Location Main business Asset securitization 0.0 0.0 Korea December 31 Subsidiaries One Punch blue the 1st Co., Ltd. (*2) Held by Woori Asset Management Corp.: Woori China Convertible Bond Hedging feeder Investment Trust H (debt-oriented hybrid) (*3) Woori China Convertible Bond Master Fund (debt-oriented hybrid) (*3) Woori Yellow Chip High Yield Strategic Allocation 1 (FOF) (*3) Woori Together TDF 2025 (*3) Woori Together TDF 2030 (*3) Woori Together TDF 2035 (*3) Woori Together TDF 2040 (*3) Woori Together TDF 2045 (*3) Woori Together TDF 2050 (*3) Held by Woori Financial Capital Co., Ltd., Woori Private Equity Asset Management Co., Ltd. and Woori Investment Bank Co., Ltd.: (*6) Japanese Hotel Real Estate Private Equity Fund 1 (*3) Held by Woori Global Asset Management Co., Ltd.: Woori G China Value Equity (C/C(F)) (*3)(*5) Woori G Global Multi Asset Income Private Placement Investment Trust_Class Cs (*3) Held by Woori Bank, Woori Financial Capital Co., Ltd., Woori Investment Bank Co., Ltd and Woori Private Equity Asset Management Co., Ltd.: (*6) Woori Innovative Growth Professional Investment Type Private Investment Trust No.1 (*3) Woori Innovative Growth Professional Investment Type Private Investment Trust No.2 (*3) Held by Woori bank and Woori Investment Bank Co., Ltd.: (*6) Heungkuk Woori Tech Company Private Placement Investment Trust No. 1 (*3) Woori Global Development Infrastructure Synergy Company Private Placement Investment Trust No.1 (*3) Woori G NorthAmerica Infra Private Placement Investment Trust No. 1 (*3) 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 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 Securities investment and others Woori G Infrastructure New Deal Specialized Investment Private Securities investment and others 200 - 17 - 99.6 98.8 Korea December 31 34.5 98.6 Korea December 31 89.8 47.6 47.4 47.8 48.8 47.7 87.0 - Korea December 31 - Korea December 31 - Korea December 31 - Korea December 31 - Korea December 31 - Korea December 31 - Korea December 31 100.0 45.5 Korea December 31 - 95.1 Korea - 22.2 - Korea December 31 90.0 60.0 Korea December 31 85.0 - Korea December 31 100.0 100.0 Korea December 31 100.0 100.0 Korea December 31 100.0 100.0 - Korea December 31 - Korea December 31 Subsidiaries Equity Investment Trust No. 1 (*3) Woori G Private Placement Real Estate Investment Trust No.2 (*3) Held by Woori bank (*6) Woori G Woori Bank Partners Private Placement Investment Trust No. 1 (*3) Woori G Secondary Private Placement Investment Trust No. 1 (*3) Woori G Private Placement Real Estate Investment Trust No.1[USD] (*3) Held by Woori Financial Capital Co., Ltd. Woori G Japan Private Placement Real Estate Feeder Investment Trust No.1-1 (*3) Held by Woori G Japan Private Placement Real Estate Feeder Investment Trust No.1-1 and Woori G Japan Investment Trust No. 1-2 Woori G Japan Private Placement Real Estate Master Investment Trust No.1 (*3) Held by Woori G Japan Private Placement Real Estate Master Investment Trust No.1 GK OK Chatan (*3) Percentage of ownership (%) December 31, 2020 December 31, 2019 Financial statements date of use Location 30.1 - Korea December 31 92.6 97.2 80.0 - Korea December 31 - Korea December 31 Korea December 31 63.2 - Korea December 31 Main business Securities investment and others Securities investment and others Securities investment and others Securities investment and others Securities investment and others Securities investment and others 100.0 - Korea December 31 Other financial services - - Korea December 31 (*1) The entity was merged with WB Finance Co., Ltd., which is a second-tier subsidiary, 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. (*5) Companies are excluded from the consolidation as of December 31, 2020. (*6) Determined that the Group controls the investees, considering 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, by two or more subsidiaries' investment or operation. (*7) The equity ratio changed due to paid-in capital increase as of December 31, 2020. - 18 - 201 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (3) The Group has not consolidated the following entities as of December 31, 2020 and 2019 despite having more than 50% ownership interest: As of December 31, 2020 Subsidiaries Location Main Business 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 Korea Kiwoom-Harmony Private Placement Investment Trust No.2 (*) Korea Kiwoom-Harmony Private Placement Investment Trust No.1 (*) Midas Global Private Placement Real Estate Investment Trust No. 7-2 (*) Korea Together-Korea Government Private Pool Private Securities Investment Trust 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 (%) 59.7 88.9 97.9 75.0 75.0 66.7 55.6 55.2 96.3 95.7 58.3 No.3 (*) INMARK France Private Placement Investment Trust No. 18-1 (*) Kiwoom Vibrato Private Placement Investment Trust 1-W(EUR) (*) Korea Korea Korea Securities Investment Securities Investment Securities Investment 100.0 93.8 99.3 (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, 2020 Subsidiaries Woori Bank Woori Card Co., Ltd. Woori Financial Capital Co., Ltd. (*) Woori Investment Bank Co., Ltd. Woori Asset Trust Co., Ltd. Woori Asset Management Corp. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Assets 374,310,415 11,366,596 8,880,117 4,332,474 185,634 136,460 40,860 18,957 38,035 37,935 97,479 7,232 Liabilities 350,790,158 9,312,986 8,053,840 3,803,594 56,396 23,411 9,830 2,172 2,009 9,807 59,577 3,689 Operating revenue 26,838,766 1,388,208 218,945 256,079 79,426 26,158 40,010 13,346 4,773 10,652 249,169 6,223 Net income (loss) attributable to owners 1,363,224 120,230 (30,349) 62,937 35,312 6,797 1,879 2,563 823 (1,449) 2,013 105 Comprehensive income (loss) attributable to owners 1,295,302 118,109 (38,293) 62,275 35,954 6,313 1,600 2,563 768 (1,449) 1,935 95 (*) 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. (*) Net income (loss) attributable to owners of Woori Financial Capital for the year ended December 31, 2020 has been prepared on a cumulative basis since entity was included as the subsidiary. As of December 31, 2019 As of and for the year ended December 31, 2019 Subsidiaries Location Main Business 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 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. Subsidiaries Woori Bank (*1) Woori Card Co., Ltd. Woori Investment Bank Co., Ltd. Woori Asset Trust Co., Ltd. (*2) Woori Asset Management Corp. (*2) Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. (*2) Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Assets 348,181,658 10,087,342 3,398,960 139,839 113,037 37,872 16,852 38,243 32,807 91,079 5,447 Liabilities 325,526,568 8,299,175 3,031,622 45,410 6,301 7,948 2,109 2,985 3,230 55,112 1,999 Operating revenue 22,240,947 1,368,234 204,655 - 9,204 39,118 11,071 4,152 3,588 244,923 5,452 Net income (loss) attributable to owners 1,505,547 114,196 53,358 - 1,720 1,698 1,735 (2,087) (1,360) 3,107 160 Comprehensive income (loss) attributable to owners 1,531,793 111,782 52,095 - 2,544 1,389 1,735 (2,124) (1,360) 3,119 117 (*1) The amount is prepared based on the consolidated financial statements of Woori Bank (before reflecting the classification of profit or loss of the discontinued operation). (*2) Net income (loss) attributable to owners of Woori Asset Trust Co., Ltd., Woori Asset Management Corp. and Woori Global Asset Management Co., Ltd. are prepared on a cumulative basis from the date on which the entities were included as subsidiaries, to December 31, 2019. 202 - 19 - - 20 - 203 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (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, 2020, the Group provides 2,540,760 million won of credit facilities for the structured entities mentioned above. (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 Korean IFRS 1110 are as follows: The interests in 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 each structured entity. 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 has been purchasing commitments of asset-backed securities or issuing 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 companies 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. Investments in MMF(Money Market Funds) as of December 31, 2020 and 2019 are 427,375 million won and 47,502 million won, respectively, and there is no additional commitments for MMF. ‘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 consolidated 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 consolidated 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. As of December 31, 2020 and 2019, the purchase commitment amount is 4,266,319 million won and 2,264,510 million won, respectively. 204 - 21 - - 22 - 205 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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 Other liabilities (provisions) The maximum exposure to risks Investment assets Credit facilities and others 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 Investment assets Credit facilities and others Loss recognized on unconsolidated structured entities December 31, 2020 Asset securitization vehicle Structured Finance Investment Funds Real-estate trust 3,900,254 69,010,369 44,629,638 76,772 648,700 374,231 163,808 109,008 - 1,653 130 130 970,628 648,700 321,928 4,291,535 167,271 41,378 4,072,321 5,958 4,607 963 963 5,366,037 4,291,535 1,074,502 3,350,605 2,922,716 - 39,955 387,902 32 - - 3,438,924 3,350,605 88,319 - 6,079 25,454 22,402 - - 22,402 - - 400 400 65,722 22,402 43,320 2,363 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 (7) As of December 31, 2020 and 2019, 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 Financial Capital Co., Ltd. Woori Investment Bank Co., Ltd. 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 December 31, 2020 December 31, 2019 3,105,070 166,369 222,289 49,738 31,369 79,890 19,521 3,660,814 - 151,170 40,161 29,800 83,315 18,524 2) Net income attributable to non-controlling interests Woori Bank (*) Woori Financial Capital Co., Ltd. Woori Investment Bank Co., Ltd. Woori Asset Trust Co., Ltd. Woori Asset Management Corp PT Bank Woori Saudara Indonesia 1906 Tbk Wealth Development Bank (*) Distribution of the hybrid securities issued by Woori Bank 3) Dividends to non-controlling interests Woori Bank (*) Woori Asset Trust Co., Ltd. PT Bank Woori Saudara Indonesia 1906 Tbk (*) Distribution of the hybrid securities issued by Woori Bank For the years ended December 31 2019 2020 162,362 1,466 25,643 9,732 1,699 6,040 1,130 134,421 - 21,588 - 408 8,502 427 For the years ended December 31 2020 2019 162,362 365 1,669 134,421 - 1,981 206 - 23 - - 24 - 207 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (1) Basis of presentation The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying consolidated financial statements have been condensed, restructured and translated into English from the Korean language financial statements. Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Group's financial position, financial performance or cash flows, is not presented in the accompanying consolidated financial statements. The consolidated financial statements of the Group have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board (IASB) that have been adopted by the Republic of Korea. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 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 first approved for the issuance by the Board of Directors on February 5, 2021 and amended on March 5, 2021. The final approval will be made in the annual general shareholders’ meeting on March 26, 2021. 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 Amendments to Korean IFRS 1103 Business Combination – Definition of a Business To consider the integration of the required activities and assets as a business, the amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs, and excludes economic benefits from the lower costs. An entity can apply a concentration test, an optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. The amendment does not have a significant impact on the financial statements. ② Amendments to Korean IFRS 1001 Presentation of Financial Statements and Korean IFRS 1008 Accounting policies, changes in accounting estimates and errors – Definition of Materiality The amendments clarify the explanation of the definition of materiality and amended Korean IFRS 1001 and Korean IFRS 1008 according to the definition. Materiality is assessed by reference to omission or misstatement of material information as well as effects of immaterial information, and to the nature of the users when determining the information to be disclosed by the Group. The amendment does not have a significant impact on the financial statements. ③ Amendments to Korean IFRS 1116 Lease – Practical expedient for COVID-19-Related Rent Exemption, Concessions, Suspension As a practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification. A lessee that makes this election shall account for any change in lease payments resulting from the rent concession the same way it would account for the change applying this Standard if the change were not a lease modification. With implementation of Korean IFRS 1116 Lease, the Group has changed its accounting policy. The Group has adopted Korean IFRS 1116 retrospectively, as permitted under the specific transitional provisions in the standard. There was no cumulative impact on the beginning balance of retained earnings as at January 1, 2020 by retrospectively applying this standard, and the Group did not restate comparatives for the 2019 reporting period. The impact of the adoption of the leasing standard are disclosed in Note 43. 2) The details of Korean 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: ① Amendments to Korean IFRS 1103 Business Combination – Reference to the Conceptual Framework The amendments update a reference of definition of assets and liabilities qualify for recognition in revised Conceptual Framework for Financial Reporting. However, the amendments add an exception for the recognition of liabilities and contingent liabilities within the scope of Korea IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets, and Korean IFRS 2121 Levies. The amendments also confirm that contingent assets should not be recognized at the acquisition date. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements. ② Amendments to Korean IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets – Onerous Contracts: Cost of Fulfilling a Contract The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the contract is onerous. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements. ③ Amendments to Korean IFRS 1016 Property, plant and equipment – Proceeds before intended use The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements. ④ Annual Improvements to Korean IFRS 2018-2020 Annual improvements of Korean IFRS 2018-2020 Cycle should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements. - Korean IFRS 1101 First time Adoption of Korean International Financial Reporting Standards- Subsidiaries that are first-time adopters - Korean IFRS 1109 Financial Instruments - Fees related to the 10% test for derecognition of financial liabilities - Korean IFRS 1116 Leases- Lease incentives - Korean IFRS 1041 Agriculture - Measuring fair value 208 - 25 - - 26 - 209 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ⑤ Amendments to Korean IFRS 1001 Presentation of Financial Statements – Classification of Liabilities as Current or Non-current The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability include the transfer of the entity's own equity instruments, however, it would be excluded if an option to settle them by the entity's own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements. The above enacted or amended standards will not have a significant impact on the Group. (2) Basis of consolidated financial statement presentation The consolidated financial statements consist of the financial statements of the parent company and the entities (including structured entities) controlled by the parent company (or 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) able to use its power to affect its returns. The Group reassesses whether 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 most 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 the Group's voting rights in an investee are enough 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 negative (-) balance. When 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. 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 Korean 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 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 Korean IFRS 1012 Income Taxes and Korean 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 Korean 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 Korean 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. 210 - 27 - - 28 - 211 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 The subsidiary's non-controlling interests are identified separately from the Group's equity. If the element of the non-controlling interest in the acquiree is the current interest at the acquisition date and the holder is entitled to a proportional share of the entity's net assets, the non-controlling interest can be measured in 1) fair value or 2) proportionate share of the current equity instrument of the amount recognized for the acquiree's identifiable net assets at the acquisition date. The selection of these metrics is made for each acquisition transaction. All other non-controlling interests are measured at fair value at the acquisition date. The carrying amount of the non-controlling interest after acquisition reflects the proportional interest of the non-controlling interest in changes in equity after acquisition in the initial recognition amount. Even if the non-controlling interest is a negative (-) balance, total comprehensive income is attributed to the non- controlling interest. 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. 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 Korean 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. 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 Korean 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 Korean 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 Korean 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 Korean 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. 212 - 29 - - 30 - 213 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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 Korean 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 the Group 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 Korean 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 Korean IFRS 1109 to long-term investments, the Group does not consider adjustments to the carrying amount required by Korean 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 Korean IFRS 1028. (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 that correspond to its interest in a joint operation in accordance with the Korean IFRSs applicable to the specific 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 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 Korean 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. Revenues other than those from contracts with customers, such as interest revenue and loan origination fee (cost), are recognized 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 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 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. Most of these fees and commission received for brokerage are from the business activities relevant to Banking segment. 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. Most 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. Most 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. 214 - 31 - - 32 - 215 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ⑤ Fees and commission received on foreign exchange ⑪ Other fees 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. 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. ⑨ Fees and commission from trust management 3) Dividend income 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. Most 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. Most of these fees and commission received for brokerage are from the business activities relevant to other segments. Dividend income is recognized when the right to receive dividends as a shareholder is confirmed. Dividend income is recognized as an appropriate item of profit or loss in the statement of comprehensive income according to the classification of financial instruments. 216 - 33 - - 34 - 217 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (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 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. 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) 218 - 35 - - 36 - 219 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ① Financial assets at FVTPL 2) Financial liabilities 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 Korean 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). 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 Korean 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. ③ Financial assets at amortized cost 4) Derecognition 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. 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). 220 - 37 - - 38 - 221 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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. 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. 222 - 39 - - 40 - 223 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 6) Expected credit losses on financial assets (10) Offsetting financial instruments 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 Korean 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. The methods to measure expected credit losses are classified into following three categories in accordance with Korean 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. 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 accumulated other comprehensive income to net income. 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. 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 Useful life 35 to 57 years 4 to 5 years 4 to 5 years 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. 224 - 41 - - 42 - 225 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (13) Intangible assets and goodwill (15) Leases The Group recognizes the acquisition cost of an intangible asset as the manufacturing cost or purchase cost plus additional incidental expenses. Development costs are the sum of expenditures incurred after the asset recognition requirements, such as technical feasibility and future economic benefits, are met. After the initial recognition, the carrying value is presented as the accumulated amortization and accumulated impairment losses deducted from the cost. The Group’s intangible asset are amortized over the following economic lives using the straight-line method. However, for some intangible assets, the period of time that is expected to be available is not predictable, so the useful life of some intangible assets is assessed as indefinite and not depreciated. The estimated useful life and amortization method of intangible assets with a finite useful life are reviewed at the end of each reporting period. The estimated useful life and amortization method of intangible assets with an indefinite useful life are reviewed at the end of each reporting period to ensure that the asset has an indefinite useful life. 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 1 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. 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 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 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. The Group determines whether the contract is a lease or includes a lease at the time of the contract agreement. In exchange for consideration in a contract, the contract is either a lease or includes a lease if the control over the use of the identified asset is transferred for a period of time. In determining whether a contract transfers control over the use of the asset to which it is identified, the Group uses the definition of lease in Korean IFRS 1116. 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. The Group makes adjustments to reflect the terms of the lease and the characteristics of the lease asset in interest rates obtained from external financial information, and calculates the incremental borrowing rate. The Group calculates the lease term by including the relevant period when it is quite certain that the lessee will exercise the extension option or the termination option. The Group calculates the enforceable period in consideration of the economic disadvantages of terminating the contract if the lessee and the lessor have the right to terminate it without the consent of the other parties. The lease payments included in the measurement of the lease liability comprise the following: - - Variable lease payments that depend on an index(or a rate), initially measured using the index Fixed payments (including in-substance fixed payments) 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. 226 - 43 - - 44 - 227 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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. Because the Group can replace the asset without significant cost or business discontinuation, the option to extend the lease is not included in the lease liability in most offices and vehicle transport leases. The Group reevaluates the lease term when the option is exercised (or not exercised) or the Group is liable to exercise (or not exercise) the option. Group will change its judgment only when significant events occur that affect the lessee's control and the determination of the lease term, or there is a significant change in the circumstances. Lease liabilities and right-of-use-asset increased by 15,810 million won, reflecting the exercise impact of the extension and termination options during the current term. 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 based on its relative stand-alone price. As a lessor, the Group classifies its leases as either a finance lease or an operating 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 Korean IFRS 1115 to allocate the consideration of the contract. The Group applies the derecognition and impairment provisions of Korean 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 Korean IFRS 1116. (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. 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 Korean IFRS 1109 are 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 Korean 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 Korean 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: When there is an economic relationship between the hedged items and hedging instruments. 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. 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). 228 - 45 - - 46 - 229 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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. 3) Fair value hedge 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. (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. 230 - 47 - - 48 - 231 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 2) Hybrid securities (22) Income taxes 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. (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 Korean IFRS 1109 Initial book value less accumulated profit measured in accordance with Korean 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. 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 Korean 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. In addition, the Group appropriately estimates and reflects the amount of corporate tax liabilities based on the analysis of corporate tax laws and the evaluation of many factors, including past experiences. (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. 232 - 49 - - 50 - 233 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS (1) Income taxes The outbreak of COVID-19 in 2020 has had a significant impact on the global economy including Korea. Financial and economic shocks may have negative impacts on the Group's financial condition and results of operations in various forms both domestically and internationally, however, the Korean government is providing unprecedented financial and economic relief measures such as extension of maturity of loan receivables. Despite the announcement of these various forms of government support policies, the negative impact of the COVID-19 on the global economy continues. Significant changes have been made in future forecast information affecting expected credit losses for the period ended December 31, 2020, and major economic factors are expected to remain negative for a considerable period of time after 2020 due to the influence of COVID-19, and uncertainties in recovery or deterioration will persist. Considering this situation comprehensively, the Group updated the forward-looking information used to estimate expected credit losses in accordance with Korean IFRS 1109 Financial Instruments by changing major variables such as GDP to reflect the impact of COVID-19, which has brought a global economic recession. The Group also reflected the effect of deferred loan principal/interest due to COVID-19. The Group determined that the credit risk of loans affected by the loan deferment has significantly increased; and evaluated that the possibility of default is high. As a result, total loans (Loan receivables, payment guarantees) that are subject to loan deferment and interest deferment amount to 1,820,324 million won, and loan allowances have increased for 219,231 million won which consist of increases of corporate loan allowance for 210,173 million won and retail loan allowance for 9,058 million won. Total loans (Loan receivables, payment guarantees) that are subject to loan deferment and interest deferment are consist of corporate loan of 1,697,899 million won and retail loan of 122,425 million won. Among total loans, loans changed its stage from 12-month to lifetime (Stage 2) expected credit losses amount to 1,650,526 million won, which consist of corporate loan of 1,548,805 million won and retail loan of 101,721 million won. The Group will continue to assess the adequacy of forward-looking information related to the duration of the impact of COVID-19 on economy and government policies. As of December 31, 2020, Woori Card has 9,136 million won in financial assets at amortized cost related to borrowers eligible for financial support, and the additional provision is 196 million won. < Woori Financial Capital and Woori Financial Group> Woori Financial Capital and Woori Financial Group increased their expected credit loss allowance by 18,457 million won and 8,701 million won, respectively. 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: 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 2. Basis of Preparation and Significant Accounting Policies (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 Korean 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 impaired (*) Credit risk may be considered not to have been significantly increased when credit risk is low at year-end. The accuracy of the provision for credit losses is determined by the estimation of the expected cash flows for each tenant for estimating the individually assessed loan-loss allowance, and the assumptions and variables in the model used for estimating the collectively assessed loan-loss allowance payment, guarantee and unused commitment. 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. 234 - 51 - - 52 - 235 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 In measuring the expected credit losses, the Group is also 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 Major macroeconomic indicators GDP growth rate Home price index Consumer price index Correlation between credit risk and macroeconomic indicators Negative(-) Correlation Negative(-) Correlation Negative(-) Correlation - 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 The results of Woori Bank's sensitivity analysis on expected credit loss provisions due to changes in macroeconomic indicators as of December 31, 2020 are as follows (Unit: Korean Won in millions): Corporate GDP growth rate Retail Consumer Price Index Increase by 1% point Decrease by 1% point Increase by 1% point Decrease by 1% point December 31, 2020 (86,086) 96,177 (15,807) 17,119 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 Bank 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 Retail Exposures Asset quality level ‘Precautionary’ or lower More than 30 days past due ‘Warning’ level in early warning system Debtor experiencing financial difficulties Asset quality level ‘Precautionary’ or lower More than 30 days past due Significant decrease in credit rating(*) Deferment of repayment of principal and interest (Capital impairment, Adverse opinion or Disclaimer of opinion by external auditors) Significant decrease in credit rating (*) Deferment of repayment of principal and interest Deferment of interest Deferment of interest (*) 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 have been noted for the financial asset. 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. 236 - 53 - - 54 - 237 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 4. RISK MANAGEMENT 2) Maximum exposure to credit risk The Group’s operating activity is exposed to various financial risks and the and the main types of risks are credit risk, market risk, liquidity risk and etc. The risk management department analyze and assess the level of complex risks in order to manage the risks and the risk management standards such as policies, regulations, management systems and decision-making have been established and operated for sound management of the Group. The risk management organization is operated by risk management committee, risk management responsible, and risk management department. The Board of Directors operates a risk management committee comprised of outside directors for professional risk management. The risk management committee plays a role as the top decision-making body in risk management by establishing basic policies for risk management that are in line with the Group’s management strategy and determining the risk level that the Group is willing to take. The risk management office (CRO) assists the risk management committee and operates a group risk management council comprised of risk management managers of subsidiaries to periodically check and improve the risk burden of external environments and the Group. The risk management department is independent and is in charge of risk management of the Group. It also supports reporting and decision- making of key risk-related issues. (1) Credit risk Credit risk represents the possibility of financial losses incurred due to the refusal of the transaction or 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. 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 as of December 31, 2020 and 2019 is as follows (Unit: Korean Won in millions): Loans and other Korean treasury and government financial assets at amortized cost (*1) agencies Banks Corporates Consumers Financial assets at FVTPL (*2) Financial assets at FVTOCI Securities at amortized cost Derivative assets Off-balance accounts Sub-total Deposit Debt securities Loans Derivative assets Sub-total Debt securities Debt securities Derivative assets (Designated for hedging) Guarantees (*3) Loan commitments Sub-total Total December 31, 2020 December 31, 2019 9,725,719 19,493,188 114,131,996 176,755,175 320,106,078 48,796 2,887,097 676,291 6,901,742 10,513,926 28,948,141 17,020,839 174,820 11,809,456 112,088,680 123,898,136 500,661,940 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 26,795,161 20,320,539 121,131 12,618,917 103,651,674 116,270,591 462,724,477 (*1) Cash and cash equivalents are not included. (*2) Puttable financial instruments are not included. (*3) As of December 31, 2020 and 2019, the financial guarantee amount of 4,163,382 million won and 4,317,969 million won are included, respectively. 238 - 55 - - 56 - 239 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 a) Credit risk exposure by geographical areas The following tables analyze credit risk exposure by geographical areas (Unit: Korean Won in millions): Korea China USA December 31, 2020 UK Japan 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 296,186,751 16,749,531 6,954,630 25,966,333 4,356,747 - 13,403 608,893 - 119,699,069 465,556,314 - 1,393,734 6,372,777 3,988,304 1,990,490 1,404,670 - 480,760 5,460 110,597 1,083,096 1,092,636 - 493,285 5 165,458 399,678 - 41,378 6,839,769 2,525,909 1,932,268 3,740 38,389 12,179,116 160,711 1,488,752 1,274,814 320,106,078 17,020,839 10,513,926 28,948,141 5,622 2,325,888 17,434,903 174,820 123,898,136 500,661,940 (*) Others consist of financial assets in Indonesia, Hong Kong, Germany, Australia, and other countries. Korea China USA December 31, 2019 UK Japan 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 268,316,454 20,104,604 5,488,229 24,553,655 5,108,144 - 10,409 332,319 121,131 112,602,603 431,186,676 - 1,211,857 6,662,729 5,077,666 1,844,374 1,172,209 - 724 2 66,747 - 144,601 - - 102,311 - 387,795 - 46,662 5,676,809 2,025,535 1,219,597 - 78,850 12,198,846 149,188 - 1,662,273 293,717,693 20,320,539 5,499,362 26,795,161 - 1,942,824 15,953,131 121,131 116,270,591 462,724,477 (*) Others consist of financial assets in Indonesia, Hong Kong, Germany, Australia, and other countries. b) Credit risk exposure by industries ① 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 as of December 31, 2020 and 2019 (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 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 Service Manufacturing Finance and insurance Construction Individuals Others Total December 31, 2020 56,627,927 492,172 301,296 475,881 35,933,953 6,691 234,712 207,903 35,450,774 8,926,909 8,520,127 23,017,149 3,493,000 302,225 32,240 142,396 172,116,780 - 14,619 - 16,483,644 7,292,842 1,410,932 5,104,812 320,106,078 17,020,839 10,513,926 28,948,141 - 18,828,656 76,725,932 - 21,460,581 57,843,840 174,820 12,086,935 88,176,714 - 4,060,358 8,030,219 - 62,477,117 234,608,516 - 4,984,489 35,276,719 174,820 123,898,136 500,661,940 Service Manufacturing Finance and insurance Construction Individuals Others Total December 31, 2019 51,233,088 8,545,838 162,780 85,609 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 14,947,807 293,717,693 431,109 20,320,539 5,499,362 1,068,595 7,582,710 26,795,161 - 17,813,366 77,840,681 - 23,841,881 57,093,617 121,131 10,015,897 80,310,953 - 4,161,139 7,865,971 - 53,335,209 208,479,935 - 121,131 7,103,099 116,270,591 31,133,320 462,724,477 ② The detailed industries of financial assets and corporate loans that might get affected by the spread of COVID-19 as of December 31, 2020 are as follow and the industries that can be affected may change by future economic conditions. (Unit: Korean Won in millions): < Woori Bank > Loans and other financial assets at amortized cost Financial assets at FVTPL Financial assets at FVTOCI Service business Distribution business General retail business General wholesale business Sub-total Manufacturing Accommodation business Travel business Art/sports, leisure service Food business Transportation business Education business Others Sub-total Textile Metal Non-metal Chemical Transportation Electronics Cosmetics Others Sub-total Total Service business Distribution business General retail business General wholesale business Sub-total Manufacturing Accommodation business Travel business Art/sports, leisure service Food business Transportation business Education business Others Sub-total Textile Metal Non-metal Chemical Transportation Electronics Cosmetics Others Sub-total Total 1,070,789 1,407,563 2,478,352 1,525,157 59,858 1,467,643 1,078,832 395,873 367,701 1,286,578 8,659,994 2,281,344 1,390,290 698,478 1,819,207 3,268,095 1,424,297 323,231 368,123 11,573,065 20,233,059 11,944 3,573 15,517 9,305 - 17,739 2,515 461 489 2,691 48,717 6,608 47,903 8,357 19,161 2,060 19,280 217 277 103,863 152,580 Off-balance accounts Total 897,101 483,360 1,380,461 152,059 21,350 114,388 135,680 193,578 48,064 318,641 2,364,221 1,064,005 1,581,887 377,506 3,233,405 2,183,616 1,789,605 54,518 1,483,551 11,768,093 14,132,314 5,461 - 5,461 5,471 - - - 8,752 - - 19,684 6,559 - - - - - - - 6,559 26,243 1,985,295 1,894,496 3,879,791 1,691,992 81,208 1,599,770 1,217,027 598,664 416,254 1,607,910 11,092,616 3,358,516 3,020,080 1,084,341 5,071,773 5,453,771 3,233,182 377,966 1,851,951 23,451,580 34,544,196 240 - 57 - - 58 - 241 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 < Woori Card Co., Ltd. > Accommodation business Travel business Aviation Cosmetics industry Distribution business Food industry Art/sports, leisure service Total Loans and other financial assets at amortized cost 4,959 2,175 479 2,462 8,050 33,084 6,156 57,365 Financial assets at FVTPL Financial assets at FVTOCI Off-balance accounts Total - - - - - - - - - - - - - - - - 12,315 25,367 4,179 13,376 44,354 163,711 51,962 315,264 17,274 27,542 4,658 15,838 52,404 196,795 58,118 372,629 Service business Distribution business General retail business General wholesale business Sub-total Manufacturing Accommodation business Travel business Art/sports, leisure service Food business Transportation business Education business Others Sub-total Textile Metal Non-metal Chemical Transportation Electronics Cosmetics Others Sub-total Total COVID-19 vulnerable business Other business Others Total Service business Distribution business General retail business General wholesale business Sub-total Manufacturing Accommodation business Travel business Art/sports, leisure service Food business Transportation business Education business Others Sub-total Textile Metal Non-metal Chemical Transportation Electronics Cosmetics Others Sub-total Total COVID-19 vulnerable business Other business Others Total Loans and other financial assets at amortized cost Financial assets at FVTPL Financial assets at FVTOCI 8,978 57,587 66,565 6,292 1,293 615 21,774 28,270 1,132 365,860 491,801 29,415 17,963 4,780 2,501 52,514 12,665 - 5,335 125,173 616,974 6,202,754 6,819,728 - - - - - - - - - 27,364 27,364 - - - - - - - - - 27,364 225,078 252,442 Off-balance accounts Total - - - - - - - - - 38,681 38,681 - 3,365 - - - - - - 3,365 42,046 333,766 375,812 - - - - - - - - - - - - - - - - - - - - - - - 8,978 57,587 66,565 6,292 1,293 615 21,774 28,270 1,132 431,905 557,846 29,415 21,328 4,780 2,501 52,514 12,665 - 5,335 128,538 686,384 6,761,598 7,447,982 242 - 59 - - 60 - 243 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 < Woori Investment Bank Co., Ltd. > Accommodation business Distribution business Art/sports, leisure service Total Loans and other financial assets at amortized cost 44,900 15,716 28,000 88,616 Financial assets at FVTPL Financial assets at FVTOCI Off-balance accounts - 20,000 - 20,000 - - - - - - - - Total 44,900 35,716 28,000 108,616 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) as of December 31, 2020 and 2019 is as follows (Unit: Korean Won in millions): December 31, 2020 Stage 1 Stage 2 Above appropriate credit rating (*1) Less than a limited credit rating (*2) Above appropriate credit rating (*1) Less than a limited credit rating (*2) Stage 3 Total Loss allowance Total, net 278,729,012 21,249,885 10,356,251 10,143,839 1,623,276 322,102,263 (1,996,185) 320,106,078 9,674,891 19,301,570 93,889,922 61,082,336 1,063 105,890 14,873,376 9,013,955 52,279 75,876 1,890,564 1,349,053 - - 3,860,389 2,585,868 - 25,598 839,234 576,078 9,728,233 19,508,934 115,353,485 74,607,290 (2,514) (15,745) (1,221,491) (869,744) 9,725,719 19,493,189 114,131,994 73,737,546 27,504,992 5,415,312 538,909 1,207,706 227,003 34,893,922 (304,077) 34,589,845 5,302,594 155,862,629 17,025,405 444,109 6,269,556 - 2,602 8,337,532 - 66,815 6,283,450 - 36,153 758,444 - 5,852,273 177,511,611 17,025,405 (47,670) (756,435) (4,566) 5,804,603 176,755,176 17,020,839 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 (*3) Total 28,789,281 324,543,698 158,860 21,408,745 - 10,356,251 - 10,143,839 - 1,623,276 28,948,141 368,075,809 (9,631) (2,010,382) 28,948,141 366,075,058 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 (*3) Total Stage1 187,731,443 19,280 1,003,971 62,817,305 35,578,470 25,404,002 1,834,833 123,890,887 - - 187,731,443 December 31, 2020 Collateral value Stage2 15,677,871 - - 3,963,101 2,670,480 1,290,941 1,680 11,714,770 - - 15,677,871 Stage3 696,709 - - 400,340 271,815 118,265 10,260 296,369 - - 696,709 Total 204,106,023 19,280 1,003,971 67,180,746 38,520,765 26,813,208 1,846,773 135,902,026 - - 204,106,023 (*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6. (*2) Credit grade of corporates are BBB- ~ C, and consumers are grades 7 ~ 10. (*3) Financial assets at FVTOCI has been disclosed as the amount before deducting loss allowance because loss allowance does not reduce the carrying amount. 244 - 61 - - 62 - 245 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 December 31, 2019 b) Guarantees and commitments 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 255,709,205 19,823,451 8,712,860 9,625,024 1,504,172 295,374,712 (1,657,019) 293,717,693 10,390 14,789,933 18,336,664 109,667 82,286,304 15,201,687 6,191,625 45,769,233 - 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 14,797,040 (3,284) 18,597,206 (21,350) (992,036) 101,041,110 53,888,709 (678,237) 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 4,888,931 (26,772) (640,349) 159,282,337 20,320,539 (5,511) 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 The credit quality of the guarantees and loan commitments as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Stage 1 December 31, 2020 Stage 2 Above appropriate credit rating (*1) Less than a limited credit rating (*2) Above appropriate credit rating (*1) Less than a limited credit rating (*2) Stage3 Total Financial assets Off-balance accounts: Guarantees Loan Commitments Total 10,152,900 105,108,967 115,261,867 1,382,592 4,045,595 5,428,187 11,504 1,951,649 1,963,153 191,962 977,185 1,169,147 70,498 11,809,456 5,284 112,088,680 75,782 123,898,136 (*4) Total 26,684,601 110,560 302,719,856 19,934,011 - 8,712,860 - 9,625,024 - 1,504,172 26,795,161 342,495,923 (8,569) 26,795,161 (1,671,099) 340,833,393 (*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6. (*2) Credit grade of corporate are BBB- ~ C, and consumers are grades 7 ~ 10. 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. 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 Financial assets Off-balance accounts Guarantees Loan Commitments Total 10,952,917 97,854,790 108,807,707 355 1,333,561 3,479,295 1,388,136 4,812,856 1,388,491 223,657 108,427 906,033 12,618,917 23,420 103,651,674 1,129,690 131,847 116,270,591 (*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. 4) Collateral and other credit enhancements For the year ended December 31, 2020 and 2019, 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, 2020, there are no financial assets that do not recognize the allowance for losses just because financial assets have collateral. 5) Among financial assets that measured loss allowance at lifetime expected credit losses, amortized costs before changes in contractual cash flows as of December 31, 2020 and 2019 are 265,760 million Won and 18,735 million Won, respectively, with net losses recognized along with the changes 12,786 million Won and 82 million Won, respectively. 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, 2020 and 2019 are 9,986,186 million won and 9,667,199 million won. In addition, the contractual non-recoverable amount of financial assets amortized for the year ended December 31, 2020, but still in the process of recovery is 390,854 million won. 246 - 63 - - 64 - 247 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Market risk b) Non-trading activities 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 the standard method and the internally developed model (the Bank) in measuring market risk for trading positions, and allocates market risk capital through the Risk Management Committee. Risk management departments of the Group and its subsidiaries manage limits in detail including those on risk and loss with their management result regularly reported to the Risk Management Committee. 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 Bank for the year December 31, 2020 and 2019, and the VaR of the Bank as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): The Bank manages and measures interest risk for non-trading activities through △NII(Change in Net Interest Income) and △EVE(Change in Economic Value of Equity) in accordance with IRRBB(Interest Rate Risk in the Banking Book) introduced at the end of 2019. △NII represents a change in net interest income that may occur over a certain period (e.g. one year) due to changes in net interest income, 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. Subsidiaries other than the Bank measure and manage interest rate risk with interest rates EaR(Earnings at Risk) and VaR(Value at Risk). The interest rate EaR represents the maximum expected change in profit or loss that could occur over a period of time (e.g. one year) due to unfavorable interest rate changes, which shows the maximum reduction scale in net interest. The interest rate VaR represents the maximum expected loss that indicates how unfavorable changes in interest rates can reduce the value of the net asset at any given point in time, now or in the future. For assets and liabilities as of December 31, 2020 and 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): December 31, 2020 December 31, 2019 △EVE (*1) △NII (*2) △EVE (*1) △NII (*2) 634,596 66,138 490,981 162,023 December 31, 2019 For the year ended December 31, 2019 (*1) (*2) EVE: change in Economic Value of Equity NII: change in Net Interest Income Risk factor Interest rate Stock price Foreign currencies Commodity price Diversification Total VaR(*) December 31, 2020 6,815 2,283 For the year ended December 31, 2020 Average Maximum Minimum 2,427 1,982 15,065 14,394 7,959 5,783 11,160 - 8,814 - (11,087) (11,175) 11,381 9,171 11,233 - (18,796) 21,896 4,613 - (3,452) 5,570 5,052 3,730 5,028 - (6,233) 7,577 Average Maximum Minimum 1,176 1,146 5,725 5,935 3,406 3,203 5,033 1 (5,127) 6,516 6,469 32 (9,229) 8,932 4,395 - (2,339) 4,378 (*) VaR (Value at Risk): Retention period of 1 day, Maximum expected losses under 99% level of confidence. △ △ For the remaining subsidiaries except the bank, consolidated trusts, and consolidated subsidiaries of the bank as of December 31, 2020 and 2019, the interest rate EaR and VaR calculated based on the BIS Framework are as follows (Unit: Korean Won in millions): Woori Card Co., Ltd. Woori Financial Capital Co., Ltd. Woori Investment Bank Co., Ltd. Woori Asset Trust Co., Ltd. Woori Asset Management Corp. Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. December 31, 2020 December 31, 2019 EaR (*1) VaR (*2) EaR (*1) VaR (*2) 106,645 157,085 100,213 85,010 3,701 1,479 3,211 64 193 119 12,550 5,005 398 493 37 318 - 7,629 - 256 416 386 - 958 - 2,486 80 84 (*1) EaR (Earning at Risk): Change of maximum expected income and expense (*2) VaR (Value at Risk): Maximum expected losses 248 - 65 - - 66 - 249 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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, 2020 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 Financial assets at FVTPL Financial assets at FVTOCI Securities at amortized cost Total Liability: Deposits due to customers Borrowings Debentures Total Asset: Loans and other financial assets at amortized cost Financial assets at FVTPL Financial assets at FVTOCI Securities at amortized cost Total Liability: Deposits due to customers Borrowings Debentures Total 2) Currency risk 177,214,415 54,035,826 12,410,513 11,140,520 64,799,854 5,170,572 324,771,700 609,542 263,510 91,791 94,879 150,148 13,239 1,223,109 4,344,718 3,339,086 3,751,882 2,915,238 14,648,033 473,124 29,472,081 1,372,094 1,869,352 11,080,632 183,540,769 59,109,731 17,187,901 16,019,989 90,678,667 1,471,309 933,715 127,557,303 46,471,099 35,455,403 29,354,652 52,395,811 11,223,338 3,828,384 3,495,915 21,899,788 3,246,233 142,026,874 52,700,372 40,511,477 33,800,459 78,123,983 1,126,728 3,929,346 2,832,846 3,396,427 949,892 1,018,002 17,745,104 6,674,937 373,211,994 50,655 291,284,923 452,495 20,413,683 3,257,026 39,224,735 3,760,176 350,923,341 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 5,414,586 5,486,113 3,450,669 3,174,893 9,367,756 318,371 27,212,388 1,844,868 1,409,549 14,869,227 160,433,206 56,711,371 16,758,127 15,125,211 81,950,459 1,696,004 738,383 116,490,812 45,803,202 32,683,132 26,740,013 43,175,232 3,264,861 12,105,234 2,466,142 19,211,409 2,378,211 130,974,257 50,608,538 37,062,781 29,913,107 65,651,502 1,048,991 3,330,658 1,910,759 2,894,577 706,952 858,142 21,416,173 6,399,530 337,377,904 59,305 264,951,696 509,359 19,546,156 2,537,391 32,818,388 3,106,055 317,316,240 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 as of December 31, 2020 and 2019 are as follows (Unit: USD in millions, JPY in millions, CNY in millions, EUR in millions, and Korean Won in millions): USD JPY CNY EUR Others Total December 31, 2020 Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent Foreign currency Korean Won equivalen t Foreign currency Korean Won equivalent Korean Won equivalent Korean Won equivalent Asset Liability Cash and cash equivalents 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 5,584 6,074,879 22,832 240,710 4,580 764,686 115 154,154 501,900 7,736,329 21,687 23,595,957 172,782 1,821,554 24,230 4,045,435 2,001 2,678,382 4,857,438 36,998,766 280 304,146 18,855 198,781 73 11,989 248 332,182 88,745 935,843 2,741 2,981,832 - - 2,601 434,258 37 49,789 565,893 4,031,772 319 - 30,611 33,304,384 214,469 2,261,045 31,484 5,256,368 347,570 - - - 34 45,197 115,534 2,435 3,259,704 6,129,510 508,301 50,211,011 426 463,678 14,493 152,792 - - 158 211,525 115,429 943,424 16,664 18,130,448 220,153 2,320,983 26,733 4,463,300 - 5,657 6,154,464 48,446 - - 3,973 4,322,800 510,750 - - - 2,381 2,590,147 309,319 29,101 31,661,537 289,797 3,055,215 28,586 4,772,619 70,690 6,705 1,853 1,532 2,050,400 3,443,631 697,234 789,955 444,711 - 590 - 30,408,762 8,152,403 4,767,511 64 85,553 193,128 2,344 3,137,433 4,894,133 3,248,837 47,520,937 Off-balance accounts 7,441 8,095,297 24,992 263,478 3,007 502,106 533 712,846 556,988 10,130,715 financial assets at amortized cost (*) Financial assets at FVTPL Financial assets at FVTOCI Securities at 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 amortized cost Total 319 26,079 369,677 - 30,194,956 155,784 1,656,742 - - - 33,423 5,539,605 40 97,092 52,139 2,428 3,150,295 5,840,382 518,908 46,381,980 Liability Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Other financial 251 291,102 4,415 46,957 - - 68 87,776 83,790 509,625 13,208 6,588 3,999 15,291,671 166,108 1,766,526 117,634 7,627,665 11,061 - - 4,629,944 27,739 4,597,467 2,743 - 16 - 1,727 2,240,884 3,247,164 499,046 668,060 271,790 136,230 515 105 27,143,712 8,915,148 5,037,964 liabilities Total 3,016 27,062 119,529 3,492,462 11,240 31,332,844 192,824 2,050,646 510,281 3,079 30,834 5,110,491 359 6,906 466,240 2,774 3,599,190 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 10,615,507 153,023,603 49,505,606 12,505,250 10,506,470 57,582,270 5,209,670 288,332,869 150,149 23,648 63,825 34,299 131,206 13,347 416,474 Asset Loans and other Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent USD JPY December 31, 2019 CNY EUR Total Others Korean Won equivalent Korean Won equivalent 250 - 67 - - 68 - 251 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (3) Liquidity risk 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 as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Within 3 months 4 to 6 months 7 to 9 months 10 to 12 months 1 to 5 years Over 5 years Total December 31, 2020 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 Lease liabilities Other financial liabilities Total 64,183 42,418 135,232 112,102 191,660,253 34,349,298 25,213,410 31,144,452 1,866,810 10,159,819 3,246,233 3,495,915 53,429 8,121,978 - 9,230,904 4,177,634 21,899,788 201,113 451,096 213,305,895 40,520,357 30,950,767 36,664,937 35,960,535 2,524,572 3,396,427 44,551 70,277 1,714,490 3,929,346 40,809 10,294 34,761 10,897 - 353,935 1,793,143 293,391,460 463,376 20,906,701 3,257,228 39,224,937 409,443 2,142,772 10,807,314 7,691,299 365,093,790 34,780 Within 3 months 4 to 6 months 7 to 9 months 10 to 12 months 1 to 5 years Over 5 years Total December 31, 2019 - - 115,156 - 166,474,535 36,697,168 24,634,859 31,233,844 1,880,424 2,466,142 - 6,590,119 3,682,214 19,211,409 232,985 71,561 188,852,543 42,643,659 30,285,416 35,625,964 29,788,288 8,596,202 2,378,211 46,072 11,242,367 2,948,384 2,894,577 42,549 60,981 2,162,846 3,330,658 37,420 119,633 35,210 10,344 - 115,156 1,877,594 267,508,119 520,936 19,791,006 2,537,391 32,818,388 434,934 2,660,640 14,165,526 7,637,259 334,833,129 40,698 b) Cash flows of principals and interests by expected maturities of non-derivative financial liabilities as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Within 3 months 4 to 6 months December 31, 2020 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Lease liabilities Other financial liabilities Total 68,909 41,428 131,496 - 199,931,480 35,912,096 23,924,403 25,477,917 7,582,278 10,159,819 2,524,572 1,714,490 1,866,810 4,177,634 Total 353,935 105,413 292,933,587 463,376 20,906,701 3,246,233 3,396,427 3,929,346 3,495,915 21,899,788 3,257,228 39,224,937 419,421 36,950 208,125 451,096 2,142,772 10,807,314 221,581,848 42,079,762 29,660,910 30,998,715 34,318,921 6,005,739 364,645,895 53,429 8,121,978 40,949 10,294 35,074 10,897 44,894 70,277 112,102 - 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 Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Lease liabilities Other financial liabilities Total - - 115,156 Total 115,156 - 150,233 266,978,703 175,309,271 38,219,793 23,649,424 24,102,750 5,547,232 520,936 19,791,006 8,596,202 2,948,384 2,162,846 1,880,424 3,682,214 2,378,211 2,894,577 3,330,658 2,466,142 19,211,409 2,537,391 32,818,388 434,934 40,698 71,561 2,660,640 14,165,526 197,687,279 44,166,284 29,299,981 28,494,870 28,745,401 5,909,898 334,303,713 46,072 11,242,367 37,420 119,633 35,210 10,344 42,549 60,981 232,985 - - 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, 2020 and 2019 is as follows (Unit: Korean Won in millions): Within 3 months 4 to 6 months Remaining maturity 10 to 12 months 7 to 9 months December 31, 2020 December 31, 2019 Cash flow risk hedge Fair value risk hedge Trading purpose Cash flow risk hedge Trading purpose 2,655 255 6,460,472 1,839 2,843,195 6,004 (302) - (341) - 515 233 - (298) - 239 (287) - (247) - 1 to 5 years 55,744 126 - 6,249 - Over 5 years Total 65,157 - - 25 - 6,460,472 - 7,202 - 2,843,195 4) Maturity analysis of off-balance accounts (Guarantees and loan commitments) 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. The loan commitment represents the limit if the Group has promised a credit to the customer. 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 Other commitments December 31, 2020 December 31, 2019 11,809,456 112,088,680 4,912,690 12,618,917 103,651,674 3,411,334 252 - 69 - - 70 - 253 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (4) Operational risk 5. OPERATING SEGMENTS 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 established and operated an operating risk management system to strengthen external competitiveness, reduce risk capital volume, enhance operational risk management capacity and prevent accidents through compliance with Basel II, and has obtained approval from the Financial Supervisory Service for “Advanced Measurement Approaches”(AMA) based on self-compliance verification and independent third-party inspection results. 2) Operational risk measurement The Group is applying the basic indicator method for the purpose of calculating the regulatory capital of operation risk, and the Bank is applying the advanced measurement method. The Bank applies AMA using internal and external loss data, business environment and internal control factors, and scenario analysis. (5) 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 8.0% and 7.0%, a Tier 1 capital ratio of 9.5% and 8.5%, and a minimum total capital ratio of 11.5% and 10.5% as of December 31, 2020 and 2019 The risk management committee of the Group determines the risk appetite of the Group, allocates internal capital by risk type and major subsidiaries, and the major subsidiaries operate the capital efficiently within the allocated internal capital. The risk management department of the Group monitors internal capital limit management and reports it to the management and risk management committees. If internal capital is expected to exceed the limit due to new business or expansion of operations, the capital adequacy of the Group is managed by taking a preliminary review and approval process by the Risk Management Committee. Details of the Group’s capital adequacy ratio as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Details(*) December 31, 2020 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 19,828,094 3,533,648 4,086,035 27,447,777 178,114,590 6,086,905 14,067,185 198,268,680 10.00% 11.78% 13.84% 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% (*) The above figures are prior to dividend reflection and may change to provisional values. 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 prior term, the Group 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 Comprehensive finance 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 Financial Capital Co., Ltd., Woori Asset Trust Co., Ltd., Woori Asset Management Corp., Ltd., Woori Credit Information Co., Ltd., Woori Fund Services Inc., Woori Private Equity Asset Management Co., Ltd., Woori Global Asset Management Co., Ltd., Woori FIS Co., Ltd. and Woori Finance Research Institute, (2) The composition of each organization's sectors for the years ended December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Banking Credit card Investment banking Others (*1) Sub-total Adjustments (*2) Total For the year ended December 31, 2020 4,545,155 564,461 78,302 69,188 5,257,106 741,406 5,998,512 1,423,286 3,648 34,497 1,071,852 2,533,283 (1,710,849) 822,434 (512,008) (195,816) (4,146) (43,660) (755,630) (28,741) (784,371) (3,545,186) (207,301) (39,039) (416,595) (4,208,121) 251,940 (3,956,181) Net Interest income(expense) Non-interest income(expense) Impairment losses due to credit loss General and administrative expense Net operating income(expense) 1,911,247 164,992 69,614 680,785 2,826,638 (746,244) 2,080,394 Non-operating income(expense) Net income(expense) before tax Tax income(expense) Net income(loss) Total assets Total liabilities (57,027) (5,569) (775) 771 (62,600) (16,543) (79,143) 1,854,220 (437,288) 1,416,932 2,001,251 (486,002) 1,515,249 374,120,064 11,366,596 4,332,474 31,872,690 421,691,824 (22,610,807) 399,081,017 925,168 372,355,172 348,706,682 9,312,986 3,803,594 9,606,742 371,430,004 2,764,038 (511,755) 2,252,283 (762,787) 25,753 (737,034) 681,556 (29,372) 652,184 159,423 (39,193) 120,230 68,839 (5,902) 62,937 (*1) Other segments include gains and losses from Woori Financial Group Inc., Woori Financial Capital Co., Ltd.( Profit or loss for 3 months after incorporation into subsidiary), Woori Asset Trust Co., Ltd., Woori Asset Management Corp., Woori Credit Information Co., Ltd., Woori Fund Service Inc., Woori Private Equity Asset Management Co., Ltd., Woori Global Asset Management Co., Ltd., Woori FIS Co., Ltd. and Woori Finance Research 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. 254 - 71 - - 72 - 255 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 For the year ended December 31, 2019 6. STATEMENTS OF CASH FLOWS Banking Credit card Investment banking Others (*1) Sub-total Adjustments (*2) Total 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) Net Interest income(expense) Non-interest income(expense) Impairment losses due to credit loss General and administrative expense Net operating 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) Total assets Total liabilities (151,348) 13,889 (3,501) (1,545) (142,505) 65,578 (76,927) 2,478,129 (616,110) 1,862,019 2,723,049 (685,453) 2,037,596 347,819,743 10,087,342 3,398,960 21,681,769 382,987,814 (21,007,090) 361,980,724 339,323 336,488,392 323,592,850 8,299,175 3,031,622 1,225,422 336,149,069 3,315,069 (652,231) 2,662,838 (592,020) (33,222) (625,242) 150,021 (35,825) 114,196 634,559 (1,294) 633,265 52,360 998 53,358 (*1) Other segments include gains and losses from Woori Financial Group Inc., Woori Asset Management Corp., Woori Credit Information Co., Ltd., Woori Fund Service Inc., Woori Private Equity Asset Management Co., Ltd. , Woori Global Asset Management Co., Ltd., Woori FIS Co., Ltd. and Woori Finance Research 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) Operating profit or loss from external customers for the years ended December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Details Domestic Foreign Total For the years ended December 31 2020 2019 1,869,516 210,878 2,080,394 2,500,504 299,472 2,799,976 (4) Major non-current assets as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Details (*) Domestic Foreign Total December 31, 2020 (*) December 31, 2019 (*) 5,026,161 433,869 5,460,030 4,908,141 387,284 5,295,425 (*) Major non-current assets included joint ventures and related business investments, investment properties, property, plant and equipment, and intangible assets. (5) Information about major customers The Group does not have any single customer that generates 10% or more of the Group’s total revenue for the years ended December 31, 2020 and 2019. (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, 2020 1,611,282 514,565 7,314,353 550,783 9,990,983 December 31, 2019 1,957,997 625,999 3,684,044 124,526 6,392,566 (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 2020 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 profit or loss on cash flow hedge Changes in financial assets measure at FVTOCI due to debt-for-equity swap Changes in the investment assets of associates due to the transfer of assets held-for-sale Changes in financial assets at FVTPL and assets held- for-sale Transfer of investment properties and premises and equipment Transfer from property, plant and equipment to assets held for sale Changes in account payables related to intangible assets Changes in right-of-use assets and lease liabilities Comprehensive stock exchange 59,360 (2,298) 4,420 3,575 (50,411) (2,385) 30,431 - (11,639) 222,587 - (14,141) 613 (1,823) 96,527 651 - 166,892 (95) 29,705 692,103 581,609 (3) Adjustments of liabilities from financing activities in current and prior year are as follows (Unit: Korean Won in millions): Borrowings Debentures Lease liabilities Other liabilities Total Beginning balance 18,998,920 30,858,055 419,045 23,909 50,299,929 Cash flow 2,033,851 913,836 (204,794) 3,971 2,746,864 For the year ended December 31, 2020 Not involving cash inflows and outflows Variation of gains on valuation of hedged items Business Combination Others (*) Ending balance - 58,861 - - 58,861 298,854 5,980,746 3,751 - 6,283,351 56 20,745,466 (42,099) 37,479,358 407,431 194,570 (1,526) 26,354 151,001 58,658,609 Foreign Exchange (586,215) (290,041) (5,141) - (881,397) 256 - 73 - - 74 - 257 (*) The change in lease liabilities due to the new contract includes 231,325 million won. INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 For the year ended December 31, 2019 Not involving cash inflows and outflows Borrowings Debentures Lease liabilities(*) Total Beginning balance Cash flow 16,202,986 3,081,757 28,735,862 1,858,763 377,030 (217,867) 45,315,878 4,722,652 Variation of gains on valuation of hedged items - 85,984 - 85,984 Foreign Exchange (285,607) 155,433 (819) (130,993) Business Ending balance Combination Others - - 5,552 5,552 (216) 18,998,920 22,013 30,858,055 419,045 255,149 276,947 50,276,020 (*) The amount of lease liability at the beginning of the current in applying Korean IFRS 1116 is reflected. 7. FINANCIAL ASSETS AT FVTPL (1) Details of financial assets at FVTPL as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Financial assets at fair value through profit or loss measured at fair value 14,762,941 8,069,144 December 31, 2020 December 31, 2019 (2) Financial assets at fair value through profit or loss measured at fair value as of December 31, 2020 and 2019 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, 2020 December 31, 2019 48,796 27,901 1,020,418 873,031 761,681 231,967 570,772 865,685 2,812,558 7,136,112 676,291 6,901,742 14,762,941 872,954 600,303 762,265 101,563 688,350 515,199 1,366,233 4,906,867 212,473 2,921,903 8,069,144 The Group does not have financial assets at fair value through profit or loss designated as upon initial recognition as of December 31, 2020 and 2019. 8. FINANCIAL ASSETS AT FVTOCI (1) Details of financial assets at FVTOCI as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Debt securities: Korean treasury and government agencies Financial institutions Corporates Bond denominated in foreign currencies Securities loaned Equity securities Sub-total Total December 31, 2020 December 31, 2019 2,922,671 17,996,660 3,896,744 4,031,721 100,345 28,948,141 1,080,788 30,028,929 1,152,711 17,769,924 3,917,004 3,874,785 80,737 26,795,161 935,370 27,730,531 (2) Details of equity securities designated as financial assets at FVTOCI as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Purpose of acquisition Investment for strategic business partnership purpose Debt-equity swap Others Total December 31, 2020 December 31, 2019 Remarks 778,657 302,090 41 1,080,788 678,846 256,480 44 935,370 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 For the year ended December 31, 2020 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. Stage 1 (8,569) - - - (1,529) 764 (297) (9,631) Stage 2 Stage 3 - - - - - - - - Total (8,569) - - - (1,529) 764 (297) (9,631) - - - - - - - - Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net provision (reversal) of loss allowance Disposal 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) 258 - 75 - - 76 - 259 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 2) Gross carrying amount (2) Changes in the loss allowance and gross carrying amount of securities at amortized cost are as follows For the year ended December 31, 2020 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 Acquisition Disposal / Recovery Gain (loss) on valuation Amortization based on effective interest method Others (*) Ending balance 26,795,161 - - - 22,970,010 (20,530,076) 17,957 (12,545) (292,366) 28,948,141 (*) Changes due to foreign currencies translation, etc. - - - - - - - - - - - - - - - - - - - - 26,795,161 - - - 22,970,010 (20,530,076) 17,957 (12,545) (292,366) 28,948,141 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 Acquisition Disposal / Recovery Gain (loss) on valuation Amortization based on effective interest method Business combination Others (*) Ending balance 17,087,096 - - - 23,774,375 (14,224,358) 48,956 14,629 24,985 69,478 26,795,161 25,153 - - - - (25,000) (153) - - - - (*) Changes due to foreign currencies translation, etc. - - - - - - - - - - - 17,112,249 - - - 23,774,375 (14,249,358) 48,803 14,629 24,985 69,478 26,795,161 (4) During the years ended December 31, 2020 and 2019, the Group sold its equity securities., designated as financial assets at FVTOCI in accordance with decision of disposal by the creditors, and the fair values at disposal dates were 2,848 million won and 34,841 million won, respectively and cumulative losses at disposal dates were 3,665 million won and 38,995 million won, respectively. 9. SECURITIES AT AMORTIZED COST (1) Details of securities at amortized cost as of December 31, 2020 and 2019 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, 2020 December 31, 2019 6,947,495 4,843,534 4,726,075 508,301 (4,566) 17,020,839 8,044,040 6,694,614 5,068,489 518,907 (5,511) 20,320,539 (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 (*) Changes due to 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 reversal of loss allowance Others (*) Ending balance (*) Changes due to 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 / Recovery Amortization based on effective interest method Others (*) Ending balance (*) Changes due to 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 / Recovery Amortization based on effective interest method Others (*) Ending balance (*) Changes due to foreign currencies translation, etc. For the year ended December 31, 2020 Stage 1 Stage 2 Stage 3 Total (5,511) - - - 934 11 (4,566) - - - - - - - - - - - - - - (5,511) - - - 934 11 (4,566) For the year 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, 2020 Stage 1 20,326,050 - - - 2,380,448 (5,659,365) (396) (21,332) 17,025,405 Stage 2 Stage 3 - - - - - - - - - - - - - - - - - - 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 - - - - - - - - - - - - - - - - - - Total 20,326,050 - - - 2,380,448 (5,659,365) (396) (21,332) 17,025,405 Total 22,939,484 - - - 6,092,078 (8,709,947) (3,286) 7,721 20,326,050 260 - 77 - - 78 - 261 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 10. LOANS AND OTHER FINANCIAL ASSETS AT AMORTIZED COST (1) Details of loans and other financial assets at amortized cost as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Due from banks Loans Other financial assets Total December 31, 2020 December 31, 2019 9,863,160 302,794,182 7,448,736 320,106,078 14,492,223 271,032,244 8,193,226 293,717,693 (2) Details of due from banks are as follows (Unit: Korean Won in millions): December 31, 2020 December 31, 2019 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 Sub-total Due from banks in foreign currencies: Due from banks on demand Due from banks on time Others Loss allowance Sub-total Total 6,519,226 84,195 266 227 172,914 (1,576) 6,775,252 - 1,608,126 296,489 1,186,083 (2,790) 3,087,908 9,863,160 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 (3) Details of restricted due from banks are as follows (Unit: Korean Won in millions): Counterparty December 31, 2020 Reason of restriction Due from banks in local currency: Due from BOK The BOK Due from KSFC Others KB Securities Co. Ltd. Korea Federation of Savings Banks and others Sub-total Due from banks in foreign currencies: 6,519,226 Reserve deposits under the BOK Act 227 Futures trading margin Guarantees, mortgage of domestic exchange transactions and others 89,562 6,609,015 Due from banks on demand Foreign currency deposits on time Others The BOK and others National Bank Cambodia Reserve deposits under the BOK 1,544,492 Act and others Korea Investment & Securities and others Sub-total Total 1,180,570 2,725,116 9,334,131 Overseas futures and options trade deposits and others 54 Reserve deposits and others Counterparty December 31, 2019 Reason of restriction Due from banks in local currency: Due from BOK The BOK Due from KSFC Others Korea Securities Finance Corp. and others 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 11,028,850 Reserve deposits under the BOK Act 50,113 41,645 11,120,608 Customer’s deposit reserve Central counterparty KRW margin and others 1,103,917 Reserve deposits under the BOK Act and others Reserve deposits and others Overseas futures and options trade deposits and others 58 872,603 1,976,578 13,097,186 (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 Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Reversal for allowance for credit loss Others (*) Ending balance (*) Changes due to 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 Reversal for allowance for credit loss Others (*) Ending balance (*) Changes due to foreign currencies translation, etc. For the year ended December 31, 2020 Stage 1 Stage 2 Stage 3 Total (4,860) - - - 315 179 (4,366) - - - - - - - - - - - - - - (4,860) - - - 315 179 (4,366) For the year ended December 31, 2019 Stage 1 Stage 2 Stage 3 Total (5,387) - - - 544 (17) (4,860) - - - - - - - - - - - - - - (5,387) - - - 544 (17) (4,860) 262 - 79 - - 80 - 263 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 2) Gross carrying amount (6) Changes in the loss allowance of loans are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 Consumers Stage 2 Corporates Stage 2 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 Others Ending balance Stage 1 (85,148) (20,839) 9,137 3,549 5,142 - - - - (31,327) (2,041) (121,527) Stage 3 20,050 (10,800) 4,913 Stage 3 Stage 1 (77,962) (125,588) (324,258) (297,718) (390,045) 25,067 4,050 (29,117) 28,925 (48,184) 19,259 3,607 (13,956) 10,349 2,831 (200,024) (271,265) (66,179) - 243,634 - 47,106 - 14,945 - (24,364) (13,703) 38,405 13,921 (84,463) (205,693) (327,460) (521,907) (388,744) 789 1,663 (8,462) (10,042) (125,923) (71,277) 181,713 5,640 10,790 (72,040) (2,998) - - - - (15,129) 4,507 - - 13 - (18,164) 6,754 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 Others Ending balance For the year ended December 31, 2020 Total Stage 2 Credit card accounts Stage 2 Stage 1 (74,726) (14,978) 9,341 627 17,022 - - - - - 2 (62,712) Stage 3 14,755 (9,742) 1,137 Stage 3 Stage 1 (71,533) (128,042) (484,132) (447,213) (643,675) 59,872 5,062 (64,934) (68,726) 30,989 37,737 7,783 (24,182) 16,399 24,995 (235,164) (577,060) - (203,482) - 671,237 - - 76,399 13 - 25,735 - - (96,404) (33,293) (45,030) 35,407 11,261 11,882 (90,481) (105,537) (511,699) (696,851) (699,974) 223 401 (1,764) (25,098) (179,872) (66,026) 245,890 23,653 - - - - - - - - - For the year ended December 31, 2020 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 decrease Business combination Others (*) Ending balance 14,497,083 - - - (4,759,053) 129,825 (329) 9,867,526 (*) Changes due to foreign currencies translation, etc. - - - - - - - - - 14,497,083 - - - - - - (4,759,053) - 129,825 - (329) - 9,867,526 - 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 Net decrease Business combination Others (*) Ending balance 14,156,399 - - - 313,991 35,910 (9,217) 14,497,083 (*) Changes due to foreign currencies translation, etc. (5) Details of loans are as follows (Unit: Korean Won in millions): - - - - - - - - - 14,156,399 - - - - - - 313,991 - 35,910 - - (9,217) - 14,497,083 December 31, 2020 December 31, 2019 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 Financial lease receivables Installment financial bond Others Loan origination costs and fees Discounted present value Allowance for credit losses Total 249,264,947 20,025,092 2,240,830 8,542,619 5,763,427 133,650 38,017 31,300 353,585 2,561,914 2,352,034 10,145,749 586,216 1,925,493 380 744,109 (6,656) (1,908,524) 302,794,182 221,484,049 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 8,981,752 226,296 752,961 1,191 620,791 (6,826) (1,575,020) 271,032,244 (*) As of December 31, 2020, 50,088 million won of assets provided for collateral related to the bonds sold under repurchase agreements are included. 264 - 81 - - 82 - 265 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 For the year ended December 31, 2019 (7) Changes in the gross carrying amount of loans are as follows (Unit: Korean Won in millions): Consumers Stage 2 Corporates Stage 2 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 Others Ending balance Stage 1 (114,509) (14,430) 14,022 8,603 21,802 - - - - - (636) (85,148) Stage 3 Stage 3 Stage 1 (48,368) (129,906) (348,311) (349,619) (527,673) 769 8,653 (58,537) 13,661 49,884 1,310 12,258 8,215 (15,332) (20,473) (21,160) 10,312 3,308 (18,915) 17,852 (75,392) 86,565 (38,203) (146,204) 6,855 - - - (66,359) (61,914) - 222,537 - - 217,382 42,095 1 - 2,763 - 17,887 - 9,647 - - (3,150) (2,008) - - (9) 259 (210) (15,489) (520) (32) (77,962) (125,588) (324,258) (297,718) (390,045) 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 Others Ending balance For the year ended December 31, 2019 Total Stage 2 Credit card accounts Stage 2 Stage 1 (64,787) (15,712) 6,031 98,647 (98,888) - - - - - (17) (74,726) Stage 1 Stage 3 Stage 3 (78,131) (116,772) (527,607) (476,118) (774,351) 9,903 (88,679) 78,776 (42,122) 28,268 13,854 122,280 (232,838) 110,558 9,479 (127,782) (261,939) - (188,638) - 721,339 - - 44,858 1 - 27,534 - - (3,150) (2,008) (9) (247) (240) (16,142) (71,533) (128,042) (484,132) (447,213) (643,675) 481 15,231 (6,317) 286 94,116 (192,763) (40,343) (60,365) 281,420 - - - 14 (96,434) - - - - - 2 For the year ended December 31, 2020 Stage 1 Consumers Stage 2 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 Ending balance 111,253,283 12,448,807 4,564,471 (4,552,400) (5,365,577) 5,388,064 (103,016) (96,197) - - - - 13,326,560 (1,289,910) 2,307,498 125,166 125,990,038 12,016,711 Corporates Stage 2 Stage 3 Stage 1 417,674 134,443,979 4,910,598 1,160,399 (1,146,756) (12,071) (3,983,614) 4,023,106 (22,487) (357,386) (120,491) 199,213 - - (181,713) - (398) (55,349) (696,164) 14,804,391 54,503 137,336 358,846 3,507,163 537,106 149,574,932 7,328,741 Stage 3 740,257 (13,643) (39,492) 477,877 (243,634) (163,644) (64,490) 24,678 717,909 For the year ended December 31, 2020 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 Ending balance Credit card accounts Stage 2 Stage 3 Stage 1 7,278,467 257,399 (454,230) (26,947) - - 224,286 - 885,832 (257,144) 454,709 (10,796) - - 5,619 - 7,278,975 1,078,220 Stage 1 228,367 252,975,729 5,982,269 (255) (9,803,421) (479) (480,530) 37,743 - (245,890) (43,781) - 204,369 28,355,237 5,814,661 180,074 282,843,945 - Total Stage 2 Stage 3 18,245,237 1,386,298 (25,969) (5,956,300) (62,458) 9,865,879 (234,303) 714,833 (671,237) - (262,774) (398) 194,382 (1,980,455) 162,014 484,012 20,423,672 1,435,089 For the year ended December 31, 2019 Stage 1 Consumers Stage 2 Stage 3 Stage 1 Corporates Stage 2 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 Ending balance 110,619,242 6,028,009 2,626,998 (2,614,767) (8,238,499) 8,256,600 (104,129) - (55) 883,149 - 111,253,283 12,448,807 (152,128) - - 6,397,570 100 391,494 131,453,727 5,031,258 1,560,734 (1,550,164) (12,231) (2,306,186) 2,341,881 (18,101) (142,902) 256,257 - (217,382) (67,924) (70) (809,566) 85,561 40,161 - 417,674 134,443,979 4,910,598 (252,249) - - 3,985,392 2,561 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 Stage 3 Stage 1 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 Ending balance Stage 1 6,861,844 258,674 (307,100) (124,675) - - 589,724 - 7,278,467 982,772 (258,166) 307,450 (104,712) - - (41,512) - 885,832 229,387 (281,420) - 208,989 248,934,813 (508) 4,446,406 (350) (10,851,785) (529,052) - - 72,269 10,972,686 2,661 228,367 252,975,729 - Total Stage 2 Stage 3 12,042,039 1,621,141 (23,309) (4,423,097) (54,146) 10,905,931 880,795 (351,743) (721,339) - (229,242) (125) (108,602) 32,071 21,000 40,161 18,245,237 1,386,298 266 - 83 - - 84 - 267 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (8) Details of other financial assets are as follows (Unit: Korean Won in millions): (10) Changes in the gross carrying amount of other financial assets are as follows (Unit: Korean Won in Cash Management Account asset (CMA asset) Receivables Accrued income Telex and telephone subscription rights and refundable deposits Domestic exchange settlement debit Other assets Allowance for credit losses Total December 31, 2020 December 31, 2019 210,000 3,809,929 864,107 936,878 1,518,775 192,342 (83,295) 7,448,736 199,000 5,653,997 1,012,240 949,118 373,228 82,782 (77,139) 8,193,226 (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 Provision of loss allowance Charge-off Disposal Business combination Others Ending balance Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Reversal (provision) of loss allowance Charge-off Disposal Business combination Others Ending balance For the year ended December 31, 2020 Stage 1 Stage 2 Stage 3 (3,196) (142) 125 23 (667) - - (624) 815 (3,666) (1,666) 129 (155) 64 (1,589) - - (2,235) 2 (5,450) (72,277) 13 30 (87) (3,080) 2,151 1,557 (1,968) (518) (74,179) For the year ended December 31, 2019 Stage 1 Stage 2 Stage 3 (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) Total (77,139) - - - (5,336) 2,151 1,557 (4,827) 299 (83,295) Total (67,941) - - - (6,061) 2,506 1,685 (7,669) 341 (77,139) 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 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 Ending balance For the year ended December 31, 2020 Stage 1 8,059,844 8,760 (15,305) (1,900) - - (856,008) 72,035 7,267,426 Stage 2 92,647 (8,737) 15,334 (701) - - (26,539) 4,414 76,418 Stage 3 117,874 (23) (29) 2,601 (2,151) (1,847) 69,500 2,262 188,187 For the year ended December 31, 2019 Stage 1 7,454,390 8,036 (17,678) (952) - - 606,457 9,591 8,059,844 Stage 2 28,193 (8,019) 17,740 (918) - - 55,651 - 92,647 Stage 3 72,007 (17) (62) 1,870 (2,506) (2,212) 41,138 7,656 117,874 Total 8,270,365 - - - (2,151) (1,847) (813,047) 78,711 7,532,031 Total 7,554,590 - - - (2,506) (2,212) 703,246 17,247 8,270,365 268 - 85 - - 86 - 269 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 11. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (1) The fair value hierarchy The fair value hierarchy for financial instruments is determined by the amount of observable market data. The specific financial instruments characteristics and market condition such as the existence of the transactions among market participants 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. (2) Fair value hierarchy of financial assets and liabilities measured at fair value are as follows (Unit: Korean Won in millions): Financial assets: Financial assets at FVTPL Deposits Debt securities Equity securities Capital contributions Beneficiary certificates Loans Derivative assets (Designated for trading) Others Sub-total Financial assets at FVTOCI Debt securities Equity securities Derivative assets (Designated for hedging) Total Sub-total Financial liabilities: Financial liabilities at FVTPL Deposits due to customers Derivative liabilities (Designated for trading) Securities sold Sub-total Financial liabilities at FVTPL designated as upon initial recognition Equity-linked securities Derivative liabilities (Designated for hedging) Total Level 1 (*) Level 2 (*) Level 3 Total December 31, 2020 48,796 516,597 35,422 - 24,895 - 18,416 - 644,126 3,092,237 510,073 3,602,310 - 4,246,436 - 2,365,882 - - 869,852 467,229 6,875,454 - 10,578,417 25,855,904 - 25,855,904 174,820 36,609,141 - 4,618 450,371 865,685 1,917,811 209,062 7,872 84,979 3,540,398 48,796 2,887,097 485,793 865,685 2,812,558 676,291 6,901,742 84,979 14,762,941 - 570,715 570,715 - 4,111,113 28,948,141 1,080,788 30,028,929 174,820 44,966,690 49,279 - - 49,279 6,024 285,026 340,329 6,433,727 - 6,433,727 20,136 - 20,136 6,459,887 285,026 6,794,192 - - 19,630 19,630 - 340,329 64,769 6,498,496 - 39,766 64,769 6,878,591 (*) 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. 270 - 87 - - 88 - 271 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Financial assets: Financial assets at FVTPL 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 FVTPL Deposits due to customers Derivative liabilities (Designated for trading) Sub-total Financial liabilities at FVTPL designated as upon initial recognition Equity-linked securities Derivative liabilities (Designated for hedging) Total Level 1 (*) Level 2 (*) Level 3 Total December 31, 2019 27,901 420,330 157,895 - 1 - 3,057 609,184 - 1,910,929 1,834 - 90,498 59,844 2,893,798 4,956,903 2,146,163 441,672 - 2,587,835 - 3,197,019 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 4,336 31,866 - - 27,530 2,766,771 2,766,771 72,039 72,039 2,843,146 2,870,676 - - 87,626 87,626 - 31,866 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. Financial assets and liabilities at FVTPL, financial liabilities at FVTPL designated as upon initial recognition, financial assets at FVTOCI, and derivative assets and liabilities are recognized at fair value. Fair value is the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Financial instruments are measured at fair value using a quoted market price in active markets. If there is no active market for a financial instrument, the Group determines the fair value using 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, 2020 and 2019 are as follows: Debt securities Beneficiary certificates Valuation methods Fair value is measured by discounting the future cash flows of debt securities applying the risk-free market rate with credit spread. The beneficiary certificates classified as Level 2 are MMF and are measured at the standard price. Input variables Risk-free market rate and credit spread Standard price Derivatives Fair value is measured by models such as option Discount rate, values of underlying model (Closed form), DCF model, FDM and Monte Carlo Simulation. assets such as foreign exchange rate and stock prices, risk-free market rate, forward rate, etc. Loans The future cash flows of debt instruments are Risk-free market rate and credit spread measured at a discount by applying the market interest rate applied to entities with similar creditworthiness to the debtor. 2) Valuation methods and input variables for each type of financial instrument classified into level 3 in December 31, 2020 and 2019 are as follows: Loans, bond with options Valuation methods Fair value is calculated by using the Discounted Cash Flow Model, Binomial Tree, which is a valuation technique commonly used in the market taking into account the price and variability of the underlying asset, and LSMC. Input variables Values of underlying assets, volatility, credit spread, discount rate and terminal growth rate Debt securities The Group is measuring fair value with LSMC and the Stock volatility, interest rate volatility Equity securities, capital contributions and Beneficiary certificates Hull-White model. 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, Net Asset Value Method, LSMC, and Binomial Tree, more than one method is used given the characteristic of the subject of fair value measurement. and discount rate Risk-free market rate, market risk premium, corporate Beta, stock prices, volatility of underlying asset, net asset of the investment association and discount rate Derivatives Fair value is measured by models such as option model Risk-free market rate, discount rate, (Closed form), DCF model, FDM and Monte Carlo Simulation. 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 Volatility of underlying assets, (Closed form), DCF model, FDM and Monte Carlo Simulation. Others Fair value is measured by DCF model, LSMC, etc. discount rate, dividends, volatility, correlation coefficient, foreign exchange rate, etc. Stock prices, volatility of underlying assets, etc. 272 - 89 - - 90 - 273 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Valuation methods of financial assets and liabilities measured at fair value and classified into Level 3 and significant but unobservable inputs are as follows: Loans, bond with options, convertible bonds Fair value measurement technique Binomial Tree LSMC DCF model Type Input variable Range(%) Stock prices, Volatility of underlying asset Stock prices, Volatility of underlying asset Discount rate Impact of changes in significant unobservable inputs on fair value measurement Variation of fair value increases as volatility of underlying asset increases. Variation of fair value increases as volatility of underlying asset increases. 19.82~22.84% 18.99% 4.70~16.50% decreases. Fair value increases as discount rate Terminal growth rate Credit spread Fair value increases as terminal 1.00% growth rate increases. Fair value decreases as credit spread 2.30~5.90% increases. Hull-White model Stock volatility Fair value increases as volatility 17.50~27.30% increases. Interest rate volatility Discount rate Fair value increases as volatility 0.50% increases. Fair value increases as discount rate 3.10~53.20% decreases. Derivative assets Option valuation Interest rate Correlation model and others related coefficient Variation of fair value increases as correlation coefficient increases. Fair value measurement technique Equity securities, LSMC capital contributions, and beneficiary certificates DCF model and others Others Net asset value method Binomial Tree Income approach LSMC Type Input variable Range(%) Impact of changes in significant unobservable inputs on fair value measurement Variation of fair value increases as volatility of underlying asset increases. 18.99~26.45% Fair value increases as terminal 1.00% growth rate increases. Fair value increases as discount rate 5.83~34.63% decreases. Fair value increases as sales price increases - - Variation of liquidation value increases as volatility of underlying assets increases Fair value increases as discount rate 14.30% decreases. Fair value increases as volatility 39.60% increases. Fair value increases as discount rate 8.50% decreases. Fair value increases as discount rate 12.69% decreases. Fair value increases as growth rate 1.00% increases. Variation of fair value increases as volatility of underlying asset increases. 17.61~26.45% Stock prices, Volatility of underlying asset Terminal growth rate Discount rate Fluctuation rate of real estate sales price Liquidation value Discount rate Volatility Discount rate Discount rate Growth rate Stock prices, Volatility of underlying asset Variation of fair value increases as volatility of underlying assets increases. Variation of fair value increases as correlation coefficient increases. Variation of fair value increases as volatility of underlying assets increases. Variation of fair value decreases as credit risk adjustment ratio increases. Variation of fair value increases as correlation coefficient 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. Volatility of underlying asset 0.90~0.98 25.46~131.47% 0.29~0.75 - 100.00% 0.90~0.98 Equity related Correlation coefficient Derivative liabilities DCF model Interest rate related Option valuation Interest rate model and others related Volatility of underlying asset Credit risk adjustment ratio Correlation coefficient Volatility of underlying asset Equity related Correlation coefficient Volatility of underlying asset Equity related Correlation coefficient Volatility of underlying asset Equity-linked securities Monte Carlo Simulation and others 25.46~131.47% Variation of fair value increases as volatility of underlying assets increases. Variation of fair value increases as correlation coefficient increases. 0.29~0.75 - 0.48~0.60 27.59~49.29% Variation of fair value increases as volatility of underlying assets increases. Fair value of equity-linked securities increases if both historical volatility and correlation coefficient increase. However, when correlation coefficient decreases despite the increase in historical volatility, the fair value variation of equity-linked securities may decrease. 274 - 91 - - 92 - 275 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (3) Changes in financial assets and liabilities measured at fair value classified into Level 3 are as follows (Unit: Korean Won in millions): Beginning balance Business combination Net income (loss) (*1) Other comprehensive income Purchases/ issuances Disposals / settlements Transfer to or out of Level 3 (*2) Ending balance For the year ended December 31, 2020 Financial assets: Financial assets at FVTPL Debt securities Equity securities Capital contributions Beneficiary certificates Loans Derivative assets Others Sub-total Financial assets at FVTOCI Equity securities Total Financial liabilities: Financial liabilities at FVTPL Derivative liabilities Financial liabilities at FVTPL designated as upon initial recognition Equity-linked securities Derivative liabilities (Designated for hedging) Total 5,826 464,741 515,199 1,275,734 152,629 25,048 63,880 2,503,057 - 493,698 2,996,755 - 3,894 173,244 166,467 35,854 - - 379,459 - 379,459 (632) (8,977) 39,500 (7,919) 6,149 9,458 3,472 41,051 - - 41,051 - - - 2,627 5,088 194,396 715,437 - 656,880 - 9,501 - 17,997 - - 1,601,926 (3,203) (14,407) (56,654) (231,908) (642,450) (23,911) (370) (972,903) - 32 - 4,618 450,371 865,685 - 1,917,811 - 209,062 (12,224) 7,872 - 84,979 (12,192) 3,540,398 - - 82,227 (4,920) (4,920) 1,684,153 - (2,482) (975,385) - 2,192 - 570,715 (10,000) 4,111,113 72,039 - 30,150 - 2,650 (66,170) (18,533) 20,136 87,626 321 159,986 - - - 665 - 30,815 - - - - (68,661) - 19,630 - 2,650 (321) (135,152) - (18,533) - 39,766 (*1) For financial liabilities, positive numbers represent losses that increase balance and negative numbers represent gains that decrease balance. The statements of comprehensive income includes gain of 37,340 million won included in net gain (loss) on financial assets at FVTPL and net gain (loss) on financial assets at FVTOCI pertaining to the assets and liabilities held by the Group at the end of the period. (*2) The Group recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed. Beginning balance Business Combination Net Income (loss) (*1) Other comprehensive income Purchases/ issuances Disposals/ settlements Transfer to or out of Level 3 (*2) Ending balance For the year ended December 31, 2019 8,389 401,860 422,614 854,299 180,450 48,798 1,916,410 - - 707 - - - 707 476 59,537 (13,270) 18,450 6,854 16,935 88,982 - - - - - - - 2,000 95,511 173,064 578,228 60,696 1,115 910,614 (5,039) (28,287) (67,916) (183,684) (95,371) (40,343) (420,640) - - - 5,826 528,621 515,199 8,441 - (1,457) 6,984 1,275,734 152,629 25,048 2,503,057 468,847 2,385,257 1,408 2,115 - 88,982 23,063 23,063 687 911,301 (306) (420,946) (1) 6,983 493,698 2,996,755 16,691 - 84,033 - (11,140) (14,817) (2,728) 72,039 164,767 - 33,237 - 181,458 - - - 117,270 - - - 1,809 (112,187) - 87,626 321 (9,010) - (127,004) - (2,728) 321 159,986 Financial assets: Financial assets at FVTPL 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 FVTPL Derivative liabilities Financial liabilities at FVTPL designated as upon initial recognition Equity-linked securities Derivatives liabilities (designated for hedging) Total (*1) For financial liabilities, positive numbers represent losses that increase balance and negative numbers represent gains that decrease balance. The statements of comprehensive income includes gain of 21,809 million won included in net gain (loss) on financial assets at FVTPL and net gain (loss) on financial assets at FVTOCI pertaining to the assets and liabilities held by the Group at the end of the period. (*2) The Group recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed. 276 - 93 - - 94 - 277 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Financial assets: Financial assets at FVTPL 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 FVTPL 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 (935) (128) (640) (10,929) (1,125) - (13,757) 1,054 (816) 136 1,190 (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%). The stock prices and volatility are major unobservable variables. (*3) Fair value changes of equity securities are calculated by increasing or decreasing terminal growth rate (0~1%) and discount rate 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 rate of real estate which is underlying assets and discount rate by 1%. (4) Sensitivity analysis results on reasonable fluctuation of the significant unobservable input variables for the fair value of Level 3 financial instruments are as follows. 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. Meanwhile, among the financial instruments that are classified as Level 3 amounting to 4,150,878 million won and 3,156,741 million won as of December 31, 2020 and 2019 respectively, equity instruments of 3,052,432 million won and 2,194,320 million won whose carrying amount are considered to represent the reasonable approximation of fair value are excluded from the sensitivity analysis. The sensitivity on fluctuation of input variables by financial instruments as of December 31, 2020 and 2019 is as follows (Unit: Korean Won in millions): Financial assets: Financial assets at FVTPL Derivative assets (*1) Loans (*2) Debt securities Equity securities (*2) (*3) (*4) Beneficiary certificates (*4) Others (*2) Financial assets at FVTOCI Equity securities (*3) (*4) Total Financial liabilities: Financial liabilities at FVTPL Derivative liabilities (*1) Financial liabilities at FVTPL designated as upon initial recognition Equity-linked securities (*1) Total December 31, 2020 Net income (loss) Other comprehensive income (loss) Favorable Unfavorable Favorable Unfavorable 110 933 13 8,539 1,403 640 - - 11,638 (257) (932) (10) (7,337) (1,537) (547) - - (10,620) 776 (405) 57 833 (45) (450) - - - - - - - 21,587 21,587 - - - - - - - - - - (16,740) (16,740) - - - (*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%). The stock prices and volatility are major unobservable variables. (*3) Fair value changes of equity securities are calculated by increasing or decreasing terminal growth rate (- 0.5%~0.5%) 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 rate of real estate which is underlying assets and discount rate by 1%. 278 - 95 - - 96 - 279 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (5) Fair value and carrying amount of financial assets and liabilities that are recorded at amortized cost are (6) Financial instruments by category 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, 2020 Fair value Level 1 Level 2 Level 3 Total Book value 2,968,875 14,299,748 - 17,268,623 17,020,839 - - 318,144,845 318,144,845 320,106,078 - 291,767,282 20,586,930 - 37,931,989 - 13,305,067 - - 291,767,282 20,763,675 37,931,989 13,591,556 176,745 - 286,489 291,477,279 20,745,466 37,479,358 13,808,386 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 - 17,274,514 - - 264,909,974 18,919,018 - 31,173,189 - 17,274,514 - 264,685,578 18,998,920 30,858,055 17,287,722 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 The fair value is measured by discounting the projected Valuation methods cash flows of debt securities by applying risk-free market rate with credit spread. Input variables Risk-free market rate and credit spread 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 and prepayment rate 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, credit spread and forward rate 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 Financial liabilities Deposits due to customers Borrowings Debentures Derivative liabilities Other financial liabilities Total December 31, 2020 Financial asset at FVTPL Financial assets at FVTOCI 48,796 7,136,112 676,291 6,901,742 - 14,762,941 - 30,028,929 - - - 30,028,929 Financial assets at amortized cost 9,863,160 17,020,839 302,794,182 - 7,448,736 337,126,917 Derivatives assets (Designated for hedging) - - - 174,820 - 174,820 Total 9,911,956 54,185,880 303,470,473 7,076,562 7,448,736 382,093,607 December 31, 2020 Financial liabilities at FVTPL Financial liabilities designated at FVTPL Financial liabilities at amortized cost Derivatives liabilities (Designated for hedging) 49,279 285,026 - 6,459,887 - 6,794,192 - 19,630 - - - 19,630 291,477,279 20,745,466 37,479,358 - 13,808,386 363,510,489 - - - 64,769 - 64,769 Total 291,526,558 21,050,122 37,479,358 6,524,656 13,808,386 370,389,080 280 - 97 - - 98 - 281 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 December 31, 2019 (7) Income or expense from financial instruments by category Financial assets Deposits Securities Loans Derivative assets Other financial assets Total Financial liabilities Deposits due to customers Borrowings Debentures Derivative liabilities Other financial liabilities Total 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 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 December 31, 2019 Financial liabilities at FVTPL Financial liabilities designated at FVTPL Financial liabilities at amortized cost Derivatives liabilities (Designated for hedging) 27,530 - - 2,843,146 - 2,870,676 - 87,626 - - - 87,626 264,685,578 18,998,920 30,858,055 - 17,287,722 331,830,275 - - - 6,837 - 6,837 Total 264,713,108 19,086,546 30,858,055 2,849,983 17,287,722 334,795,414 Income or expense from financial assets and liabilities by each category during the years ended December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 Fees and Commissions Income (expense) Provision (reversal) of credit loss - - Gain or loss on transactions and valuation 421,709 Interest Income (expense) 48,612 Others 120,158 Total 590,479 437,527 311 (1,529) 24,138 18,385 478,832 382,988 - 934 - - 383,922 8,654,726 376,872 (792,250) 44,443 - 8,283,791 (3,516,023) - - - - (3,516,023) Financial assets at FVTPL Financial assets at FVTOCI Securities at amortized cost Loans and other financial assets at amortized cost Financial liabilities at amortized cost Net derivatives (designated for hedging) Total - 6,007,830 - 377,183 - (792,845) (74,213) 416,077 - 138,543 (74,213) 6,146,788 For the year ended December 31, 2019 Interest Income (expense) Fees and Commissions Income (expense) Provision (reversal) of credit loss 50,277 89,817 - Gain or loss on transactions and valuation 25,455 Others 86,979 Total 252,528 474,751 436,340 - - (3,297) 11,015 20,980 503,449 1,415 - - 437,755 9,615,060 296,435 (385,758) 102,115 - 9,627,852 (4,682,722) - - - - (4,682,722) Financial assets at FVTPL Financial assets at FVTOCI Securities at amortized cost Loans and other financial assets at amortized cost Financial liabilities at amortized cost Net derivatives (designated for hedging) Total - 5,893,706 - - 386,252 - - (387,640) - 36,982 175,567 - - 107,959 36,982 6,175,844 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. 282 - 99 - - 100 - 283 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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): 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 2) Securities loaned December 31, 2020 December 31, 2019 410,331 138,315 40,987 50,088 639,721 657,823 407,985 56,975 42,841 82,594 590,395 569,002 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 treasury and government bonds December 31, 2020 December 31, 2019 Loaned to 100,345 80,737 Korea Securities Finance Corporation 3) Liquidity of financial assets As of December 31, 2020 and 2019, the consolidated structured companies issued asset-backed securities with loans and corporate bonds held by the Group as liquid assets, and the Group bear related risks through the purchase agreements or credit contributions. The transaction details of the transfer of the financial instrument are as follows: December 31, 2020 December 31, 2019 Book value (*) Fair value Book value Fair value Assets transferred Related liabilities 4,630,470 3,803,911 4,629,545 3,804,821 4,504,496 3,523,010 4,485,942 3,532,784 (*) The carrying amount is the amount before the allowance for bad debts. On the other hand, the details of transferred financial assets that have not been removed, such as bonds sold under the repurchase agreement and loan securities, are also described in Note 18. The Group does not have financial instruments that are continuously involved. (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 Korean 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 payables 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 Korean 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 Korean 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. 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 Korean 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, 2020 and 2019, the financial instruments to be offset and may be covered by master netting agreements and similar agreements are as follows (Unit: Korean Won in millions): December 31, 2020 Gross amounts of recognized financial assets Gross amounts of recognized financial assets setoff Net amounts of financial assets presented Related amounts not setoff in the consolidated statement of financial position Netting agreements and others Cash collateral received and others Net amounts 6,456,799 3,153,919 - 6,456,799 - 3,153,919 7,733,997 598,545 1,278,176 10,145,749 - 10,145,749 10,145,749 - - 34,352,965 32,834,189 1,518,776 - 54,109,432 32,834,189 21,275,243 17,879,746 - 1,518,776 598,545 2,796,952 5,823,620 - 5,823,620 19,630 3,153,400 - 19,630 - 3,153,400 7,147,683 477,603 1,371,364 657,823 - 657,823 213,623 444,200 - 33,014,440 32,834,189 180,251 42,668,913 32,834,189 9,834,724 176,179 7,537,485 - 4,072 921,803 1,375,436 Financial assets: Derivative assets (*1) Receivable spot exchange (*2) Bonds purchased under resale agreements (*2) Domestic exchange settlement debits (*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 credits (*4) (*6) Total (*1) The items include derivative assets and liabilities held for trading and 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. 284 - 101 - - 102 - 285 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 December 31, 2019 Gross amounts of recognized financial assets Gross amounts of recognized financial assets setoff Net amounts of financial assets presented Related amounts not setoff in the consolidated statement of financial position Netting agreements and others Cash collateral received Net amounts 3,032,894 5,112,206 - 3,032,894 - 5,112,206 7,058,885 111,122 975,093 8,981,752 - 8,981,752 8,981,752 - - - 31,642,486 31,269,258 48,769,338 31,269,258 17,500,080 16,040,637 373,228 - 373,228 111,122 1,348,321 2,824,449 - 2,824,449 87,626 5,111,386 - 87,626 - 5,111,386 7,071,549 172,488 779,424 569,002 - 569,002 180,402 388,600 - 32,531,186 31,269,258 1,261,928 41,123,649 31,269,258 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 debits (*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 credits (*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. 13. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (1) Investments in associates accounted for using the equity method of accounting are as follows: Joint ventures and associates Main business December 31, 2020 December 31, 2019 Location Financial statements as of Percentage of ownership (%) Woori Bank: W Service Networks Co., Ltd. (*1) Freight & staffing services Korea Credit Bureau Co., Ltd. (*2) Credit information Korea Finance Security Co., Ltd. (*1) Saman Corporation (*6) Wongwang Co., Ltd. (*4) Sejin Construction Co., Ltd. (*4) ARES-TECH Co., Ltd. (*4) Reading Doctors Co., Ltd. (*4) Cultizm Korea LTD Co., Ltd. (*4) NK Eng Co., Ltd. (*4) Beomgyo.,Ltd. (*4) Woori Growth Partnerships New Technology Private Equity Fund 2016KIF-IMM Woori Bank Technology Venture Fund K BANK Co., Ltd. (*2) (*7) Smart Private Equity Fund No.2 Woori Bank-Company K Korea Movie Asset Fund Well to Sea No. 3 Private Equity Fund (*6) 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 LOTTE CARD Co., Ltd. Security service General construction Technology service Wholesale and real estate Construction Electronic component manufacturing Other services Wholesale and retail sales Manufacturing Telecommunication equipment retail sales 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 Together-Korea Government Private Pool Private Securities Investment Trust No.3 Other financial services Genesis Environmental Energy Company 1st Private Equity Fund Union Technology Finance Investment Association Trust and collective investment Trust and collective investment 4.9 9.9 4.9 Korea 2020.11.30(*5) 9.9 Korea 2020.12.31 15.0 15.0 Korea 2020.11.30(*5) - 9.2 Korea 29.0 29.6 23.4 35.4 31.3 23.1 29.0 Korea 29.6 Korea 23.4 Korea 35.4 Korea 31.3 Korea 23.1 Korea 23.1 23.1 Korea - - - - - - - - 23.1 20.0 26.2 20.0 25.0 50.0 23.3 23.1 Korea 2020.12.31 20.0 Korea 14.5 Korea 2020.12.31 2020.11.30(*5) 20.0 Korea 2020.12.31 25.0 Korea 2020.12.31 50.0 Korea 2020.9.30(*5) 23.3 Korea 2020.12.31 20.0 20.0 Korea 2020.12.31 25.0 25.0 Korea 2020.12.31 20.0 20.0 Korea 2020.9.30(*5) 100.0 - Korea 2020.12.31 24.8 29.7 - Korea 2020.12.31 - Korea 2020.12.31 286 - 103 - - 104 - 287 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Joint ventures and associates Main business December 31, 2020 December 31, 2019 Location Financial statements as of Joint ventures and associates Percentage of ownership (%) Woori Bank: (*8) Japanese Hotel Real Estate Private Equity Fund 2 Woori G Clean Energy No.1 Woori Goseong Power EBL Private Special Asset Fund Woori Seoul Beltway Private Special Asset Fund Woori Financial Capital Co., Ltd. : AJU TAERIM 1st Fund Portone-Cape Fund No.1 KIWOOM PE AJU Investment Fund (*9) Woori Investment Bank Co., Ltd. : (*8) Woori FirstValue Private Real Other financial services Investment trust and discretionary investment business Trust and collective investment Trust and collective investment Other financial services Other financial services Other financial services 19.9 19.9 Korea 2020.12.31 29.3 16.7 25.0 25.6 20.0 9.1 - Korea 2020.12.31 - Korea 2020.12.31 - Korea 2020.12.31 - Korea 2020.12.31 - Korea 2020.12.31 - Korea 2020.12.31 Estate Fund No.2 Real estate business 12.0 - Korea 2020.12.31 Woori Asset Management Co. Ltd.: Woori High plus G.B. Securities Feeder Fund1(G.B.) Woori Star50 Master Fund ClassC-F Collective investment business Collective investment business Woori Private Equity Asset Management Co., Ltd.: Uri Hanhwa Eureka Private Equity Fund (*2) Other financial services 21.8 24.5 - Korea 2020.12.31 - Korea 2020.12.31 0.8 0.8 Korea 2020.12.31 Japanese Hotel Real Estate Private Equity Fund 1: Godo Kaisha Oceanos 1 Woori bank and Woori Financial Capital Co., Ltd.: (*8) JC Assurance No.2 Private Equity Fund Dream Company Growth no.1 PEF HMS-Oriens 1st Fund Woori G Senior Loan No.1 Woori bank and Woori card Co., Ltd.: Dongwoo C & C Co., Ltd. (*4) SJCO Co., Ltd. (*4) G2 Collection Co., Ltd. (*4) Other financial services 47.8 47.8 Japan 2020.10.31(*5) Collective investment business Collective investment business Trust and collective investment Investment trust and discretionary investment business Construction Aggregate transportation and wholesale Wholesale and retail sales 29.3 27.8 22.8 - Korea 2020.12.31 - Korea 2020.12.31 - Korea 2020.12.31 21.7 - Korea 2020.12.31 24.5 24.5 Korea 28.7 29.2 48.4 28.7 Korea 29.2 Korea 48.4 Korea - - - - The Base Enterprise Co., Ltd. (*4) Manufacturing 288 - 105 - Kyesan Engineering Co., Ltd. (*4) Good Software Lap Co., Ltd. (*4) QTS Shipping Co., Ltd. (*4) DAEA SNC Co., Ltd. (*4) Main business Construction Service Complex transportation brokerage Wholesale and retail sales Force TEC Co., Ltd. (*4) Sinseong Trading Co., Ltd. (*4) PREXCO Co., Ltd. (*4) Jiwon Plating Co., Ltd. (*4) Youngdong Sea Food Co., Ltd. (*4) Manufacturing Manufacturing Manufacturing Plating Processed sea food manufacturing Percentage of ownership (%) December 31, 2020 December 31, 2019 Location 23.3 29.4 49.8 25.5 25.8 27.9 28.1 20.8 24.5 23.3 Korea 29.4 Korea 49.8 Korea 25.5 Korea 25.8 Korea 27.9 Korea 28.1 Korea 20.8 Korea 24.5 Korea Financial statements as of - - - - - - - - - Woori bank and Woori Asset Management Co., Ltd.: Woori High Plus Short-term High Graded ESG Bond Sec Feeder Inv Trust 1 Woori Bank, Woori Financial Capital Co., Ltd., Woori Investment Bank Co., Ltd. and Woori Private Equity Asset Management Co., Ltd.: (*8) Collective investment business 23.3 - - Korea 2020.12.31 Woori-Shinyoung Growth-Cap Private Equity Fund I Other financial services 35.0 31.9 Korea 2020.12.31 Woori Bank and Woori Investment Bank Co., Ltd.: (*8) Chin Hung International Inc. (*3) PCC-Woori LP Secondary Fund Woori Bank and Woori Private Equity Asset Management Co., Ltd.: (*8) Woori-Q Corporate Restructuring Private Equity Fund Construction Other financial services - 25.3 Korea - 38.8 38.8 Korea 2020.12.31 Trust and collective investment 38.4 38.4 Korea 2020.12.31 (*1) Most of the significant business transactions of associates are with the Group as of December 31, 2020 and 2019. (*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) As of December 31, 2020, it is classified as assets held for sale. Quoted market prices per share of Chin Hung International Inc. are 2,595 Won and 2,310 Won as of December 31, 2020 and 2019, respectively. (*4) There is no investment balance as of December 31, 2020 and 2019. (*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) Due to a significant loss of influence as of December 31, 2020, the entity was classified as a fair value through other comprehensive income measurement financial asset. (*7) The equity ratio increased due to paid-in capital increase as of December 31, 2020. (*8) Two or more subsidiaries may invest or operate to exert significant influence on the decision-making process for activities related to the investee. (*9) The Group can participate as a co-operator to exert significant influence. (*10) Woori G IPO10 [FI_Bal][F]C(F), Woori G Egis Bond[FI][F](C(F)) can exert significant influence but was classified as an item measured at fair value through profit or loss. - 106 - 289 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Changes in the carrying value of investments in associates accounted for using the equity method of accounting are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 Acquisition cost January 1, 2020 Share of profits (losses) Acquisition Disposal/ Reclassification Dividends Business combination 108 186 7 3,313 6,845 1,370 3,267 3,287 (221) - - 51,176 849 (742) (432) - - - - - - - - (50,411) (466) (3) (90) - - - 16,938 19,212 (2,240) - (1,728) (212) 11,893 236,232 15,141 1,240 31,254 (18,334) - 163,082 (492) - (1,088) - 2,915 2,764 (1,283) Korea Movie Asset Fund 2,100 3,323 365 - 209,023 87,180 10,000 9,908 (75) - - - - - (900) - - (117,170) (178,355) - - Change in capital December 31, 2020 1 - - (23) 49 191 8,125 3,066 - - - 15,032 (1,563) 13,238 (1,905) 174,097 - - 1,481 2,788 (678) - (17) 9,816 Woori High plus G.B. Securities Feeder Fund1(G.B.) Woori G Senior Loan No.1 Woori G Clean Energy No.1 Woori Goseong Power EBL Private Special Asset Fund Woori Seoul Beltway Private Special Asset Fund AJU TAERIM 1st Fund Portone-Cape Fund No.1 KIWOOM PE AJU Investment Fund Woori FirstValue Private Real Estate Fund No.2 Woori Star50 Master Fund ClassC-F JC Assurance No.2 Private Equity Fund Dream Company Growth no.1 PEF HMS-Oriens 1st Fund Woori High Plus Short- term High Graded ESG Bond Sec Feeder Inv Trust 1 Acquisition cost January 1, 2020 Share of profits (losses) Acquisition Disposal/ Reclassification Dividends Business combination For the year ended December 31, 2020 6,000 51,959 1,015 - - - 49 6,141 343 51,959 9 1,015 - - - - (257) - 14,915 - 611 14,915 - (408) 5,590 1,100 1,000 1,000 9,000 200 29,050 7,705 12,000 - - - - - - - - - 97 (6) - (6) 5,591 - - 1,000 1,184 - (16) 200 - - - 29,050 7,705 12,000 - - - - - - - - - (75) - - - - - - - - - - - - - 289 960 - - - - - - Change in capital December 31, 2020 (114) 6,076 - 52,045 - 1,024 - 15,118 - - - - 5,613 283 960 994 946 2,130 - 184 - 29,050 - - 7,705 12,000 91,092 2,382 973,371 806,360 101,077 - 91,092 552,368 - - (274,498) (187,306) - 1,249 - 93,474 (5,959) 993,291 - - - - - - - - - - - - W 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 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 Force TEC Co., Ltd. Together-Korea Government Private Pool Private Securities Investment Trust No.3 Genesis Environmental Energy Company 1st Private Equity Fund Union Technology Finance Investment Association Uri Hanhwa Eureka Private Equity Fund Godo Kaisha Oceanos 1 Japanese Hotel Real Estate Private Equity Fund 2 9,756 4,576 - 5,720 (540) - - - 9,756 4,130 4,375 - 75 (321) - - - 4,129 32,480 11,841 346,810 409,444 7,366 19,692 31,363 810 (12,124) - (104) (5,710) - - - 38,342 (1,404) 422,832 23,146 6,046 (159) 17,017 7,575 - 2,525 - 554 1,542 5,049 - - - - 10,000 - 23 100,000 (90,000) 3,738 - 241 4,084 (346) 4,500 - (15) 4,500 350 10,800 342 10,952 61 7 3,291 3,291 283 - - - - - - - - - - - - - - (850) (154) - - - - - - - - - - 22,904 - (1,149) 8,128 393 - 10,023 - 3,979 - 4,485 - 84 403 10,193 (186) 3,234 290 - 107 - - 108 - 291 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 W 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 Acquisition cost January 1, 2019 108 3,313 157 6,790 For the year ended December 31, 2019 Share of profits (losses) Acquisition - - 31 190 Disposal/ Reclassification Dividends (2) - (135) - 3,267 130,779 8,521 3,456 44,741 1,014 (169) 6,426 (198) - - - - - - - - - Change in capital December 31, 2019 - - - 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 15,300 43,709 1,193 (18,233) - 5,807 2,915 2,890 (41) 3,000 2,700 623 101,483 197,393 30,343 10,000 9,948 (40) - - - - 4,576 4,426 - 150 4,375 3,025 - 1,350 12,665 346,000 6,129 2,525 - - - - (824) 63,444 12,665 346,000 (83) 6,129 - 2,525 (2,615) - (85) - - - - - - - - - 1,000 787 (136) - (651) - - - - 1,263 (29) - - 15,141 31,254 2,764 3,323 (18,836) 123 209,023 - - - - - - - - - 9,908 - - - - - - - 4,576 4,375 11,841 409,444 6,046 2,525 - 350 10,870 339 - 3 2 - 10,870 - (15) - (105) - 200 342 10,952 3,291 759,368 - 361,766 - 83,997 3,291 389,096 - (10,856) - (19,242) - 1,599 3,291 806,360 (3) Summary financial information relating to investments in associates accounted for using the equity method of accounting is as follows (Unit: Korean Won in millions): W Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. 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 Force TEC Co., Ltd. Together-Korea Government Private Pool Private Securities Investment Trust No.3 Genesis Environmental Energy Company 1st Private Equity Fund Union Technology Finance Investment Association Uri Hanhwa Eureka Private Equity Fund Godo Kaisha Oceanos 1 Japanese Hotel Real Estate Private Equity Fund 2 Woori High plus G.B. Securities Feeder Fund1(G.B.) Woori G Senior Loan No.1 Woori G Clean Energy No.1 Woori Goseong Power EBL Private Special Asset Fund Woori Seoul Beltway Private Special Asset Fund AJU TAERIM 1st Fund Portone-Cape Fund No.1 KIWOOM PE AJU Investment Fund Woori FirstValue Private Real Estate Fund No.2 Woori Star50 Master Fund ClassC-F JC Assurance No.2 Private Equity Fund Dream Company Growth no.1 PEF HMS-Oriens 1st Fund Woori High Plus Short-term High Graded ESG Bond December 31, 2020 Assets Liabilities Operating revenue Net income (loss) 6,305 117,077 36,978 2,448 37,599 16,536 18,525 107,810 60,599 1,197 13,391 (1,985) 65,390 252 1,589 (9,601) 64,109 4,040,051 13,667 11,273 22,001 42,205 1,198 3,530,074 51 119 3,102 - 7,425 68,144 1 1,926 610,535 308 6,201 (83,989) (204) 1,461 16,061 (329) 46,542 655 1,024 (411) 15,747 110,452 14,578,716 - 825 12,238,805 284 23,875 1,255,593 58,355 20,927 47,077 10,025 16,192 15,151 50,382 66,793 16,293 27,870 240,414 3,496 90,728 22,452 1,192 4,800 10,986 20,220 1,011 98,431 28,727 52,685 433 4 45,552 206 2,082 25,914 1 187 118 51 235 45,472 15 - 15 1 21 1 86 - 57 2,467 246 13 43 53 1,400 1 8,150 1,425 1,359 148 1,721 33 3,060 352 - - - 9 11 - - 90 (85) 21,106 78,781 (1,590) 1,425 (415) 23 974 (50) 7,676 14 1,271 148 1,584 32 2,969 323 (22) - (71) (9) 11 (732) (116) 20 Sec Feeder Inv Trust 1 402,015 - 10,727 10,727 (*) 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. 292 - 109 - - 110 - 293 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 W 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 December 31, 2019 Assets Liabilities Operating revenue Net income (loss) 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. (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, 2020 and 2019 are as follows: Associate (*) Orient Shipyard Co., Ltd. Yuil PESC Co., Ltd. CL Tech Co., Ltd. December 31, 2020 Number of shares owned 464,812 8,642 13,759 Ownership (%) (*) 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. 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 (*) 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. 21.4 24.0 38.6 21.4 37.4 41.8 27.7 30.3 24.0 38.6 294 - 111 - (5) As of December 31, 2020 and 2019, 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): W Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. 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 (*2) Woori Bank-Company K Korea Movie Asset Fund Well to Sea No.3 Private Equity Fund (*3) 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) Woori-Q Corporate Restructuring Private Equity Fund PCC-Woori LP Secondary Fund Force TEC Together-Korea Government Private Pool Private Securities Investment Trust No.3 Genesis Environmental Energy Company 1st Private Equity Fund Union Technology Finance Investment Association Uri Hanhwa Eureka Private Equity Fund Godo Kaisha Oceanos 1 Japanese Hotel Real Estate Private Equity Fund 2 Woori High plus G.B. Securities Feeder Fund1(G.B.) Woori G Senior Loan No.1 Woori G Clean Energy No.1 Woori Goseong Power EBL Private Special Asset Fund Woori Seoul Beltway Private Special Asset Fund December 31, 2020 Total net asset Ownership (%) Ownership portion of net assets 3,857 79,478 4.9 9.9 191 7,876 Basis difference Impairment - - - 246 20,442 15.0 3,066 65,138 23.1 15,034 - - - - 62,911 509,978 20.0 26.2 12,582 133,614 - 44,117 - (3,634) 13,616 20.0 2,723 11,154 25.0 2,788 18,899 50.0 - 42,205 23.3 9,817 45,888 20.0 9,178 15,747 25.0 3,937 109,627 2,114,159 35.0 20.0 38,342 422,832 57,922 38.4 22,220 20,923 1,526 38.8 25.8 8,126 393 10,024 100.0 10,024 16,074 24.8 3,979 15,100 29.7 4,485 50,147 21,321 0.8 47.8 403 10,193 16,278 19.9 3,234 27,870 240,399 3,495 21.8 21.7 29.3 6,076 52,045 1,024 90,707 16.7 15,118 22,451 25.0 5,613 - 112 - - - - - - - - - - - - - - - - - - - - - - - (1,242) - - - - - - - - - - - - - - - - - - - - - Intercompany transaction - 3 - Book value 191 8,125 3,066 (2) 15,032 656 13,238 - 174,097 - - - 1,481 2,788 - (1) 9,816 578 9,756 192 4,129 - 38,342 - 422,832 684 22,904 2 - 8,128 393 (1) 10,023 - - - - - - - - 3,979 4,485 403 10,193 3,234 6,076 52,045 1,024 - 15,118 - 5,613 295 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 December 31, 2020 AJU TAERIM 1st Fund Portone-Cape Fund No.1 KIWOOM PE AJU Investment Total net asset Ownership (%) 1,106 4,800 25.6 20.0 Fund 10,929 9.1 Ownership portion of net assets 283 960 994 Woori FirstValue Private Real Estate Fund No.2 Woori Star50 Master Fund ClassC-F JC Assurance No.2 Private Equity Fund Dream Company Growth no.1 PEF HMS-Oriens 1st Fund Woori High Plus Short-term High Graded ESG Bond Sec Feeder Inv Trust 1 17,753 12.0 2,130 765 24.5 184 98,418 29.3 29,050 28,684 52,632 27.8 22.8 7,705 12,000 402,015 23.3 93,474 Basis difference Impairment - - - - - - - - - - - - - - - - - - Intercompany transaction Book value - - - - - 283 960 994 2,130 184 - 29,050 - - 7,705 12,000 - 93,474 (*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. (*3) The estimated recoverable amount of 15,687 million won at the time of liquidation was classified as receivable. December 31, 2019 Total net asset Ownership (%) Ownership portion of net assets 3,773 66,566 4.9 9.9 186 6,597 Basis difference Impairment - - - 246 21,914 15.0 3,287 - - Intercompany transaction - 2 - Book value 186 6,845 3,287 105,383 26,022 25.3 9.2 26,646 2,391 24,565 5,373 - (6,915) (35) - 51,176 849 83,253 23.1 19,215 - - (3) 19,212 72,425 215,800 20.0 14.5 14,485 31,248 - 3,634 - (3,634) 656 6 15,141 31,254 13,821 20.0 2,764 13,292 25.0 3,323 418,250 50.0 209,041 42,602 23.3 9,909 20,517 20.0 4,103 16,815 25.0 4,204 37,022 2,047,220 31.9 20.0 11,841 409,444 15,152 38.4 5,813 6,498 38.8 2,524 41,714 22,909 0.8 47.8 342 10,952 16,555 19.9 3,291 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,764 3,323 (18) 209,023 (1) 9,908 473 4,576 171 4,375 - 11,841 - 409,444 233 6,046 1 2,525 - - - 342 10,952 3,291 W Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. (*1) Saman Corporation (*2) 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) 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 (*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. 296 - 113 - - 114 - 297 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 14. INVESTMENT PROPERTIES 15. PREMISES AND EQUIPMENT (1) Details of investment properties are as follows (Unit: Korean Won in millions): (1) Details of premises and equipment as of December 31, 2020 and 2019 are as follows (Unit: Korean Won Acquisition cost Accumulated depreciation Accumulated impairment losses Net carrying value December 31, 2020 December 31, 2019 409,702 (22,152) (86) 387,464 299,802 (19,563) - 280,239 (2) Changes in investment properties are as follows (Unit: Korean Won in millions): Beginning balance Acquisition Disposal Depreciation Transfer Foreign currencies translation adjustments Business combination Others Ending balance For the years ended December 31 2020 2019 280,239 76,588 (353) (2,689) 30,431 267 10,557 (7,576) 387,464 178,910 70,346 (193) (2,225) 32,394 402 - 605 280,239 (3) Fair value of investment properties amounted to 750,659 million won and 502,305 million won as of December 31, 2020 and 2019, 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 15,190 million won and 10,106 million won for the years ended December 31, 2020 and 2019, respectively. Operating expenses directly related to the investment properties where rental fee was earned is amounting to 2,807 million won and 3,010 million won. (5) The lease payments expected to be received in the future under lease contracts relating to investment properties as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): December 31, 2020 December 31, 2019 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 11,553 8,403 7,545 7,154 4,312 2534 41,501 6,574 4,924 4,018 3,618 3,126 241 22,501 in millions): Premises and equipment (owned) Right-of-use asset Carrying value Premises and equipment (owned) Right-of-use asset Carrying value Land Building Equipment and vehicles December 31, 2020 Leasehold improvement Construction in progress Structures Total 1,726,045 787,040 435,132 - 1,726,045 1,222,172 268,225 12,423 280,648 50,085 8,246 - - 50,085 8,246 2 - 2 2,839,643 447,555 3,287,198 Land Building Equipment and vehicles December 31, 2019 Leasehold improvement Construction in progress Structures Total 1,761,159 - 1,761,159 802,299 449,878 1,252,177 278,016 17,236 295,252 54,839 1,287 - - 54,839 1,287 2 - 2 2,897,602 467,114 3,364,716 (2) Details of premises and equipment (owned) as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Acquisition cost Accumulated depreciation Accumulated impairment losses Net carrying value Acquisition cost Accumulated depreciation Accumulated impairment losses Net carrying value Land Building 1,726,705 1,076,647 - (289,607) Equipment and vehicles 1,142,653 (874,428) December 31, 2020 Leasehold improvement 478,290 (428,205) Construction in progress Structures 20 (18) 8,246 - Total 4,432,561 (1,592,258) (660) 1,726,045 - 787,040 - 268,225 - 50,085 - 8,246 - 2 (660) 2,839,643 Land Building 1,761,819 1,063,756 - (261,457) Equipment and vehicles 1,123,101 (845,085) December 31, 2019 Leasehold improvement 463,181 (408,342) Construction in progress Structures 20 (18) 1,287 - Total 4,413,164 (1,514,902) (660) 1,761,159 - 802,299 - 278,016 - 54,839 - 1,287 - 2 (660) 2,897,602 298 - 115 - - 116 - 299 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (3) Details of changes in premises and equipment (owned) are as follows (Unit: Korean Won in millions): (5) Details of changes in right-of-use assets for the years ended December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): For the year ended December 31, 2020 Equipment and vehicles Construction in progress Structures Total Beginning balance Acquisitions Disposals Depreciation Transfer Foreign currencies Land 1,761,159 3,787 (8,326) - (30,847) Building 802,299 26,972 (1,719) (34,572) (2,048) translation adjustments Business combination Others Ending balance (836) 1,108 - 1,726,045 (882) 81 (3,091) 787,040 Leasehold improvement 54,839 26,124 (688) (30,579) - (830) 437 782 50,085 278,016 84,828 (605) (94,388) 118 (1,849) 2,150 (45) 268,225 1,287 7,751 - - (118) (82) - (592) 8,246 2 2,897,602 149,462 - - (11,338) - (159,539) (32,895) - (4,479) - 3,776 - - (2,946) 2 2,839,643 Beginning balance Acquisitions Disposals Depreciation Classified as held-for-sale Transfer Foreign currencies translation adjustments Business combination Others Ending balance Land 1,481,871 186,303 (3,015) - (21) 93,956 880 1,185 - 1,761,159 Building 661,912 87,667 (2,245) (30,766) (74) 83,260 801 74 1,670 802,299 For the year ended December 31, 2019 Equipment and vehicles 240,013 119,474 (1,203) (87,453) - 3,670 1,459 926 1,130 278,016 Leasehold improvement 57,594 28,788 (2,738) (27,134) - 912 609 1 (3,193) 54,839 Construction in progress Structures Total 9,099 7,315 - - - (14,886) 36 - (277) 1,287 3 2,450,492 429,547 - (9,201) - (145,354) (1) (95) - 166,912 - 3,785 - 2,186 - - (670) 2 2,897,602 (4) Details of right-of-use assets as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Acquisition cost Accumulated depreciation Net carrying value Acquisition cost Accumulated depreciation Net carrying value Building 720,417 (285,285) 435,132 Building 615,201 (165,323) 449,878 December 31, 2020 Equipment and vehicles 28,463 (16,040) 12,423 December 31, 2019 Equipment and vehicles 25,563 (8,327) 17,236 Total 748,880 (301,325) 447,555 Total 640,764 (173,650) 467,114 Beginning balance New contracts Changes in contract Termination Depreciation Business combination Others Ending balance Beginning balance New contracts Changes in contract Termination Depreciation Business combination Others Ending balance Building For the year ended December 31, 2020 Equipment and vehicles Total 449,878 224,494 10,729 (18,925) (224,946) 3,210 (9,308) 435,132 17,236 6,831 32 (574) (11,716) 381 233 12,423 Building For the year ended December 31, 2019 Equipment and vehicles Total 416,828 251,992 - (3,803) (219,743) 5,438 (834) 449,878 18,963 8,306 - (178) (9,984) 114 15 17,236 467,114 231,325 10,761 (19,499) (236,662) 3,591 (9,075) 447,555 435,791 260,298 - (3,981) (229,727) 5,552 (819) 467,114 16. INTANGIBLE ASSETS (1) Details of intangible assets are as follows (Unit: Korean Won in millions): Goodwill Industrial property rights Development cost Other intangible assets Membership deposit Construction in progress December 31, 2020 Acquisition cost Accumulated amortization Accumulated impairment losses Net carrying value 334,290 - - 334,290 1,810 (1,101) 582,998 1,114,615 (875,636) (374,125) - 709 - 208,873 (33,534) 205,445 39,454 - (3,363) 36,091 6,669 - - 6,669 Goodwill Industrial property rights Development cost Other intangible assets Membership deposit Construction in progress December 31, 2019 Acquisition cost Accumulated amortization Accumulated impairment losses Net carrying value 350,682 - - 350,682 1,576 (884) 517,224 1,036,445 (776,305) (292,031) - 692 - 225,193 (25,993) 234,147 32,583 - (3,253) 29,330 4,066 - - 4,066 Total 2,079,836 (1,250,862) (36,897) 792,077 Total 1,942,576 (1,069,220) (29,246) 844,110 300 - 117 - - 118 - 301 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Details of changes in intangible assets are as follows (Unit: Korean Won in millions): 2) Impairment test For the year ended December 31, 2020 Goodwill Industrial property rights Beginning balance Acquisitions Disposal Amortization (*) Impairment losses Transfer Foreign currencies translation adjustments Business combination Others Ending balance 350,682 - - - - - (14,802) - (1,590) 334,290 692 233 - (216) - - - - - 709 Development cost 225,193 53,273 - (71,620) - 428 Other intangible assets 234,147 41,329 - (64,822) (7,692) 164 - 2,403 (804) 208,873 (2,208) 4,199 328 205,445 29,330 5,183 (782) - (99) - (15) 2,079 395 36,091 Membership deposit Construction in progress 4,066 3,197 - - - (592) Total 844,110 103,215 (782) (136,658) (7,791) - (2) - - 6,669 (17,027) 8,681 (1,671) 792,077 (*) Amortization of other intangible assets amounting to 11,890 million won is included in other operating expenses. For the year ended December 31, 2019 Goodwill Industrial property rights Membership deposit Construction in progress Development cost 240,320 41,373 - 562 318 - (188) (64,415) - - - 7,915 Other intangible assets 169,024 100,671 - (63,810) (25,858) 7,188 2,292 - - - 692 - - - 225,193 44,365 275 234,147 23,597 4,931 (675) - (939) - 60 2,143 213 29,330 10,415 8,754 - - - (15,103) Total 597,520 156,047 (675) (128,413) (26,797) - - - - 4,066 12,586 233,354 488 844,110 Beginning balance Acquisitions Disposal Amortization (*) Impairment losses Transfer Foreign currencies translation adjustments Business combination Others Ending balance 153,602 - - - - - 10,234 186,846 - 350,682 (*) Amortization of other intangible assets amounting to 22,317 million won is included in other operating expenses. (3) Goodwill 1) Details of allocated goodwill based on each cash-generating unit as of December 31, 2020 and 2019 are as follows (Unit: Korean won in million): Cash-generating unit (*1) December 31, 2020 December 31, 2019 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 92,831 47,924 6,689 334,290 43,036 2,030 141,780 106,173 49,374 8,289 350,682 (*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 segment 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 the 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. 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 applied 0.0% - 1.0% growth rate to estimate future cash flow for the period over five years. 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 PT Bank Woori Saudara Indonesia 1906 Tbk 15.24 1.0 129,877 126,522 14.89 1.0 55,346 30,475 11.41 0.0 573,559 571,704 WB Finance Co., Ltd 16.1 0.0 196,977 142,224 Woori Asset Trust Co., Ltd. 19.68 1.0 285,319 238,857 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. 3) Sensitivity analysis The sensitivity of the fair value measurement to changes in significant but unobservable inputs used in measuring fair value is as follows (Unit: Korean Won in millions): Category Discount rate (%). Terminal growth rate (%) Increase by 1.0% point Decrease by 1.0% point Increase by 1.0% point Decrease by 1.0% point Woori Asset Trust Co., Ltd. Woori Asset Management Corp. Woori Global Asset Management Co., Ltd PT Bank Woori Saudara Indonesia 1906 Tbk WB Finance Co., Ltd (23,618) (7,211) (3,623) (49,650) (14,117) 27,210 8,629 4,393 59,328 16,053 13,798 5,033 2,660 38,031 7,904 (12,008) (4,221) (2,203) - - (*) In the case of PT Bank Woori Saudara Indonesia 1906 Tbk and WB Finance Co., Ltd, declining cases are excluded from the analysis as the permanent growth rate was assumed to be 0%. 302 - 119 - - 120 - 303 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 17. ASSETS HELD FOR SALE 18. ASSETS SUBJECT TO LIEN AND ASSETS ACQUIRED THROUGH FORECLOSURES Assets held for distribution (sale) are as follows (Unit: Korean Won in millions): (1) Assets subjected to lien are as follows (Unit: Korean Won in millions): Assets (*) Premises and equipment Investments of associates Others Total December 31, 2020 2,130 50,411 7,461 60,002 December 31, 2019 95 - 10,461 10,556 (*) The Group classifies assets as held for sale that are highly likely to be sold within one year from December 31, 2020 or December 31, 2019. The Group measured assets held for sale at the lower of their net fair value or carrying amount. The Group has decided to sell some of the premises and equipment through internal consultation during the current term and classifies the premises as non-current assets held for sale. The asset is expected to be sold within 12 months, and the premises and equipment that was scheduled to be sold at the end of the prior term has been sold and removed. In addition, the investment assets of the associates, which are counted as assets held for sale as of the end of the current term, are likely to be sold within one year of the end of the current term according to the management's decision. On the other hand, other assets that are expected to be sold as of the end of the current term are classified as assets that are expected to be sold within one year due to the possibility of being sold as buildings and land acquired through auction. Financial assets at FVTPL Collateral given to Korean treasury and Kookmin bank and government bonds and others Korean treasury and government bonds and others others Korea Securities Depository Korean treasury and Shinhan Investment Corp. Korea Securities Depository Kookmin bank and others TIMEFOLIO Co., Ltd. Korea Securities Depository government bonds and others Korean financial institutions’ debt securities and others Korean financial institutions’ debt securities and others Korean financial institutions’ debt securities and others Financial assets at Korean treasury and FVTOCI Securities at amortized cost government bonds and others Korean financial institutions’ debt securities and others Foreign financial institutions’ debt securities Korean treasury and government bonds and others December 31, 2020 Amount Reason for collateral Related to bonds sold under repurchase agreements (*) 259,835 157,021 42,428 Securities borrowing collateral Collateral for futures transaction Securities borrowing 148,961 collateral 150,496 Related to bonds sold under repurchase agreements (*) Collateral for futures 19,958 transaction Related to bonds sold under repurchase agreements (*) 473 The BOK and others Settlement risk and others 1,621,941 STANDARD BANKLONDON LTD 137,842 The BOK and others Related to bonds sold under repurchase agreements (*) Settlement risk and others Foreign financial institutions’ NATIXIS and others debt securities Foreign financial institutions’ Federal Reserve Bank 8,111,193 40,987 Related to bonds sold under repurchase agreements (*) Related to the borrowing Loan at amortized cost and other financial assets debt securities 14,377 limit Due from banks in local Daishin AMC Co.,Ltd. Right of pledge currency and others 1,500 Other due from banks in local Samsung Securities Co., Margin deposit for futures currency Other due from banks in local currency Other due from banks in foreign currencies Ltd. and others Korea Federation of Savings Banks JPMORGAN CHASE BANK and others Foreign currency loan bonds Industrial and Investment real estate Land and building Mortgage loan Commercial Bank of China Public offering Credit Counselling & Recovery Service and others 39,005 or option Domestic exchange 47,805 business Collateral for CSA and 755,177 others Related to bonds sold under repurchase agreements (*) 50,088 3,190,889 Related to covered bonds Right to collateral and others 5,676 Premises and equipment Land and building Credit Counselling & Right to collateral and Total Recovery Service and others others 1,969 14,797,621 (*) 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). The asset is equivalent to a mortgage-backed debt security. 304 - 121 - - 122 - 305 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Collateral given to December 31, 2019 Amount Reason for collateral (2) As of December 31, 2020 and 2019 there is no asset acquired through foreclosures. Financial assets at Korean treasury and Nonghyup bank FVTPL government bonds and others Korean corporate debt Kookmin bank and 19,720 Related to bonds sold under repurchase agreements (*) 168,327 Related to bonds sold under repurchase agreements (*) 3,008 Collateral for futures transaction 219,938 Related to bonds sold under repurchase agreements (*) others Eugene investment & futures co., Ltd. . Nonghyup bank and others The BOK and others 5,127,383 Settlement risk and others Spain BBVA and others Nonghyup bank futures and others Korea Securities Depository 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 securities Korean corporate debt securities Korean financial institutions’ debt securities and others Korean financial institutions’ debt securities and others Foreign financial institutions’ debt securities Korean corporate debt securities Korean treasury and government bonds Korean treasury and government bonds and others Foreign financial institutions’ NATIXIS and others debt securities Due from banks in local Branch of IBK at Phnom currency 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 currency Other due from banks in local Samsung Securities Co., 17,345 Margin deposit for futures currency Other due from banks in foreign currencies Foreign currency loans Ltd. and others Korea Investment & Securities Co., Ltd. and others 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 (*) Land and building Credit Counselling & 689 Right to collateral and Recovery Service and others others Total 12,132,263 Financial assets at FVTOCI Securities at amortized cost Loan at amortized cost and other financial assets Premises and equipment (*) 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). The asset is equivalent to a mortgage-backed debt security. Investment properties Land Other assets Land for non-business use Building for non-business use Movables for non-business use Real estate assessment provision for non- business use Sub-total Assets held for sale Land Building Others Sub-total Total December 31, 2020 December 31, 2019 5,425 10,684 1,966 155 (670) 12,135 5,477 3,568 546 9,591 27,151 - 27 - - (27) - 5,143 4,742 577 10,462 10,462 (3) Securities loaned are as follows (Unit: Korean Won in millions): Financial assets at Korean treasury and government December 31, 2020 December 31, 2019 Loaned to Korea Securities Finance FVTOCI bonds 100,345 80,737 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. (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, 2020 and 2019 are as follows (Unit: Korean Won in millions): Securities 10,573,982 Fair values of collaterals subjected to lien December 31, 2020 Fair values of collaterals were disposed or re- Securities 9,340,517 Fair values of collaterals subjected to lien December 31, 2019 Fair values of collaterals were disposed or re- - - 19. OTHER ASSETS Details of other assets are as follows (Unit: Korean Won in millions): Lease assets Prepaid expenses Advance payments Non-operational assets Others Total December 31, 2020 December 31, 2019 1,116,175 170,820 28,256 12,135 21,608 1,348,994 - 135,010 78,306 - 20,330 233,646 306 - 123 - - 124 - 307 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 20. FINANCIAL LIABILITIES AT FVTPL 21. DEPOSITS DUE TO CUSTOMERS (1) Financial liabilities at FVTPL are as follows (Unit: Korean Won in millions): Details of deposits due to customers by type are as follows (Unit: Korean Won in millions): Financial instruments at fair value through profit or loss measured at fair value Financial liabilities at fair value through profit or loss designated as upon initial recognition Total December 31, 2020 December 31, 2019 6,794,192 19,630 6,813,822 2,870,676 87,626 2,958,302 (2) Financial liabilities at fair value through profit or loss measured at fair value are as follows (Unit: Korean Won in millions): Deposits Gold banking liabilities Borrowings Securities sold Derivative liabilities Total December 31, 2020 December 31, 2019 49,279 - 285,026 6,459,887 6,794,192 27,530 - - 2,843,146 2,870,676 (3) Financial liabilities at fair value through profit or loss designated as upon initial recognition as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Equity-linked securities Equity-linked securities in short position 19,630 87,626 December 31, 2020 December 31, 2019 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, 2020 December 31, 2019 19,630 25,780 (6,150) 87,626 97,503 (9,877) Deposits in local currency: Deposits on demand Deposits at termination Mutual installment Deposits on notes payables Deposits on CMA Certificate of deposits Other deposits Sub-total Deposits in foreign currencies: Deposits in foreign currencies Present value discount Total December 31, 2020 December 31, 2019 12,454,024 242,397,664 26,319 2,647,492 110,413 2,072,389 1,372,461 261,080,762 30,408,762 (12,245) 291,477,279 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 22. BORROWINGS AND DEBENTURES (1) Details of borrowings are as follows (Unit: Korean Won in millions): December 31, 2020 Lenders Interest rate (%) Amount Borrowings in local currency: Borrowings from The BOK The BOK Borrowings from Small Enterprise And Market government funds Service and others Others The Korea Development Bank 0.3 2,678,120 0.0 ~ 5.0 2,155,129 Sub-total Borrowings in foreign currencies (*): Borrowings in foreign currencies and others 0.0 ~ 5.3 7,255,938 12,089,187 JPMorgan Chase & Co. and others (0.4) ~ 7.3 7,573,722 Bills sold Call money Bonds sold under repurchase Others Bank and others Other financial institutions agreements Present value discount Total 0.0 ~ 0.9 (0.3) ~ 3.8 (0.5) ~ 10.6 8,924 416,370 657,823 (560) 20,745,466 308 - 125 - - 126 - 309 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 December 31, 2019 Lenders Interest rate (%) Amount Borrowings in local currency: Borrowings from The BOK The BOK Borrowings from Small Enterprise And Market government funds Service and others Others The Korea Development Bank 0.5 ~ 0.8 1,770,726 0.0 ~ 2.8 1,844,798 Sub-total Borrowings in foreign currencies (*): Borrowings in foreign currencies Offshore borrowings in foreign currencies Sub-total and others 0.0 ~ 5.5 6,070,201 9,685,725 The Export-Import Bank of Korea and others (0.3) ~ 8.3 8,566,872 HSBC, HKG 3.0 Bills sold Call money Bonds sold under repurchase Others Bank and others Other financial institutions agreements Present value discount Total 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. (2) Details of debentures are as follows (Unit: Korean Won in millions): December 31, 2020 December 31, 2019 Interest rate (%) Amount Interest rate (%) Amount Face value of bond (*): Ordinary bonds Subordinated bonds Other bonds Sub-total Discounts on bonds Total 0.8 ~ 4.5 1.9 ~ 5.9 0.6 ~ 17.0 0.0 ~ 4.3 2.1 ~ 5.9 1.2 ~ 17.0 29,623,445 6,955,515 925,677 37,504,637 (25,279) 37,479,358 23,207,600 6,732,687 942,421 30,882,708 (24,653) 30,858,055 (*) Included debentures under fair value hedge amounting to 2,767,208 million won and 3,151,172 million won as of December 31, 2020 and 2019 respectively. Also, debentures under cash flow hedge amounting to 857,531 million won and 829,082 million won are included as of December 31, 2020 and 2019 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 Other provisions (*2) Total December 31, 2020 December 31, 2019 68,402 89,592 122,155 221,494 501,643 66,485 92,486 112,554 172,455 443,980 (*1) Provisions for guarantees includes provision for financial guarantee of 66,232 million won and 62,764 million won as of December 31, 2020 and 2019, respectively. (*2) 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 Net provision (reversal) of unused amount Business Combination Others (*) Ending balance For the year ended December 31, 2020 Stage1 Stage2 Stage3 50,801 26,303 15,382 Total 92,486 81 (60) (21) (396) 1,639 (1,243) (12) (13) 25 - - - (1,124) 14,501 953 64,804 (11,124) - - 16,745 (6,100) - - 8,043 (18,348) 14,501 953 89,592 (*) Others have occurred as a result of new financial guarantee contract valued at initial fair value. 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 Stage2 Stage3 44,903 33,760 11,098 Total 89,761 13,568 (13,568) - (317) 532 (215) - - (30) (27,711) (14,400) 34,788 50,801 (32) - 5,611 - 26,303 62 - - (27,711) 4,437 - 15,382 (4,352) 34,788 92,486 (*) Others have occurred as a result of new financial guarantee contract valued at initial fair value. 310 - 127 - - 128 - 311 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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 Business combination 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, 2020 Stage1 65,038 Stage2 Stage3 43,164 4,352 Total 112,554 8,006 (7,500) (506) (2,704) 3,299 (595) (174) (186) 360 - - - (6,653) 7 (280) 63,240 16,949 - - 55,726 (422) - - 3,189 9,874 7 (280) 122,155 For the year ended December 31, 2019 Stage1 74,624 Stage2 Stage3 45,285 1,626 Total 121,535 11,771 (11,024) (747) (1,813) 1,945 (132) (213) (275) 488 - - - (19,394) 63 65,038 7,233 - 43,164 3,117 - 4,352 (9,044) 63 112,554 (3) Changes in asset retirement for the years ended December 31, 2020 and 2019, obligation are as follows (Unit: Korean Won in millions): Beginning balance Provisions provided Provisions used Reversal of provisions unused Unwinding of discount Business combination Others Ending balance For the years ended December 31 2019 2020 66,485 806 (2,958) (106) 459 219 3,497 68,402 67,200 2,729 (2,276) (2,926) 435 329 994 66,485 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, 2020, 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 for the years ended December 31, 2020 and 2019, are as follows (Unit: Korean Won in millions): Beginning balance Provisions provided Provisions used Reversal of provisions unused Foreign currencies translation adjustments Transfer Business combination Others Ending balance (5) Others For the years ended December 31 2020 2019 172,455 232,629 (181,433) (2,345) 606 (344) - (74) 221,494 63,637 109,875 (6,123) (171) 1,193 - 3,820 224 172,455 1) The Group has been offering Korean won settlement services for trade with Korea and Iran; however, the Group has stopped the services for trade in line with U.S. economic sanctions on September 23, 2019. The Group resumed the service humanitarian goods trade only since July 13, 2020. In connection with these services, the Group is currently being investigated by the U.S. government agencies including the U.S. prosecutors (United States Attorney’s Office and New York State Attorney General’s Office) and New York State Financial Supervisory Service 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 U.S. In this regard, the Bureau of Foreign Assets Control concluded its investigation in December 2020 without taking any additional sanctions, but the investigation procedures of the U.S. Public Prosecutors' Office and the New York State Financial Supervisory Service have yet to be completed. 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 previous term and a fine 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. 3) For the year ended December 31, 2020, the Group recognized the provisions for the required expenditure as the best estimate to fulfill its obligations as of December 31, 2020 due to the expected losses of clients arising from the delay in the redemption of funds by Lime Asset Management and the dispute settlement by the Financial Supervisory Service. As of December 31, 2020, the provision for this case is 106.8 billion won and the advance payment is 113.9 billion won. 312 - 129 - - 130 - 313 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 24. NET DEFINED BENEFIT LIABILITY(ASSET) The characteristics of the Group’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 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 liabilities (*) December 31, 2020 December 31, 2019 1,610,680 (1,564,101) 46,579 1,442,859 (1,352,971) 89,888 (*) Net defined benefit liability of 46,579 million won and 89,888 million won as of December 31, 2020 and 2019 is the subtracted amount of the net defined benefit asset of 5,658 million won 2,582 million won from the net defined benefit liability of 52,237 million won and 92,470 million won. (2) Changes in the carrying value of defined benefit obligation are as follows (Unit: Korean Won in millions): Beginning balance Transfer-in / out Current service cost Interest cost Remeasurements Financial assumption Demographic assumptions Experience adjustments Retirement benefit paid Foreign currencies translation adjustments Business combination Others Ending balance For the years ended December 31 2019 2020 1,442,859 - 174,509 34,653 (20,838) 4,161 (4,481) (55,864) (119) 34,001 1,799 1,610,680 1,275,020 93 163,369 32,693 32,831 49,453 (33,518) (79,908) 179 4,674 (2,027) 1,442,859 (3) Changes in the plan assets are as follows (Unit: Korean Won in millions): Beginning balance Transfer-in / out Interest income Remeasurements Employer’s contributions Retirement benefit paid Business combination Others Ending balance For the years ended December 31 2019 2020 1,352,971 - 34,534 (7,666) 211,505 (52,627) 27,599 (2,215) 1,564,101 1,101,911 93 30,937 125 292,095 (76,304) 6,369 (2,255) 1,352,971 (4) Plan assets consist of fixed deposits and others as of December 31, 2020 and 2019. Cash and due from banks December 31, 2020 December 31, 2019 1,564,101 1,352,971 Meanwhile, Among plan assets, realized returns on plan assets amount to 26,868 million won and 31,062 million won for the years ended December 31, 2020 and 2019, respectively. The contribution expected to be paid in the next accounting year amounts to 170,637 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 (*) Amount before tax For the years ended December 31 2019 2020 174,509 119 174,628 (13,492) 161,136 163,369 1,756 165,125 48,641 213,766 314 - 131 - Retirement benefits related to defined contribution plans recognized as expenses are 3,827 million won, and 3,297 million won for the years ended December 31, 2020 and 2019, respectively. - 132 - 315 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (6) Key actuarial assumptions used in net defined benefit liability measurement are as follows: 26. DERIVATIVES Discount rate Future wage growth rate Mortality rate Retirement rate December 31, 2020 2.13% ~ 2.97% 2.05% ~ 7.00% Issued by Korea Insurance Development Institute Experience rate for each employment classification December 31, 2019 2.18~2.50% 1.89~6.00% Issued by Korea Insurance Development Institute Experience rate for each employment classification The weighted average maturity of defined benefit liability is a minimum of 6.74 to a maximum 15.00 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, 2020 December 31, 2019 (151,104) 178,434 176,169 (152,174) (165,754) 195,475 193,149 (167,037) 25. OTHER FINANCIAL LIABILITIES AND OTHER LIABILITIES Other financial liabilities and other liabilities are as follows (Unit: Korean Won in millions): December 31, 2020 December 31, 2019 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 4,028,639 2,049,401 2,984,031 466,485 789,189 180,251 407,431 3,317,358 (6,968) 14,215,817 254,702 219,111 473,813 14,689,630 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 (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 For trading For cash flow hedge Liabilities For fair value hedge For trading December 31, 2020 Interest rate: Futures Swaps Purchase options Written options Currency: Futures Forwards Swaps Purchase options Written options Equity: 184,413 137,057,240 330,000 285,440 2,546 105,146,634 87,249,320 1,147,877 1,632,048 Futures Forwards Swaps Purchase options Written options Total 123,742 11 269,039 9,863,110 10,369,009 353,660,429 - - - - - - - - - - - - - - - - 174,820 - - - 318,545 6,271 - - 1,476 - - - - - 2,541,957 - 3,325,135 59,329 - - - - - - - - - - - 650,505 - 174,820 6,901,742 - - 63,265 - - - - - - - 64,741 - - 28 524,190 - 5,419 - - - - - 2,848,980 - 2,415,610 - - 23,271 - - - - - 12,533 - - - - 629,884 28 6,459,887 Nominal amount For cash flow hedge Assets For fair value hedge For trading For cash flow hedge Liabilities For fair value hedge For trading December 31, 2019 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 - - - - - 111,764 - - - 300,750 11,888 - - - 9,367 - - - - - - - 9,367 - - - 1,447,811 966,181 - 18,835 - - - - - - - - - - 1,217 175,221 - 111,764 2,921,903 - 1,323 - - - 321 5,193 - - - - - - - 6,837 - - - 413,195 - - 9,655 - - - - 1,030,246 - 1,106,423 - - 9,403 - - - - - 54,393 - - - - 219,831 - 2,843,146 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. 316 - 133 - - 134 - 317 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (2) Overview of the Group’s hedge accounting 2) Cash Flow Hedge 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 3M LIBOR, USD 6M LIBOR and AUD 3M BBSW. The nominal amounts of hedging instruments related to 3M LIBOR, 6M LIBOR and 3M BBSW in the hedging relationships of the Group are USD 1,800,000,000, USD 500,000,000 and AUD 150,000,000, 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 December 31, 2020, the Group has applied fair value hedge on fixed interest rate foreign currency denominated debentures amounting to 2,767,208 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 hedging 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, price margin set by counterparty of hedging instrument, and unilateral change in credit risk of any party of hedging instrument. 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 and AUD BBSW 3M 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. As of the December 31, 2020, the Group has applied cash flow hedge on local currency denominated debentures amounting to 149,936 million won, debentures on foreign currency amounting to 707,595 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 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 value of the hedged item will generally fluctuate in opposite direction. 318 - 135 - - 136 - 319 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (3) The nominal amounts of the hedging instrument are as follows (Unit: USD, AUD, EUR, SGD, JPY and (4) The average interest rate and average currency rate of the hedging instrument as of December 31, 2020 Korean Won in millions): Fair value hedge Interest rate risk 1 year or less December 31, 2020 1 year to 5 years More than 5 years Total Interest rate swap (USD) Interest rate swap (AUD) 1,000,000,000 1,000,000,000 150,000,000 - 300,000,000 2,300,000,000 150,000,000 - 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) Fair value hedge Interest rate risk 100,000 50,000 - 150,000 130,000,000 470,000,000 - 600,000,000 68,000,000 - - 68,000,000 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 - - 26,635,556 100,000 150,000,000 330,000,000 - 480,000,000 136,000,000 68,000,000 49,325,155 1,059,903,932 - 204,000,000 - 1,109,229,087 and 2019 are as follows: Fair value hedge Interest rate risk Interest rate swap (USD) Interest rate swap (AUD) 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) 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, 2020 Average interest rate and average exchange rate Fixed 4.22% receipt and Libor 3M+1.71% floating paid Fixed 5.88% receipt and Libor 6M+2.15% floating paid 0.84% receipt and BBSW 3M+0.72% paid KRW 3Y CMS+0.40% receipt, 2.38% paid KRW CD+0.69% receipt, 2.06% paid KRW CD+0.33% receipt, 1.68% paid USD 3M Libor+0.80% receipt, KRW 1.45% paid, USD/KRW = 1,155 USD 1M Libor+0.67% receipt, KRW 1.14% paid, USD/KRW = 1,190 USD 1M Libor+0.69% receipt, KRW 1.02% paid, USD/KRW = 1,199 SGD 1.91% receipt, KRW 1.98% paid, SGD/KRW = 827 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 KRW 3Y CMS+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 = 10.47 320 - 137 - - 138 - 321 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (5) The amounts related to items designated as hedging instruments are as follows (Unit: Korean Won in (6) Details of carrying amount to hedge and amount due to hedge accounting are as follows (Unit: Korean millions, USD, AUD, EUR, SGD and JPY): Won in millions): December 31, 2020 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 USD 2,300,000,000 AUD 150,000,000 174,820 28 Derivative assets (designated for hedging) Derivative liabilities (designated for hedging) KRW 150,000 - 1,476 Derivative liabilities (designated for hedging) USD 600,000,000 - 62,893 Derivative liabilities (designated for hedging) SGD 68,000,000 - Derivative liabilities (designated for hedging) 373 57,221 (196) (69,319) (4,699) 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 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) SGD 204,000,000 5,297 JPY 1,109,229,087 - Derivative assets (designated for hedging) Derivative liabilities (designated for hedging) - 321 90,244 (43) (615) 22,364 8,918 321 Fair value hedge Interest rate risk Interest rate swap Interest rate swap Cash flow hedge Interest rate risk Interest rate swap Foreign currency translation risk and interest rate risk Currency swap Foreign currency translation risk Currency swap Fair value hedge Interest rate risk Interest rate swap Cash flow hedge Interest rate risk Interest rate swap Interest rate swap Foreign currency risk translation and interest rate risk Currency swap Foreign currency translation risk Currency swap Currency forward December 31, 2020 Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item Carrying amounts of the hedged item Assets Liabilities 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 (*) 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 - 2,767,208 - 144,741 Debentures (59,073) - - 149,936 - - Debentures 188 (909) - 651,704 - 55,891 - - - Debentures 61,823 (95) - Debentures 6,564 (268) December 31, 2019 Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item Carrying amounts of the hedged item Assets Liabilities 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 (*) Fair value hedge Interest rate risk Debentures Cash flow hedge Interest rate risk Borrowings in foreign currencies Debentures Foreign currencies translation risk and interest rate risk Debentures Foreign currencies translation risk Debentures (*) After tax amount - 3,151,172 - 91,368 Debentures (85,984) - - - 34,443 99,941 - 554,433 - 174,708 - - - - Borrowing foreign currency - - Debentures 43 663 (43) (821) - Debentures (25,057) (2,525) - Debentures (8,315) (2,304) 322 - 139 - - 140 - 323 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 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 2019 2020 52,259 22,901 (68,221) 6,939 25,463 53,289 (26,493) 52,259 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, which is deferred and amortized to maturity using the effective interest method and reflected in profit and loss. The table above presents the difference yet to be realized as profit or losses. (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 (1,852) Other net operating income(expense) For the year ended December 31, 2020 Hedge ineffectiveness recognized in profit or loss Line item in the profit or loss that includes hedge ineffectiveness For the year ended December 31, 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 4,260 Other net operating income(expense) (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, 2020 Changes in the value of hedging instruments recognized in OCI Hedge ineffective ness recognize d in profit or loss Changes in the value of foreign basis spread recognized in OCI (122) (74) - (68,270) (1,049) 5,893 (3,677) (1,022) 320 Amounts reclassified from cash flow hedge reserve to profit or loss 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) 64,762 5,393 Line item recognized in the profit or loss Other net operating income (expense) Other net operating income (expense) Other net operating income (expense) For the year ended December 31, 2019 Changes in the value of hedging instruments recognized in OCI 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 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) (23,541) (8,215) Line item recognized in the profit or loss 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 324 - 141 - - 142 - 325 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 28. EQUITY (2) The number of authorized shares and others of the Group are as follows: (1) Details of equity as of December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): December 31, 2020 December 31, 2019 Capital Common stock capital Hybrid securities Capital surplus Paid in capital in excess of par Equity method Others Sub-total Capital adjustments Treasury stocks Other adjustments (*1) Sub-total Accumulated other comprehensive income Financial assets at FVTOCI Changes in capital due to equity method Loss from foreign business translation Remeasurements of defined benefit plan Loss on evaluation of cash flow hedge Capital related to noncurrent assets held for sale Sub-total Retained earnings (*2) (*3) Non-controlling interest (*4) Total 3,611,338 1,895,366 608,348 - 17,763 626,111 - (1,775,312) (1,775,312) (9,833) (2,609) (298,363) (261,195) (1,386) 1,226 (572,160) 19,268,265 3,672,237 26,725,845 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 (*1) Included 178,060 million won in capital transaction profit and loss recognized by Woori Bank and (formerly) Woori Financial Group in 2014 and 223,228 million won due to the spin-off of Gyeongnam Bank and Gwangju Bank. During the previous term, the Group entered an agreement to acquire additional interest in the Woori Asset Trust Co., Ltd., and the capital adjustment reduced by 111,242 million won. (*2) The earned surplus reserve in retained earnings amounted to 2,547,547 million won and 2,356,246 million won as of December 31, 2020 and 2019, respectively in accordance with the relevant article. (*3) The regulatory reserve for credit loss in retained earnings amounted to 62,830 million won as of December 31, 2020 in accordance with the Article 53 of the Financial Holding Company Act. (*4) The hybrid securities issued by Woori Bank amounting to 3,105,070 million won and 3,660,814 million won as of December 31, 2020 and 2019, respectively, are recognized as non-controlling interests. 162,362 million won and 134,421 million won of dividends for the hybrid securities are allocated to net profit and loss of the non-controlling interests for the years ended December 31, 2020 and 2019, respectively. Shares of common stock authorized Par value Shares of common stock issued Capital stock December 31, 2020 December 31, 2019 4,000,000,000 Shares 5,000 Won 722,267,683 Shares 3,611,338 million won 4,000,000,000 Shares 5,000 Won 722,267,683 Shares 3,611,338 million won (3) The Group issued 42,103,377 new shares in the stock exchange process with the shareholders of Woori Card for the period from January 11, 2019, to December 31, 2019, which changed the total number of issued shares from 680,164,306 as of the date of establishment to 722,267,683 as of December 31, 2020. (4) Hybrid securities The bond-type hybrid securities classified as owner’s equity are as follows (Unit: Korean Won in millions): Issue date Maturity Interest rate (%) December 31, 2020 December 31, 2019 Securities in local currency 2019-07-18 Securities in local currency 2019-10-11 Securities in local currency 2020-02-06 Securities in local currency 2020-06-12 Securities in local currency 2020-10-23 - - - - - Issuance cost Total 3.49 3.32 3.34 3.23 3.00 500,000 500,000 500,000 500,000 400,000 300,000 200,000 (4,634) 1,895,366 - - - (2,456) 997,544 The hybrid securities mentioned above do not have maturity date but are redeemable after 5 years from date of issuance. 326 - 143 - - 144 - 327 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (5) Accumulated other comprehensive income (6) Regulatory Reserve for Credit Loss Changes in the accumulated other comprehensive income are as follows (Unit: Korean Won in millions): Net gain (loss) on valuation of financial assets at FVTOCI Changes in capital due to equity method 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 Capital related to noncurrent assets held for sale Total Beginning balance Increase (decrease) (*) Reclassification adjustments Classified as held for sale Income tax effect Ending balance (71,914) 115,167 (30,643) - (22,443) (9,833) 915 (3,171) (152,987) (152,486) (270,977) 13,492 (5,692) 4,568 - - - - (1,691) 1,338 (2,609) - - 7,110 (298,363) (3,710) (261,195) - (262) (1,386) - (500,655) - (22,430) - (30,643) 1,691 - (465) (18,432) 1,226 (572,160) (*) 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 the reclassification adjustments amounting to 2,664 million won are due to disposal of equity securities during the period. For the year ended December 31, 2019 Beginning balance Increase (decrease) (*) Reclassification adjustments Income tax effect Ending balance (87,182) (24,180) 43,021 (3,573) (71,914) 302 (244,735) (1,420) 96,157 (236,726) (48,244) - - - 2,033 915 (4,409) (152,987) 13,993 (270,977) Net gain (loss) on valuation of financial assets at FVTOCI Changes in capital due to equity method 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 In accordance with Article 26 ~ 28 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, 2020 2,547,547 20,820 2,568,367 December 31, 2019 2,356,246 191,301 2,547,547 2) Provision of regulatory reserve for credit loss, adjusted income after the provision of regulatory reserve and others 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 before regulatory reserve Provision of regulatory reserve (reversal) for credit loss Adjusted net income after the provision of regulatory reserve Dividends to hybrid securities Adjusted net income after regulatory reserve and dividends to hybrid securities Adjusted EPS after regulatory reserve and the dividends to hybrid securities (Unit: Korean Won) For the years ended December 31 2020 1,515,249 20,820 1,494,429 (48,915) 2019 2,037,596 191,301 1,846,295 (4,362) 1,445,514 1,841,933 2,002 2,725 (3,869) (572,210) (32,719) (10,406) 31,756 74,777 (860) 7,184 (5,692) (500,655) (7) Treasury stock (*) 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 the reclassification adjustments amounting to 29,368 million won are due to disposal of equity securities during the period. Details of treasury stocks are as follows (Unit: Shares, Korean Won in millions): December 31, 2020 December 31, 2019 Number of shares Book value Number of shares Book value 2 - - 2 - - - - 2,728,774 57,721,387 (60,450,159) 2 34,113 799,886 (833,999) - Beginning balance Acquisition (*) Disposal Ending balance 29. DIVIDENDS The dividend and total dividend per share for the fiscal year ending December 31, 2019 were 700 won and 505,587 million won, respectively, approved at the regular shareholders' meeting held on March 25, 2020 and paid in April 2020. A dividend in respect of the year ended December 31, 2020, of 360 won per share, amounting to a total dividend of 260,017 million won, is to be proposed to shareholders at the annual general meeting on March 26, 2021. These financial statements do not reflect this dividend payable. 328 - 145 - - 146 - 329 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 30. NET INTEREST INCOME (2) Details of fees and commissions expense incurred are as follows (Unit: Korean Won in millions): (1) Interest income recognized is as follows (Unit: Korean Won in millions): 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 Subtotal Total For the years ended December 31 2019 2020 48,612 437,527 382,988 53,586 8,570,173 30,967 8,654,726 9,523,853 50,619 474,751 436,340 141,330 9,443,740 29,990 9,615,060 10,576,770 (2) Details of interest expense recognized are as follows (Unit: Korean Won in millions): Interest on deposits due to customers Interest on borrowings Interest on debentures Other interest expense Interest on lease liabilities Total For the years ended December 31 2019 2020 2,486,523 269,985 722,551 36,964 9,318 3,525,341 3,424,441 383,213 777,322 89,002 9,086 4,683,064 31. NET FEES AND COMMISSIONS INCOME (1) Details of fees and commissions income recognized are as follows (Unit: Korean Won in millions): For the years ended December 31 2019 2020 Fees and commissions paid Credit card commission Brokerage commission Others Total 32. DIVIDEND INCOME 246,824 424,316 551 8,286 679,977 (1) Details of dividend income recognized are as follows (Unit: Korean Won in millions): Dividend income related to financial assets at FVTPL Dividend income related to financial assets at FVTOCI Total 120,158 18,385 138,543 For the years ended December 31 2019 2020 189,789 407,689 775 8,445 606,698 86,979 20,980 107,959 (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 For the years ended December 31 2019 2020 18,385 20,980 33. NET GAIN OR LOSS ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS MANDATORILY MEASURED AT FAIR VALUE For the years ended December 31 2020 2019 (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): 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 Fees and commission received related to lease Other fees Total 162,653 195,391 125,107 55,984 69,017 74,647 507,852 79,606 160,564 13,254 84,164 165,777 1,694,016 156,578 189,597 137,289 61,756 92,408 71,106 548,580 113,346 180,290 12,626 4,753 140,997 1,709,326 Gain on financial instruments at fair value through profit or loss measured at fair value Gain (loss) on financial instruments at fair value through profit or loss designated as upon initial recognition Total For the years ended December 31 2019 2020 422,374 58,692 (665) 421,709 (33,237) 25,455 330 - 147 - - 148 - 331 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 34. NET GAIN OR LOSS ON FINANCIAL ASSETS AT FVTOCI 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 2020 2019 (57) 24,195 24,138 15 11,000 11,015 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 Reversal of impairment loss due to credit loss on securities at amortized cost Provision for impairment loss due to credit loss on loan and other financial assets at amortized cost Reversal of provision on guarantee Reversal of (provision for) unused loan commitment Total For the years ended December 31 2020 2019 (1,529) 934 (792,250) 18,348 (9,874) (784,371) (3,297) 1,415 (385,758) 4,352 9,044 (374,244) (2) Details of net gain or loss on financial instruments at fair value through profit or loss measured at fair value and financial instruments held for trading are as follows (Unit: Korean Won in millions): Financial assets at FVTPL Securities Gain on transactions and Loans Other financial assets Derivatives (Held for trading) Interest rates derivatives Currency valuation Loss on transactions and valuation Sub-total Gain on transactions and valuation Loss on transactions and valuation Sub-total Gain on transactions and valuation Loss on transactions and valuation Sub-total Sub-total Gain on transactions and valuation Loss on transactions and valuation Sub-total Gain on transactions and For the years ended December 31 2020 2019 142,551 186,394 (122,506) 20,045 (80,306) 106,088 15,299 (8,087) 7,212 10,902 (10,257) 645 27,902 1,556 (21) 1,535 3,963 (3,570) 393 108,016 1,727,585 1,507,254 (1,998,824) (271,239) (1,615,833) (108,579) derivatives valuation 12,562,354 6,872,513 Loss on transactions and valuation Sub-total (11,906,353) 656,001 (6,855,447) 17,066 Equity derivatives Gain on transactions and valuation Loss on transactions and valuation Sub-total 1,835,497 839,196 (1,825,372) 10,125 (796,336) 42,860 Other derivatives Gain on transactions and valuation Loss on transactions and valuation Sub-total Sub-total Net, total - 695 (415) (415) 394,472 422,374 (1,366) (671) (49,324) 58,692 (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): Loss on equity-linked securities For the years ended December 31 2020 2019 (665) (33,237) 332 - 149 - - 150 - 333 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 36. GENERAL AND ADMINISTRATIVE EXPENSES AND OTHER NET OPERATING INCOME (4) Share-based payment (EXPENSES) (1) Details of general and administrative expenses recognized are as follows (Unit: Korean Won in millions): Employee benefits Short-term employee benefits Salaries Employee fringe benefits Share based payment Retirement benefit service costs Termination Subtotal 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 For the years ended December 31 2020 2019 1,638,341 1,584,791 506,048 7,495 178,455 202,259 2,532,598 520,969 78,707 129,904 244,825 108,810 72,711 45,891 94,880 6,954 7,263 12,127 10,805 16,500 18,367 14,993 10,225 29,652 902,614 3,956,181 475,238 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 (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 2020 2019 758,347 67,395 9,646 63,702 899,090 602,115 126,651 231 45,706 774,703 (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 2020 2019 679,350 371,054 327,911 82,746 68,508 189,959 1,719,528 192,331 333,600 317,667 3,686 86,214 143,786 1,077,284 (*) Other expense includes such expenses amounting to 11,890 million won and 22,317 million won, respectively, of intangible asset amortization expense for the years ended December 31, 2020 and 2019, respectively. 334 - 151 - Details of performance condition share-based payment granted to executives as of December 31, 2020 and 2019 are as follows. 1) Performance condition share-based payment Subject to Type of payment Vesting period Date of payment Fair value (*1) Valuation method Expected dividend rate Expected maturity date Number of shares remaining Number of shares granted (*2) Subject to Type of payment Vesting period Date of payment Fair value (*1) Valuation method Expected dividend rate Expected maturity date Number of shares remaining Number of shares granted (*2) As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 As of December 31, 2020 As of December 31, 2019 Shares granted for the year 2019 Cash-settled January 1, 2019 ~ December 31, 2022 2023-01-01 9,162 Won Black-Scholes Model 4.13% 2 years 602,474 shares 602,474 shares 602,474 shares 602,474 shares Shares granted for the year 2020 Cash-settled January 1, 2020 ~ December 31, 2023 2024-01-01 8,792 Won Black-Scholes Model 4.13% 3 years 944,343 shares - 944,343 shares - (*1) As the amount of payment varies according to the base price (the arithmetic average of the weighted average stock price of transactions in the past one week, the past one month, and the past two months) at the date of payment, the fair value is calculated to measure the liability according to the Black Shawls model based on the base price at the time of each settlement. (*2) It is a system in which the amount of stock payable is determined at the beginning, and the payment rate is determined in accordance with the degree of achievement of the pre-set performance target. Performance is evaluated by long- term performance indicators such as relative shareholder return, net profit, 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, 2020 and 2019, the book value of the liabilities related to the performance condition share-based payments recognized by the Group amounts to 13,823 million won and 6,328 million won, respectively. - 152 - 335 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 37. NON-OPERATING INCOME (EXPENSES) 38. INCOME TAX EXPENSE (1) Details of gains or losses on valuation of investments in joint ventures and associates are as follows (1) Details of income tax expenses are as follows (Unit: Korean Won in millions): (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 2020 2019 125,602 (23,283) (1,242) 101,077 103,775 (16,144) (3,634) 83,997 (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 2020 133,195 (313,415) (180,220) 2019 68,459 (229,383) (160,924) (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 2020 15,190 3,470 9,715 172 104,648 133,195 2019 10,106 - 1,632 103 56,618 68,459 (*) Included 67,427 million won of profit from bargain purchase for the year ended December 31,2020. (4) Details of other non-operating expenses recognized are as follows (Unit: Korean Won in millions): Depreciation on investment properties Operating expenses on investment properties Losses on disposal of premises and equipment, intangible assets and other assets Impairment losses of premises and equipment, intangible assets and other assets Donation Others (*) Total For the years ended December 31 2020 2019 2,689 762 2,717 8,763 44,504 253,980 313,415 2,225 834 3,433 28,295 62,545 132,051 229,383 (*) Included 224,427 million won of other special losses related to other provisions for the year ended December 31,2020. 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 Change in deferred tax assets (liabilities) due to temporary differences Income tax expense directly attributable to equity Income tax expense Sub-total For the years ended December 31 2020 2019 501,223 4,914 506,137 (1,702) (18,433) (20,135) 486,002 612,680 (65,227) 547,453 130,816 7,184 138,000 685,453 (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 2020 2,001,251 514,456 2019 2,723,049 738,476 (42,440) (61,730) 19,451 31,549 4,914 (10,379) (28,454) 486,002 24.3% (65,227) 42,385 (53,023) 685,453 25.2% (*) 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. 336 - 153 - - 154 - 337 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (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, 2020 Beginning balance Business combination Recognized as income (expense) Recognized as other comprehensive income (expense) (*2) Ending Balance 278,352 2,243 19,121 (23,221) 276,495 - 21,499 1,385 33,597 10,713 (75,412) (66,384) (52,711) 6,893 675 (4,392) 2,201 - (162,442) (14,131) 396,302 7,923 (381,776) 7,915 88,456 (144,684) (94,778) (6,369) 3,441 - (12,678) (21,087) (67,423) 4,548 4,015 1,328 6,377 41,186 (36,858) (1,871) (3,283) 31,494 20,133 (192) - - - - (142,352) (66,228) (46,495) 8,221 (170,196) (3,404) 442,007 97 - - 6,904 (18,431) (424,906) 9,485 85,173 (118,964) (114,163) 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 24,059 million won. For the year ended December 31, 2019 Beginning balance Business combination Recognized as income (expense) Recognized as other comprehensive income (expense) (*2) Ending Balance 372,346 1,360 (91,781) (3,573) 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 - - - - 10,713 (75,412) (66,384) (52,711) 6,893 (162,442) 13,850 396,302 143 - 2,228 (5,687) 7,184 (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. (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, 2020 December 31, 2019 327,139 97,898 (10,409,344) (9,984,307) 171,714 41,546 (8,024,406) (7,811,146) No deferred income tax asset has been recognized for the deductible temporary difference of 322,083 million won associated with investments in subsidiaries and associates as of December 31, 2020, because it is not probable that the temporary differences will be reversed in the foreseeable future. 5,056 million won associated with others, respectively, as of December 31, 2020, due to the uncertainty that these will be realized in the future. No deferred income tax liability has been recognized for the taxable temporary difference of 10,409,344 million won associated with investment in subsidiaries and associates as of December 31, 2020, 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, 2020, 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 29,979 14,341 34,470 1 year or less 1 – 2 years 2 – 3 years More than 3 years 19,108 (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 valuation of equity method investments Gain on foreign currency translation of foreign operations Remeasurements of the net defined benefit liability Gain on derivatives designated as cash flow hedge Total December 31, 2020 December 31, 2019 27,849 1,748 4,628 3,133 10,883 101,128 556 120,328 3,774 102,120 280 135,771 (6) Current tax assets and liabilities are as follows (Unit: Korean Won in millions): Current tax assets Current tax liabilities December 31, 2020 75,655 370,718 December 31, 2019 47,367 182,690 338 - 155 - - 156 - 339 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 39. EARNINGS PER SHARE (“EPS”) (1) 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): For the years ended December 31 2019 2020 Net income attributable to common shareholders Dividends to hybrid securities Net income attributable to common shareholders Weighted average number of common shares outstanding (Unit: million shares) Basic EPS (Unit: Korean Won) 1,307,266 (48,915) 1,258,351 722 1,742 1,872,207 (4,362) 1,867,845 685 2,727 (2) The weighted average number of common shares outstanding is as follows (Unit: number of shares, days): For the year ended December 31, 2020 Period Number of shares Dates (Unit: Day) Accumulated number of shares outstanding during period Common shares issued at the beginning of the period Treasury stock 2020-01-01 ~ 2020-12-31 2020-01-01 ~ 2020-12-31 722,267,683 (2) 366 366 Sub-total (①) Weighted average number of common shares outstanding (②=(①/366) 264,349,971,978 (732) 264,349,971,246 722,267,681 For the year ended December 31, 2019 Period Number of shares Dates (Unit: Day) Accumulated number of shares outstanding during period Common shares issued at the beginning of the period Purchase of treasury stock Disposal of treasury stock Purchase of treasury stock Disposal of treasury stock (*) Disposal of treasury stock (*) Purchase of treasury stock 2019-01-01 ~ 2019-12-31 2019-01-08 ~ 2019-12-31 2019-03-22 ~ 2019-12-31 2019-08-26 ~ 2019-12-31 2019-09-26 ~ 2019-12-31 2019-11-22 ~ 2019-12-31 2019-12-13 ~ 2019-12-31 673,271,226 (11,453,702) 18,346,782 (1) 28,890,707 13,212,670 (1) 365 358 285 128 97 40 19 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 (128) 2,802,398,579 528,506,800 (19) 250,203,310,276 685,488,521 (*) In September 2019, Woori Bank disposed of 42,103,377 shares acquired through comprehensive exchange of shares in Woori Card Co., Ltd. and its parent company Woori Financial Group Inc. Diluted EPS is equal to basic EPS because there is no dilution effect for the years ended December 31, 2020 and 2019. 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, 2020 December 31, 2019 103,229 602,014 78,395 6,491,608 7,275,246 187,146 3,025,923 403,652 3,616,721 917,489 11,809,456 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 (2) Details of unused loan commitments and others are as follows (Unit: Korean Won in millions): Loan commitments Other commitments (*) December 31, 2020 December 31, 2019 112,088,680 7,827,774 103,651,674 5,993,608 (*) As of December 31, 2020 and 2019, the amount of unsecured bills (purchase note sales) and discounts on electronic short-term bond sales (purchase) are 2,894,688 million won and 2,582,274 million won, respectively. (3) Litigation case 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, 2020 As plaintiff 138 cases As defendant 460 cases 413,852 413,744 24,336 December 31, 2019 As plaintiff As defendant 119 cases 291,880 415 cases 391,362 27,029 (*) The number of lawsuits as of December 31, 2020 and 2019 do not include fraud lawsuits, etc. and those lawsuits that are filed only to extend the statute of limitation. 340 - 157 - - 158 - 341 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (4) Other commitments 41. RELATED PARTY TRANSACTIONS 1) 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% of interest (58.6% of voting rights) in July, 2019, and to acquire additional 21.3% of 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 regard to this acquisition, the Group recognized 127,335 million won as other financial liabilities for the second sales agreement. 2) Lime Asset Management Co., Ltd. announced the suspension of redemption of many funds in operation in October 2019. The Group's total amount of sales of fund under management of Lime Asset Management Co., Ltd.'s subject to redemption suspension is 1,348 accounts and 270.3 billion won at the end of December 2020. In December 2020, Lime Asset Management Co., Ltd.'s business registration was revoked, and funds subject to redemption suspension were transferred to Wellbridge Asset Management Co., Ltd., which was jointly established by distributors. The Financial Supervisory Dispute Meditation Committee was held on February 23, 2021 for incomplete sales of vendors, and the obligation to compensate investors for some of the losses may be changed by the Dispute Mediation Committee’s decision and the Board’s approval. 3) As of December 31, 2020, Woori Asset Trust Co., Ltd., a subsidiary, has agreed to carry out construction completion obligations for 44 constructions, which includes the construction of residential and commercial complexes in Busan (U-dong, Haeundae-gu). Land Trust responsible for Construction and Management is a trust that bears the obligation to fulfill the responsibility of the constructor and to compensate the loan financial institution for damages if the company fails to fulfill the construction completion obligation. As of December 31, 2020, the total PF loan amount of PF loan institutions invested in the project of the Land Trust responsible for Construction and Management is 1,389,356 million won. Although additional losses may occur in relation to the construction completion obligations, the financial statements at December 31, 2020 do not reflect these effects since losses are unlikely and the amount cannot be estimated reliably. Related parties of the Group as of December 31, 2020 and 2019, and assets and liabilities recognized, guarantees and commitments, major transactions with related parties and compensation to key management for the years ended December 31, 2020 and 2019 are as follows. Please refer to Note 13 for the details of joint ventures and associates. (1) Assets and liabilities from transactions with related parties are as follows (Unit: Korean Won in millions): Associates W Service Networks Co., Related parties 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 (*1) (*2) Account title 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 Other assets Deposits due to customers Other liabilities 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, 2020 December 31, 2019 21 - 2,183 6 459 1 2,311 5 3,440 (6) 1,927 1 257 (3) 8,715 171 7,500 (77) 12 2,697 113 104 26 2 - - 4,997 - - - 651 5,831 5 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 (*1) Others include Smart Private Equity Fund No.2, IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership, Woori G IPO10 [FI_Bal][F]C(F), Woori G Senior Loan No.1, Woori G Egis Bond[FI][F](C(F)), Woori G Clean Energy No.1, Woori Star50 Master Fund ClassC-F, Dongwoo C & C Co., Ltd., Woori Growth Partnerships New Technology Private Equity Fund, Woori-Shinyoung Growth-Cap Private Equity Fund, Woori- Q Corporate Restructuring Private Equity Fund, Woori High plus G.B. Securities Feeder Fund1(G.B.), Uri Hanhwa Eureka Private Equity Fund, Japanese Hotel Real Estate Private Equity Fund 2, Partner One Value Up I Private Equity Fund and etc., as of December 31, 2020. (*2) 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. and etc., as of December 31, 2019. (2) Gain or loss from transactions with related parties are as follows (Unit: Korean Won in millions): 342 - 159 - - 160 - 343 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Associates W Service Network Co., Ltd. Related parties Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc LOTTE CARD Co., Ltd. Account title Other income Interest expenses Fees expenses Reversal of allowance for credit loss Other expenses Interest expenses Fees expenses Interest income Interest expenses Provisions for allowance for credit loss Other expenses Interest expenses Provision for (reversal of) allowance for credit loss Interest income Fees income Interest expenses Provision for allowance for credit loss K BANK Co., Ltd. Fees income Well to Sea No.3 Private Equity Fund Interest income Others (*1) (*2) Interest expenses Reversal of allowance for credit loss Fees income Dividends income Other income Interest expenses Reversal of allowance for credit loss For the year December 31 2020 2019 32 13 525 (4) 2,174 5 3,155 70 3 3 100 19 (145) 311 2,748 68 171 1,763 1,883 5 (55) 2,677 52 16 28 - 32 20 448 (3) 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) (*1) Others include Smart Private Equity Fund No.2, IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership, AJU TAERIM 1st Fund, Woori G IPO10 [FI_Bal][F]C(F),Woori G Senior Loan No.1, Woori G Egis Bond[FI][F](C(F)), Woori G Clean Energy No.1, Woori Star50 Master Fund ClassC-F, Saman Corporation, Woori Growth Partnerships New Technology Private Equity Fund, Woori-Shinyoung Growth- Cap Private Equity Fund, Woori-Q Corporate Restructuring Private Equity Fund, Woori High plus G.B. Securities Feeder Fund1(G.B.), Uri Hanhwa Eureka Private Equity Fund, Japanese Hotel Real Estate Private Equity Fund 2, Partner One Value Up I Private Equity Fund, PCC-Woori LP Secondary Fund and etc., as of December 31, 2020. (*2) Others include Saman Corporation, Woori-Shinyoung Growth-Cap Private Equity Fund, Uri Hanhwa Eureka Private Equity Fund, Kyesan Engineering Co., Ltd., DAEA SNC Co., Ltd. and etc, as of December 31, 2019. (3) Major loan transactions with related parties for the years ended December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Related parties Associates W Service Network Co., 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 For the year ended December 31, 2020 Beginning balance Loan 23 3 1,860 244 7,500 141 4,490 337 17 2,133 2,575 - 1,942 - Collection 339 19 553 2,562 - 1,979 4,490 Ending balance (*) 21 1 3,440 257 7,500 104 - (*) Payments that occurred for business reasons among related parties are excluded and net increase or decrease was used for limited credit loan. Related parties Associates W Service Network Co., 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 For the year ended December 31, 2019 Beginning balance Loan 69 7 57 241 - 185 1,857 315 26 2,426 2,338 7,500 2,249 2,633 Collection 361 30 623 2,335 - 2,293 - Ending balance (*) 23 3 1,860 244 7,500 141 4,490 (*) Payments that occurred for business reasons among related parties are excluded and net increase or decrease was used for limited credit loan. (4) Details of changes in major deposits due to customers with related parties for the year December 31, 2020 and 2019 are as follows (Unit: Korean Won in millions): Associates W Service Networks Co., Ltd Related parties Chin Hung International Inc Partner One Value Up I Private Equity Fund Korea Credit Bureau Co., Ltd. For the year ended December 31, 2020 Beginning balance 1,180 400 1,150 - Increase Decrease Ending balance (*) 1,180 - 1,737 1,000 1,180 400 2,024 - 1,180 - 863 1,000 (*) Details of payment between related parties, demand deposit due to customers and etc. are excluded. Associates Related parties Saman Corporation (*2) W Service Networks Co., Ltd Chin Hung International Inc Partner One Value Up I Private Equity Fund Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. For the year ended December 31, 2019 Beginning balance Increase 2,436 1,180 765 1,403 6,000 535 86 1,460 400 1,617 - 25 Decrease - 1,460 765 Ending balance (*1) 2,522 1,180 400 1,870 6,000 560 1,150 - - (*1) Details of payment between related parties, demand deposit due to customers and etc. are excluded. (*2) Excluded from the related parties due to the loss of significant influence for the year ended December 31, 2020. (5) There are no major borrowing transactions with related parties for the years ended December 31, 2020 and 2019. 344 - 161 - - 162 - 345 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (6) Guarantees provided to the related parties are as follows (Unit: Korean Won in millions): 42. TRUST ACCOUNTS Warrantee Korea Finance Security Co., Ltd. Korea Credit Bureau Co., Ltd. W Service Network Co., Ltd. Chin Hung International Inc. K BANK Co., Ltd. Well to Sea No.3 Private Equity Fund LOTTE CARD Co. Ltd. December 31, 2020 820 34 179 16,167 196 - 500,000 December 31, 2019 400 32 177 32,055 159 210,510 150,000 Warranty Unused loan commitment Unused loan commitment Unused loan commitment Unused loan commitment Unused loan commitment Unused loan commitment Unused loan commitment As of December 31, 2020 and 2019, the recognized payment guarantee provisions are 284 million won and 384 million won, respectively, in relation to the guarantees provided to the related parties above. (7) Amount of commitments with the related parties Warrantee December 31, 2020 December 31, 2019 - 584,377 Warranty Open interest Well to Sea No.3 Private Equity Fund Together-Korea Government Private Pool Private Securities Investment Trust No.3 Woori-Q Corporate Restructuring Private Equity Fund PCC-Woori LP Secondary Fund Union Technology Finance Investment Association IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership Genesis Environmental Energy Company 1st Private Equity Fund Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund Woori-Shinyoung Growth-Cap Private Equity Fund I Woori G Senior Loan No.1 JC Assurance No.2 Private Equity Fund Woori Seoul Beltway Private Special Asset Fund Woori G Clean Energy No.1 990,000 - Open interest 36,355 2,525 10,500 9,704 916 550 12,799 53,041 1,650 41,393 7,485 53,372 7,575 Open interest Open interest - Open interest 15,424 Open interest - 625 39,335 - - 43,402 - Open interest Open interest Open interest Open interest Open interest Open interest Open interest (1) Trust accounts of the Bank are as follows (Unit: Korean Won in millions): Total assets Trust accounts December 31, 2020 64,317,167 December 31, 2019 60,288,399 Operating income For the years ended December 31 2020 2019 886,210 1,118,746 (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, 2020 December 31, 2019 33,761 353,598 1,639,869 1,993,467 31,533 392,453 2,730,806 3,123,259 (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 2019 2020 86,196 1,430 87,626 1,502 16,010 17,512 171,072 488 171,560 6,684 40,489 47,173 (8) Compensation for key management is as follows (Unit: Korean Won in millions): Short-term employee salaries Retirement benefit service costs Share-based compensation Total For the years ended December 31 2019 2020 22,778 910 3,519 27,207 13,427 783 2,494 16,704 Major management shall be executives and outside directors of Woori Financial Group and major subsidiaries, and includes the CEO of other subsidiaries. Outstanding assets from transactions with key management amount to 3,888 million won and 2,414 million won, as of December 31, 2020 and 2019 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 11,155 million won and 6,543 million won, respectively, as of December 31, 2020 and 2019, 346 - 163 - - 164 - 347 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (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, 2020 December 31, 2019 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 9,179 625 1,596 11,400 3,112 505,762 813,323 29,528 7,671 1,297 1,360,693 19 349 368 1,372,461 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 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): 43. LEASES (1) Lessor 1) Finance lease ① The total investment in finance lease and the present value of the minimum lease payments to be recovered are as follows: (Unit: Korean Won in millions): December 31, 2020 Within one year After one year but within two years After two years but within three years After three years but within four years After four years but within five years After five years Total Total investment in lease 24,649 48,781 132,894 171,137 277,282 16 654,759 Net investment in lease 23,957 45,575 120,414 151,756 244,481 12 586,195 ② The unrealized interest income of the finance lease as of December 31, 2020 is as follows. (Unit: Korean Won in millions): Total investment in lease Net investment in lease Present value of minimum lease payments Present value of unguaranteed residual value Unearned interest income Unearned interest income 654,759 586,195 586,133 62 68,564 Liabilities for the account (subsidy for Trust account adjustment) 16 35 ① The details of operating lease assets as of December 31, 2020 are as follows: (Unit: Korean December 31, 2020 December 31, 2019 2) Operating lease Won in millions): Acquisition cost Accumulated depreciation Net carrying value Vehicles 1,507,156 (390,981) 1,116,175 ② The details of changes in operating lease assets as of December 31, 2020 are as follows: (Unit: Korean Won in millions): Beginning balance Acquisition Disposal Depreciation Business combination Others Ending balance Amount - 118,256 (21,963) (52,504) 1,071,111 1,275 1,116,175 348 - 165 - - 166 - 349 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 ③ The future lease payments to be received under the lease contracts are as follows (Unit: Korean Won in millions): 44. BUSINESS COMBINATION (1) General Within one year After one year but within two years After two years but within three years After three years but within four years After four years but within five years Total Amount 240,005 223,074 156,859 80,174 24,992 725,104 ④ There is no adjusted lease payments recognized as profit or loss for the year ended December 31, 2020. (2) Lessee 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 December 31, 2020 December 31, 2019 173,885 200,844 34,787 409,516 161,251 232,985 40,698 434,934 2) Total cash outflows from lease are as follows (Unit: Korean Won in millions): Total cash outflows from lease For the years ended December 31 2020 2019 207,305 220,163 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): Lease payments for short-term leases Lease payments for which the underlying asset is of low value Total For the years ended December 31 2020 2019 1,760 751 2,511 1,964 332 2,296 (3) As mentioned in Note 2, the Group uses a practical expedient for rent concession as a direct consequence of COVID-19. Accordingly, the amount recognized in profit or loss during the reporting period is 20,602 million won, to reflect changes in lease payments arising from the rent concession. The Group acquired substantial control over Aju Capital Co., Ltd. on October 20, 2020, and completed the acquisition of 76.8% (excluding treasury stocks, 74.0% interest including treasury stocks) stake in Woori Financial Capital Co., Ltd. (formerly Aju Capital Co., Ltd.) on December 10, 2020.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 loss of Woori Financial Capital Co., Ltd., reflected in the consolidated statement of comprehensive income for the three months after the date of obtaining substantial control(October 20, 2020), are 21,163 million won and 30,349 million won, respectively. Had Woori Financial Capital Co., Ltd. been acquired from January 1, 2020, the consolidated statement of comprehensive income would have shown operating profit and net income of Woori Financial Capital Co., Ltd. for 138,116 and 58,980 million won, respectively. (2) Identifiable net assets Identified assets and liabilities as of the acquisition date are as follows (Unit: Korean Won in millions): Amount Assets Cash and cash equivalents Financial assets at FVTPL Financial assets at amortized cost (*1) Investment properties Premises and equipment and right-of- use assets Intangible assets (*2) Deferred tax assets Other assets Sub-total Financial liabilities Provisions Deferred tax liabilities Other liabilities Sub-total Liabilities Fair value of net identifiable assets 259,275 575,569 6,489,669 10,557 7,367 8,681 6,676 1,103,542 8,461,336 7,559,535 21,129 27,762 48,327 7,656,753 804,583 (*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 Financial Capital Co., Ltd. is 6,669,123 million won (including 4,531 million won in financial lease receivables), and the contractual cash flows that are not expected to be recovered as of the acquisition date are 179,454 million won. (including 710 million won in financial lease receivables) (*2) As 61,396 million won of Woori Financial Capital Co., Ltd.'s goodwill recognized at the acquisition of Woori Savings Bank is not an identifiable asset, it has been fully deducted. As the core deposits of Woori Savings Bank are determined to be separately identifiable intangible assets, an additional 1,278 million won was recognized, which was calculated by the fair value assessment through cost reduction method. The cost reduction method is to evaluate the reduced capital raising cost discounted as present value by comparing the cost of financing through deposits generated from stable customer relationships with the cost of financing through other sources. 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. 350 - 167 - - 168 - 351 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 (3) Profit from bargain purchase Recognized profit from bargain purchase as a result of business combination are as follows (Unit: Korean Won in million): Transfer price Fair value of net identifiable asset Non-controlling interest (*1) Profit from bargain purchase (*2) Amount 572,333 804,583 164,823 67,427 (*1) The Group measured the non-controlling interest in Woori Financial Capital acquired as of December 31, 2020 at fair value. (*2) Included in other non-operating income in the consolidated comprehensive income statement. In the event of a business combination, the consideration transferred includes the premium paid to acquire Woori Financial Capital Co., Ltd. In addition, the consideration paid for the business combination includes expected synergies, revenue growth, and the amount related to future market growth. The Group also acquired core deposit intangibles held by Woori Financial Savings Bank as part of the acquisition of Woori Financial Capital Co., Ltd. It was recognized separately from goodwill because it met the reparability criteria to meet the recognition requirements for intangible assets. (4) Business combination cost The Group incurred 1,071 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 45. EVENTS AFTER THE REPORTING PERIOD Amount 572,333 259,275 313,058 On March 5, 2021, the Group entered into a share purchase agreement to acquire 100% interests of Woori Savings Bank (common stock 12,160,398 shares) from one of the subsidiaries, Woori Financial Capital Co., Ltd. 352 - 169 - GLOBAL NETWORK (as of the end of Dec. 2020) Woori Bank Head Office 51, Sogong-ro (203, Hoehyeon-dong 1-ga), Jung-gu, Seoul, 100-792, Korea Phone: +82-2-2002-3000 Swift: HVBKKRSE Overseas Branch New York Agency 245, Park Ave. 43rd Floor, New York, NY 10167, USA Phone: 1-212-949-1900 LA Br. 3360, West Olympic Blvd. Suite 300, LA, CA90019, USA Phone: 1-213-620-0747~8 London Br. 9th Floor, 71 Fenchurch Street, London, EC3M 4BR,UK Phone: 44-207-680-0680 Tokyo Br. Shiodome City Center 10th Floor, 5-2 Higashi-Shimbashi 1-Chome, Minato-ku, Tokyo, 105-7110 Japan 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 Subsidiary U.S.A Woori Bank Narayanganj Branch Adamjee Export Processing zone, Shiddhirganj, Narayanganj-1431 Bangladesh Phone: 880-2769-2031~34 Woori Bank Motijheel Sub-Branch AA Tower, 23, Ground Floor, Motijheel C/A, Dhaka 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 Bank Kawranbazar Sub-Branch A.H.N Tower, Ground Floor, 13 Biponon C/A, Sonargaon Road, Bagla Motor, Dhaka Woori America Bank, Flushing Br. 136-88 39th Avenue Flushing New York, NY 11354, USA Phone: 1-718-886-1988 Chittagong Customer Service Center BEPZA Building, 1st floor of Zone Services Complex in Chattogram EPZ(CEPZ) Sydney Br. Suite 21.02, 126 Phillip Street, Sydney, NSW, Australia Phone: 61-2-8222-2200 Woori Bank Dubai Br. 1102A, Level 11, The Gate Building, East Wing, P.O. Box 506760, DIFC, Dubai, United Arab Emirates Phone: 971- 4-325-8365 Woori Bank India Regional Headquarters Unit 601, 6th floor, Birla Centurion, Century Mills Compound, Pandurang Budhkar Marg, Worli, Mumbai, Maharashtra-400030, India Phone: 91-22-6263-8100 Woori Bank Chennai Br. 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 Bank Gurgaon Br. 1st Floor, Salcon Platina Building, MG Road, Sector-28, Sikanderpur, Gurgaon-122001,Haryana, India 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 Woori America Bank, Fort Lee Br. 2053 Lemoine Avenue Fort Lee, NJ 07024, USA Phone: 1-201-363-9300 Woori America Bank, Woodside Br. 43-22 50th St. Woodside, NY 11377, USA Phone: 1-718-429-1900 Woori America Bank, Ridgefield Br. 321 Broad Avenue #104 Ridgefield, NJ 07657, USA Phone: 1-201-941-9999 Woori America Bank, Palisades Park Br. 225 Broad Avenue Palisades Park, NJ 07650, USA Phone: 1-201-346-0055 Woori America Bank, Closter Br. 234 Closter Dock Road Closter, NJ 07624, USA Phone: 1-201-784-7012 Woori America Bank, Elkins Park Br. 7300 Old York Rd Elkins Park, PA 19027 Phone: 1-215-782-1100 Woori America Bank, Annandale Br. Seoul Plaza 4231 Markeham St. Annandale, VA 22003, USA Phone: 1-703-256-7633 Woori America Bank, Bayside Br. 215-10 Northern Blvd. Bayside, NY 11361, USA Phone: 1-718-224-3800 Woori America Bank, Ellicott City Br. 100352 Baltimore National Pike Ellicott City, MD 21042, USA Phone: 1-443-973-3690 Woori America Bank, Wilshire Br. 3540 Wilshire Blvd. Unit 104, Los Angeles, CA 90010, USA Phone: 1-213-382-8700 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 353 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Woori America Bank, Garden Grove Br. 10120 Garden Grove Blvd. Suite 151Garden Grove, CA 92844, USA Phone: 1-714-534-6300 Woori Bank (China) Ltd. Suzhou Br. 6F Building #58 Suzhou Center, Suxiu Road,Suzhou Industrial Park, Jiangsu, China Phone: 86-0512-6295-0777 Wooribank (China) Ltd. Beijing Sanyuanqiao Sub-Br. 26F, Tower A, Tianyuangang Center, C2, North Road, East Third Ring Road, Chaoyang District, Beijing, China Phone: 86-010-8440-7177 Malang Branch Jl. Letjen Sutoyo No. 27 Malang- Jawa Timur/65141 Phone: 62341-421906 Soekarno Hatta Sub-Branch Jl. Soekarno Hatta No. 618 F/40286 Phone: 6222-7509905 Mojokerto Sub-Branch Jl. Gajah Mada No.85B/60319 Phone: 62321-383444 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 Woori America Bank, Torrance Br. 2390 Crenshaw Boulevard, Units C Torrance CA 90501 USA Phone: 1-310-974-1880 Woori America Bank, Georgia LPO 2472 Pleasant Hill Rd. Duluth, GA30096, USA Phone: 1-404-904-9880 Woori America Bank, San Jose LPO 2328 Walsh Ave, Santa Clara CA 95051 USA Phone: 1-415-652-9476 Woori America Bank. Northern 164-25 Northern Blvd. Flushing NY 11358, USA Phone: 1-929-362-3330 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, Dallas Br. 2405 S. Stemmons FWY, Lewisville, TX 75067 China Woori Bank (China) Ltd. Floor 11-12, Block A Building 13, District4, Wangjing East Park, Chaoyang District Beijing China 100102 Phone: 86-010-8412-3000 Woori Bank (China) Ltd. Head office business department Floor1 Block B Building 13 District4 Wangjing East Park Chaoyang District Beijing China 100102 Phone: 86-010-8441-7771 Woori Bank (China) Ltd. Beijing Br. 1F, West Tower, Twin Towers, B-12 Jianguomenwai Avenue, Chaoyang District, Beijing 100022, CHINA Phone: 86-010-8453-8880 Woori Bank (China) Ltd. Shanghai Br. 104B,502, Dongfangchunyi Building 1, 5F, Eshan Avenue 505 Pudong New Area, Shanghai,200122, China Phone: 86-021-5081-0707 Woori Bank (China) Ltd. Shenzhen Br. 1001,1002,1003,1004,1008 ,Hon Kwok City Commercial Center, Fuming Road, Futian District, Shenzhen, China Phone: 86-0755-3338-1234 354 Woori Bank (China) Ltd. TianJin Br. NO.1 Building, Aocheng Commercial Square, Binshui West Road, Nankai District, Tianjin, 300381 CHINA Phone: 86-022-2338-8008 Wooribank (China) Ltd, Shenyang Branch 1F, 2F, Lotte North-Station Arcade,9-8Beiling Street, Huanggu District, Shenyang, Liaoning 110032, China Phone: 86-024-8186-0808 Woori Bank (China) Ltd. Shanghai Puxi Sub-Br. 1F, Maxdo Center, NO.8 Xingyi Road, Changning District, Shanghai, 200336, China Phone: 86-021-5208-1000 Woori Bank (China) Ltd. Beijing Wangjing Sub-Br. 1F,NO.10, FURONG STREET, CHAOYANG DISTRICT, BEIJING 100102, CHINA Phone: 86-010-8471-8866 Woori Bank (China) Ltd. Shanghai Wuzhonglu Sub-Br. 1C, Liaoshen Building, 1068 Wuzhong Road, Minhang District, Shanghai, 201103, China Phone: 86-021-6446-7887 Woori Bank (China) Ltd. Shenzhen Futian Sub-Br. Room 107, Daqing Building, NO.6027 Shennan Road, Futian District, Shenzhen 518040, China Phone: 86-0755-8826-9000 Woori Bank (China) Ltd. Shanghai Jinxiujiangnan Sub-Br. 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 Phone: 86-0411-8765-8000 Woori Bank (China) Ltd. Zhangjiagang Sub-Br. B104/B205 Huachang Oriental Plaza, 11 Renmin East Road, Zhangjiagang Jiangsu, 215600 China Phone: 86-0512-5636-6696 Woori Bank (China) Ltd. Chengdu Br. No.302-306, 3F, Ping’an Fortune Center, No.1, Renmin South Road(Section 3), Chengdu, Sichuan, China, 610041 Phone: 86-512-028-6557-2336 Woori Bank (China) Ltd. Weihai Br. No.106-1、No.106-2、No.106-3 Attached Qingdao Mid- Road,Weihai, Shandong Province, China Phone: 86-0631-599-6000 Woori Bank (China)Ltd.Tianjin Dongmalu Sub-Br 1-2F，No. 4 of TowerC，Yuding Plaza（Qixiang Street), Dongma Road, Nankai District, Tianjin, 300090, China Phone: 86-022-8776-9000 WooriBank (China) Ltd. Chongqing Br. Shop 2, First Floor, Jinjia International Building, No.10, GuiHua Street Branch Road, JiangBei District, ChongQing, China, 400000 Phone: 86-023-6152-2222 Wooribank (China) Ltd. Shanghai Lianyang Sub-Br. No.52, Zendai Thumb Plaza Lane 199, FangDian Road,Pudong New District, Shanghai, 200135 CHINA Phone: 86-021-6882-0608 Indonesia Bank Woorisaudara Head Office Treasury Tower 26th, 27th FL. District 8 SCBD Lot 28 JI.Jend. Sudirman Kav. 52-53, Jakarta 12190 Phone: 6221-50871906 Corporate Branch Treasury Tower 26th, 27th FL. District 8 SCBD Lot 28 JI.Jend. Sudirman Kav. 52-53, Jakarta 12190 Phone: 6221-50871888 Diponegoro Branch JL. Diponegoro No,. 28, Bandung, West Java Phone: 6222-87831906 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.68 E - 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 The Gedung Energy Branch Gd The Energy Lot 11 A SCBD, Jl. Jendral Sudirman Kav 52 - 53, Jakarta/12190 Phone: 6221-29951906 Ampera Branch Jl. Ampera Raya No. 20 Gd.Medco III/12560 Phone: 6221-7821756 Purwokerto Branch Jl. Jenderal gatot Subroto No.78 Purwokerto - Jawa Tengah/53116 Phone: 62281-622212 Solo Branch Jl. Ronggo Warsito No. 53 Kota, Solo - Jawa Tengah/57131 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 Pekalongan Branch Jl. KH. Mansyur No.64, Perkalongan Phone: 62 285 4460505 Madiun Branch Jl. Diponegoro No. 110, Madiun Phone: 62 351 4773000 Jamber Branch Jl. Gajah Made No. Ruko Gajah Mada Square Block A2-3 Phone: 62 331 421648 Kediri Branch Jl, Brawijaya No. 25A Kota Kederi Phone: 62 354 4526726 Purwakarta Branch Jl. Basuki Rahmat No. 94, Purwakarta/41114 Phone: 62264-8227474 Subang Branch JL. Ahmad Yani No. 36/41211 Phone: 62260-421014 Karawaci Tangerang Branch Ruko Pinangsia Blok H No. 1 Lippo Karawaci Kel. Cibodas Tangerang/15139 Phone: 6221-55772345 Garut Branch Jl. Ahmad Yani No.33/44117 Phone: 62262-544672 Medan Branch Jl. Zainul Arifin No. 53A Phone: 6261-42007100 Makassar Branch Jl. Gunung Latimojong, Ruko Metro Square Blok E No. 1 Phone: 6241-18001859 Buah Batu Sub-Branch Jl. Buah Batu No. 58 Bandung/40265 Phone: 6222- 7306347 Kopo Sub-Branch Komp Ruko Mas J-9 Jl. Kopo Cirangrang/40225 Phone: 6222-5436802 Cimahi Sub-Branch Jl. Raya Cibabat No. 310 Cimahi/40213 Phone: 6222-6634656 Sukajadi Sub-Branch Jl Sukajadi No. 248 Bandung Phone: 6222-2042248 Pemuda/Rawamangun Sub-Branch Jalan Paus No 91F, Pulogadung, Jakarta Timur Phone: 6221-47862070 Cianjur Sub-Branch Jl. Abdulah Bin Nuh No.15/43253 Phone: 62263- 260941, 260943 Sumedang Sub-Branch Jl. Prabu Geusan Ulun No.76/45311 Phone: 62261-206527 Serang Sub-Branch Jl. KH. Abdul fatah Hasan No.53 Kel. Cipare Serang/42124 Phone: 62254-224142 Commercial Center Cikarang Sub-Branch Ruko The Capitol, Kawasan Industri JABABEKA, Jl. Niaga Raya Blok 2 C, Bekasi, West Java Phone: 6221-89328838 Atrium/Cideng Sub-Branch Jalan Keseman No 2, Kota. Jakarta Pusat Phone: 6221-3451964 Pamulang/Ciputat Sub-Branch Jl. RE. Martadinata No. 167 B RT.03 RW. 05 Cipayung, Ciputat, Kota Tangerang Selatan Phone: 6221-7403205, 7443335 Sumber Sub-Branch Jl. Dewi Sartika No. 57 Sumber/45611 Phone: 62231-8330618 Bantul Sub-Branch 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 Kebon Jeruk Sub-Branch Jl. Kelapa Dua Raya(RayaPanjang) No.2, Rt 008, Rw 002 Kel. Kelapa Dua Kec. Kebon Jeruk/12130 Phone: 6221-53660160 Ciledug Sub-Branch Ruko Dian Plaza Jl. Raden Fatah No. 8A Kelurahan Sudirman Selatan,Ciledug/15225 Phone: 6221-7330545 Pajajaran Sub-Branch Jl. Pajajaran no. 85, Bandung, West Java Phone: 6222-20565353 Magelang Sub-Branch Ruko Metro Square Blok F No.25/56172 Phone: 62293-326498/326499 Lembang Sub-Branch Jl. Grand Hotel Lembang No.25 Bandung/40391 Phone: 6222-2784797 Padalarang Sub-Branch Jl. Raya Padalarang No.463 H/40553 Phone: 6222-6803940/41 Jababeka Cikarang Sub-Branch Ruko Metro Boulevard Kav. A Jl. Niaga Raya No. 10 Kawasan Industri Jabeka/17835 Phone: 6221-89836020/ 89837020 Majalengka Sub-Branch Jl. KH. Abdul Halim No.447 Majalengka/45411 Phone: 62233-8285460 Kuningan Sub-Branch Jl. Dewi Sartika No.4/45512 Phone: 62232- 8880938 Indramayu Sub-Branch Jl. DI. Panjaitan No.103/45212 Phone: 62234-276236 Cibubur Sub-Branch Cibubur Times Square Blok B1/1 Jl. Alternatif Cibubur KM 3 Kel. Jatiraya, Kec. Jastisampurna Bekasi/17435 Phone: 6221-84305050 Cikampek Sub-Branch Jl. Terusan Sudirman No. 6B(Sudirman Center)/41373 Phone: 62264-8385171/ 8385172 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 Patrol Sub-Branch Jl. Raya Patrol Anjatan Blok Bunder No. 52/45256 Phone: 62234-5613627 Gianyar Sub-Branch Jl. By.Pass Dharma Giri No.99/80511 Phone: 62361-8958295 Gresik Sub-Branch Ruko KIG Jl. Tri Dharma Kav. A-14/61117 Phone: 6231-3981758 Karawang Sub-Branch Perumahan Galuh Mas Ruko Street Festival Blok 3 No. H-9, Jl. Galuh mas Raya, Karawang, West Java Phone: 62267-8407706 Cibinong Sub-Branch Jl. Raya Mayor Oking No.158 V/16918 Phone: 6221-87904397 Singaparna Sub-Branch Jl. Raya Timur No.45 Singaparna/46416 Phone: 62265-543111-3 Ciamis Sub-Branch Ruko Jl Pasar Manis No. 35 -Kab. Ciamis Phone: 62265-772221 Sleman Sub-Branch Jl. Magelang KM 12.8 No.200/55514 Phone: 62274-865922 Losari Sub-Branch Jl. Letjen S. Parman No. 20 Kecamatan Pabuaran , Kab. Cirebon Jawa Barat Phone: 62231- 8832738-39 355 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Bekasi/Pondok Gede Sub-Branch Jl Raya Jatimakmur Blok A No. 20 Pondok Gede, Kota Bekasi Ruko Taman Jatimakmur Indah Phone: 6221-82611045-46 Cilacap Sub-Branch Jl. Jend. A Yani No.46 Cilacap/53212 Phone: 62282-537929 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 Pangalengan Sub-Branch Jl. Raya Pintu Pangalengan KM-1/40378 Phone: 6222-5979222 Megablock Cilegon Sub-Branch Jl. Raya Ahmad Yani Komp. Cilegon Green Megablock D3 No. 17 - Kota. Cilegon Phone: 62254-8484772 Rangkasbitung Sub-Branch Jl Hardiwangun No.6 B Rangkasbitung - Kab. Lebak Phone: 62252-203612 Tabanan Sub-Branch Jl. Ngurah Rai No. 73 Kediri/82121 Phone: 62361-814160 Surabaya /Darmo Boulevard Sub-Branch Office Park II B.2 No.11 Phone: 6231-7381906 Soreang Sub-Branch Jl. Raya Soreang No.412/40900 Phone: 6222-5896880 Ujung Berung Sub-Branch Jl AH Nasution No. 28 - Kota.Bandung Phone: 6222-7834128 Jemur Sari/Surabaya selatan Sub-Branch Jl. Raya Jemursari No. 15C Surabaya/60237 Phone: 6231-8480454 Luragung Sub-Branch Jl. Siliwangi No. 62, Ds. Luragungtonggoh, Kec. Luragung, Kab. Kuningan Phone: 62223-2870016 Pangandaran Sub-Branch Jl. Parapat, Desa Pangandaran, kec pangandaran kab ciamis/46396 Phone: 62265-630400,630010 Purwodadi Sub-Branch 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 Ciawi Tasikmalaya Sub-Branch Jl. Perjuangan No.80 Kp.Karanganyar Rt. 04 Rw. 05 Desa Pakemitan Kec Ciawi Kab. Tasikmalaya/46156 Phone: 62265-455163,455167 356 Jombang Sub-Branch Ruko Cempaka Mas Regency Block B-2. JL Soekarno Hatta Kel Kepuhkembeng Kec Peterongan. Jombang, East Java Phone: 62321-878906 Banjar Sub-Branch Jl. Letjen Soewarto No.92/46321 Phone: 62265-740557 Boyolali Sub-Branch Jl. Pandanaran No.179 B Kab.Boyolali/57313 Phone: 62276-323655 Radio dalam Sub-Branch JL. Radio dalam raya No.4 Kel. Gandaria Utara Kec. Kebayoran baru Jakarta selatan/12160 Phone: 6221-7211005 Singaraja Sub-Branch Jl. Ngurah Rai No. 16 Singaraja Kelurahan Kendran Kecamatan Buleleng/81112 Phone: 62362-25098 Manonjaya Sub-Branch Jl. RTA. Prawira Adiningrat No.214 A Desa Manonjaya kec.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 Karangnunggal Sub-Branch Jl. Raya Karangnunggal KP.Karangmekar RT/RW 03/09 Desa Hegarwangi Kec. Bantarkalong Kab. Phone: 62265-2584571/2584572 Wonogiri Sub-Branch Jalan Ahmad Yani No 66, Wonogiri Phone: 62271-633600 Kawali Sub-Branch Jl. Siliwangi No.262, Desa Kawali mukti Phone: 62265 791560 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 Ruko Harco Mangga Dua Blok L. No.5 Phone: 6221 62306495 Kelapa Gading Sub-Branch Jl. Boulevard Barat Ruko MOI Blok I No.15 Phone: 62 21 29364053 Kayu Agung Sub-Branch Jl. Letnan Muthtar Saleh, Kayuagung, Palembang, South Sumatra Phone: 62-711-315828 Klaten Sub-Branch Jl. Pemuda No. 246 Klaten, solo Phone: 62-271-633600 Pasuruan Sub-Branch Jl. Panglima Sudirman No.45 Ruko I, Pasuruan, Malang 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 Pelabuhan Ratu Sub-Branch Jl. Siliwangi Rt/Rw 02/18, Desa Pelabuhan Ratu Phone: 62-266-6249715 Posco Cilegon Sub-branch Annex Building Lt. 1 Jl. Afrika No.2 Krakatau Posco Cilegon/42435 Phone: 62254-369755 Union Square Cikarang Sub-branch 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 Cikajang Sub-branch Jl. Raya Cikajang No. 80 Garut Phone: 6262-576094 Kendal Sub-branch Jl. Raya Utama No.9 weleri kendal Phone: 62294-644704 Wonosari Sub-branch Jl. KH. Agus Salim No.71A Wonosari - Kab Gunungkidul Phone: 62274-3950673 Purbalingga Sub-branch Jl. Ahmad Yani No.42 Purbalingga Phone: 62281-895553 Sragen Sub-branch Jl. Sukowati No.156 Sragen Phone: 62271-895015 Bintaro Sub-branch Jl Kesehatan No 18B, jakarta Phone: 6221-7374693 KCP PROBOLINGGO Ruko Manunggal No. 2, Jl. Soekarno Hatta Phone: 6233-54491787 KCP PANDEGLANG Jl. Raya Labuan KM 1 Phone: 6225-35554739 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 Jl. Jawa Raya Blok A 14 No. 7 (Kawasan Berikat Nusantara) Phone: 6214-84556 KCP PANTAI INDAH KAPUK Jl. Marina Raya, Rukan Cordoba Blok A Nomor 11 Phone: 6212-2571768 KCP CENTRAL PARK Ruko Garden Shopping Arcade No. 9 A-C Phone: 6212-9334623 KCP JEPARA Jl. Pemuda No. 21 D-E Phone: 6291-4290507 KCP BANJARNEGARA Jl. Letjend S Parman No. 29 Phone: 6286-5963716 Lawang Sub-branch Ruko Lawang View Kav 8, JI. Thamrin, Kecamatan Lawang Phone: 62-341-423540 Purworejo Sub-branch JI. Ahmad Yani no.93, Purworejo Phone: 62-75-321457 Brebes Sub-branch Jl. Jenderal Ahmad Yani No 26 F Phone: 6288-34511421 Karanganyar Sub-branch Jalan Raya Palur Jurug RT 004/RW 001 Desa Ngringo, Kec. Jaten, Kab. Karanganyar Phone: 62-271-6882712 Ungaran Sub-branch Jl. Diponegoro No. 79 Kelurahan Ungaran, Kecamatan Ungaran Barat, Semarang, Central Java, 50511 Phone: 6224-76510787 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 Asabri Bandung Cash-Office Jl. Citarum No.6, Bandung, West Java Phone: 6222-7279740 Jatinangor Cash-Office Jl. Raya Jatinangor KM 20.5 KKBI IKOPIN/45363 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 AO Woori Bank Saint-Petersburg Br. 1st Floor, Atlantic City, 126 Savushkina Street, Saint- Petersburg, 197374, Russia Phone: 7-812-327-9787 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 AO Woori Bank Vladivostok Representative Office Vladivostok Business-Center Office No. 614, 29, Semenovskaya Str. Vladivostok, 690091, Russia Phone: 7-423-240-7014 Brazil Serang / pamila Cilegon Cash-Office Jl. Raya Serang- pandeglang KM 11 Lingkungan waru Lor,Desa/kel. Kamanisa Kec Curug Kota serang/42117 Phone: 62254-222133 Woori Bank Brasil Avenida das Nacoes Unidas, 14,171, Crystal Tower, Conj.803, Vila Gertrudes, 04794-000, Sao Paulo-SP,Brasil Phone: 55-11-3511-3300 Gading Serpong Cash-Office Jl. Boulevard Raya Gading Sepong, Ruko Alexandrite 3, No.21, Kabupaten Tangerang Phone: 62-21-5421-2159 Woori Bank Brasil Bom Retiro Branch Rua Tres Rios, 261 Andar 2, Bom Retiro, Sao Paulo SP, Brasil Phone: 55-11-3511-3350 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. Phone: 04 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 Asabri Semarang Cash-Office JL Perintis Kemerdekaan No3. Kel Pudakpayung Kec Banyumanik. Semarang, Central Java Phone: 62247-6403870 Dalem Kaum Functional Office JL. Dalem Kaum No.5 Bandung Phone: 6222- 4233810 Hong Kong Woori Global Markets Asia Limited Rooms 1907-1909, 19/F, Gloucester Tower, The Landmark, 15 Queen’s Road Central, Hong Kong Phone: 852-3763-0888 Russia AO Woori Bank 8th floor., Lotte Plaza, 8, Novinsky Boulevard, Moscow, 121099, Russia Phone: 7-495-783-9787121099 Myanmar Woori Finance Myanmar Plc. 115/A, Pyay Road, Saw Bwar Gyee Kone Ward(10 miles), Insein Township Yangon, Myanmar Phone: 95-01-64379811011 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, Yangon, Myanmar Phone: 95-9-974563586 Hmawbi II Branch 1F No(26) Tatkyee Kone village, Hmawbi Township, Yangon, Myanmar Phone: 95-9-97456395 Maubin I Branch Plot No(34), No(396), Building 01, Yei Le road, Ward 7, Maubine Township, Ayeyarwaddy, Myanmar (2F) Phone: 95 9 9712 25895 Maubin II Branch Plot No(34), No(396), Building 01, Yei Le road, Ward 7, Maubine Township, Ayeyarwaddy, Myanmar (1F) Phone: 95 9 9616 12763 357 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Kawhmu Branch No 192/B, Bogyoke St. South Wd Kawhmu Townshop, Yangon Phone: 95 9 9742 91112 Gyobingauk I Branch No. 154, Ashay Myopat St. Pan Tin Ward, Gyobingauk Township, Bago, Myanmar Phone: 95 9 764433936 Natmauk Branch No.22, Plot U Paing No.105, East Aung San Ward, Natmauk Township, Magway Phone: 95-9-891504155 TAGBILARAN BANKING CENTER Ground Floor, No. 15 JS Torralba St., Poblacion 2, Tagbilaran City, Bohol Phone: 63-411-4860 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 Insein Branch 115/A, Pyay Road, Saw Bwar Gyee Kone Ward(10 miles), Insein Township Yangon, Myanmar Phone: 95 1 643798 Zigon Branch Hlaing Htate Khaung Tin St. No. 1 Ward, Zigon Township, Bago, Myanmar Phone: 95 9 780 113417 Kungyangon Branch No 540, Yadanar Pone 2nd St, Kangyi / Magyi Ward, Kungyangon Township, Yangon, Myanmar Phone: 95 9 975 890019 Paungde I Branch Plot No. 79, Shwetaung Street, Min Kwet 3, Ward, Paungde Township, Bago, Myanmar Phone: 95 9 780114012 Zalun Branch Bogyok St. Nyaung Pin Zay Ward, Zalun Township, Ayeyarwady, Myanmar Phone: 95 9 960996083 Paungde II Branch Plot No. 79, Shwetaung Street, Min Kwet 3, Ward, Paungde Township, Bago, Myanmar Phone: 95 9 780114068 Kyimyindaing Branch No. 101, Tha Yet Taw(3) Upper St. Tha Yet Taw Ward, Kyimyindaing Township, Yangon, Myanmar Phone: 95 9 960996092 Lewe I Branch No. 17 Plot, Min Wine Yat, No. 4 Ward, Lewe Township, Nay Pyi Taw, Myanmar Phone: 95 9 402187901 Hinthada I Branch No. 49, U Wisarra St. Pha Tar Gyi Ward, Hinthada Township, Ayeyardady, Myanmar Phone: 95 9 960996099 Pyinmana I Branch No. 181, Yarza Htarni St. Aung Thar Yar Ward, Pobbathiri Township, Nay Pyi Taw, Myanmar Phone: 95 9 402187923 Hlaing Branch No. 101, Tha Yet Taw(3) Upper St. Tha Yet Taw Ward, Kyimyindaing Township, Yangon, Myanmar Phone: 95 9 960996089 Pyinmana II Branch No. 181, Yarza Htarni St. Aung Thar Yar Ward, Pobbathiri Township, Nay Pyi Taw, Myanmar Phone: 95 9 402187924 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 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 Ⅲ Branch Lewe No. 241, Office Street, Min Wine Yat, No. 4 Ward, Lewe Township, Nay Pyi Taw, Myanmar Phone: 95 9 403663020 Ⅰ Branch Takkon No. (ma-127), Yin Mar Street, Area (3), Mya Waddy Ward, Takkon Township, Nay Pyi Taw Phone: 95 9 441473341 Ⅱ Branch Takkon 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 Branch No.52, Apyin Tharzi Street, Tharzi Ward, Nattalin Township, Bago Phone: 95-9-773579731 Gyobingauk I Branch No. 154, Ashay Myopat St. Pan Tin Ward, Gyobingauk Township, Bago, Myanmar Phone: 95 9 764433935 Taungwingyi Branch No. 174, Ohntaw No. 2 Ward, Taungdwingyi Township, Magwey Phone: 95-9-692687628 358 Philippines Wealth Development Bank Taft Financial Center, Cardinal Rosales Avenue, Cebu Business Park, Cebu City, Cebu Phone: 63-32-415-5265 ALABANG BRANCH Unit 103, South Center Tower Condominium 2206 Market Street, Madrigal Business Par Alabang, Muntinlupa City Phone: 63-2-801-5335 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 CEBU TABUNOK BRANCH Ground Floor, AGSy Bldg., National Hi-Way, Tabunok Talisay City, Cebu Phone: 63-32-272-2955 CEBU MANDAUE PACIFIC MALL METRO BRANCH Ground Floor, Mandaue Pacific Mall Metro National Highway corner M.B. Fernan Ave. Estancia, Ibabao, Mandaue City, Metro Cebu Phone: 63-32-239-1072 CEBU MAMBALING BRANCH G/F Metro Store Mambaling, Cebu, N. Bacalso Avenue corner F. Llamas Street, Basak San Nicolas, Cebu City Phone: 63-414-4233 ILOILO BANKING CENTER Ground Floor, ACCE Bldg., Mabini Ledesma St., Liberation, Iloilo City Phone: 63-338-4419 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 NAGA BRANCH Ground Floor, Super Metro Camarines Sur, Panganiban Drive, Naga City, Casmarines Sur Phone: 63-054-881-2836 BAGUIO BRANCH NRC Building, Abanao Street, Baguio City, Benguet, Cordillera Administrative Region Phone: 63-074-665-2394 BINONDO BRANCH Lucky Chinatown Mall, Reina Regente St. Binondo, Manila, National Capital Region 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 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 10th Floor, Becamex Building, No.230, Binh Duong boulevard, Thu Dau Mot City, Binh Duong Province, Vietnam Phone: 84-274-222-2631821620 Phu My Hung Branch 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 Ha Nam Branch 1st and 2nd floor, Tien Loc Building, Commercial Service Zone 4, Thanh Chau ward, Phu Ly City, Ha Nam Province, Vietnam Phone: 84-266-730-0020 Da Nang Branch 2nd floor, Phi Long Technology Building, 52 Nguyen Van Linh Road, Nam Duong Ward, Hai Chau District, Da Nang City, Vietnam Phone: 84-236-730-0321 Bien Hoa Branch 5th Floor, Sonadezi Building, No 1, Road 1, Bien Hoa 1 Industrial Zone, An Binh Ward, Bien Hoa City, Dong Nai Province, Vietnam Phone: 84-251-730-0270 Sai Gon Branch 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 Hoan Kiem Branch 1st and 5th Floor, Asia Tower Building, No.6, Nha Tho street, Hang Trong ward, Hoan Kiem district, Hanoi city, Vietnam Phone: 84-24-3204-5203 Cambodia WB Finance Buliding 398, Preah Monivong Blvd, Sangkat Boeun Keng Kang 1, Khan Chamkarmon, Phnom Penh 12302, 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, Sangkat Preak Ruessei, Ta Khmao City, Kandal Province Phone: 087634444 Sa’ang Branch Office National Road no.21, Preaek Run village, Preaek Koy commune, S’ang district, Kandal province Phone: 087777993 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, Preaek Roka Commune, Kandal Stueng district, Kandal province Phone: 087777132 Leuk Daek (Kampong Phnom) Branch Office National Road No. 1, Ampil Tuek village, Kampong Phnum commune, Leuk Daek district, Kandal province Phone: 087777279 Prey Veng Branch Office National Road No 11. Village 8, Sangkat Kampong Leav, Prey Veng city, Prey Veng province Phone: 010855644 Sithor Kandal Branch Office Preaek Sandaek Village Preaek Changkran Commune, Sithor Kandal District Prey Veng Province. Phone: 010855220 Svay Rieng and Svay Chrom Regional Office Keansang Village, Svay Rieng Commune, Svay Rieng City, Svay Rieng Province Phone: 068855973 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 Chantrea Branch Office 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 359 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Kampong Ro Branch Office Svay Anat Village, Nhor Commune, Kampong Rou District, Svay Rieng Province Phone: 0889204643 Basedth Branch Office Slab Leaeng village, Svay Rompea commune, Basedth district, Kampong Speu province Phone: 0884874229 Phnum Kravanh Branch Office Pich Ban Village, Leach Commune, Phnum Kravanh District, Pursat Province Phone: 0884845057 Rumduol Branch Office 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 Bati Branch Office National Road no. 2, Smau Khnhei village, Trapeang Sab commune, Bati district, Takeo province Phone: 0884839823 Tramkok Branch Office Prey Rumdeng Village, Angk Ta Saom Commune, Tram Kak District, Takeo province Phone: 060855213 Kirivong Branch Office Po Khvet Village, Phrah Bat Choan Chum Commune, Kirivong District, Takeo Province Phone: 060855886 Koh Andaet Branch Office Prey Malong Khang Tbong Village, Prey Khla commune, Koh Andaet district, Takeo province Phone: 0884839711 Samraong Branch Office Krang Lang Village, Cheung Kuon Commune,Samraong District, Takeo province Phone: 0888551219 Prey Kabas Branch Office #408, St 108, Prey Lavea Ket Village, Prey Lavea Commune,Prey Kabas district, Takeo povince Phone: 0884839908 Kampot (Chhouk) Regional Office National Road no. 3, Damnak Toap Khang Tboung village, Krang Snay commune, Chhuk district, Kampot province Phone: 0974855014 Banteay Meas Branch Office Samrong village, Samrong Krom commune, Banteay Meas district, Kampot province Phone: 0884844237 Angkor Chey Branch Office Pral Village, Tani Commune, Angkor Chey District,Kampot Province Phone: 060855085 Kampong Trach Branch Office Kampong Trach Ti Muoy Village, Kampong Trach Khang Kaeut Commune, Kampong Trach District, Kampot Province Phone: 060855075 Kampong Speu Regional Office # 85, national road #04, Borei Kammeakkar Village, Rokar Thum Commune/Sangkat, Chbar Mon Municipality/District/Khan, Kampong Speu Province Phone: 066746666 Korng Pisey Branch Office Tuol Ta Sokh Village, Saen Die Commune, Samraong Tong District, Kampong Speu Province Phone: 068855662 Veal Veaeng Branch Office Pramaoy village, Pramaoy commune, Veal Veaeng district, Pursat province Phone: 0884845556 Kampong Thom Regional Office House #009 Group 01 National Road no. 6, Stueng Saen Village, Sangkat Kampong Krabao,Stoung Sen City and Kampong Thom Province Phone: 067855333 Oudong-1 Branch Office Bat Doeung village, Khsem Khsan commune, Oudongk district, Kampong Speu province Phone: 060855776 Romlong Branch Office Rom Chek Village,Treal Commune, Baray District, Kompong Thom Province, Phone: 060855388 Kraing Chek (Oudong II) Branch Office Ta Ni village, Krang Chek Commune, Odongk District, Kampong Speu province Phone: 0884839856 Thporng Branch Office Tranh Veaeng Village, Prambei Mum Commune, Thpong District, Kampong Speu Province Phone: 0884839945 Oral Branch Office Phsar Kontourt village, Sangkea Sartorb Commune, Oral district, Kampong Speu province. Phone: 066574593 Phnum Sruoch Branch Office Krang Khcheay village, Tang Sya commune, Phnum Sruoch district, Kampong Speu province Phone: 0884837957 Tuek Phors Branch Office Srae Ta Chey Vallage, Akphivoadth Communce, Tuek Phos District, Kampong Chhnang Province Phone: 087777010 Kampong Chhnang Regional Office National Road no.5, Tuol Kralanh village, Sangkat Kampong Chhnang , Kampong Chhnang city, Kampong Chhnang province Phone: 0974855006 Stoung Branch Office National Road no. 6, Leap Tong village, Kampong Chen Tboung commune, Stoung district, Kampong Thom province Phone: 0884836778 Baray Branch Office Prey Ta Trav Village, Balang Commune, Baray District, Kampong Thom Province Phone: 0713855039 Sandan Branch Office Toekmleang village, Sandan commune, Sandan district, Kampong Thom province Phone: 0884827690 Prasat Sambour Branch Office Sambo Village ,Sambo commune, Prasat Sambour district, Kampong Thom province Phone: 0884836883 Chamka Loeu Branch Office Thnol Bek Lech Village, Svay Tearb Commune, Chamkar Loeu District, Kampong Cham Province. Phone: 0888472236 Battambang Regional Office #99, No. 03, Mphey Osakphea village, Sangkat Svay Pao, Battambang city, Battambang province Phone: 066855022 Kampong Leaeng Branch Office Kampong Boeng village, Kampong Hau commune, Kampong Leng district, Kampong Chhnang province Phone: 090855763 Banan Branch Office Banan Village Kantueu Pir Commune, Banan District, Battambang Province Phone: 010855775 Kampong Tralach Branch Office Soben Village, Peani Commune, Kampong Tralach District, Kampong Chhnang Province Phone: 090855820 Ratanak Mondul Branch Office #34, Sdau village, Sdau Commune, Rotonak Mondol distrcit, Battambang province Phone: 010855977 Boribour Branch Office Cheung Khnar Village, Ponley Communce, Boribour District, Kampong Chhnang Province Phone: 0886007498 Moung Ruessei Branch Office Pou Muoy Village,Kear Commune, Moung Ruessei District, Battambang Province Phone: 069855585 Kampong Som Branch Office Village no. 03, Sangkat Lak 02, Quarter, Metapheap Ward, Preah Sihanouk City Phone: 068855997 Pursat Branch Office #475, National Road 5, Krang Pophleak Village, Svay At Commune, Pursat District, Pursat province Phone: 0886007540 Bakan Branch Office Khnach Romeas Village, Beung Khnar Commune, Bakan District, Pursat Province Phone: 0886007538 Sre Ambel Branch Office Trapeang village, Sre Ambel commune, Sre Ambel district, Koh Kong province Phone: 0884837124 Krakor Branch Office National Road 5, Phsar village, Anlong Tnaot commune, Krakor district, Pursat province Phone: 0884838011 Pailin Branch Office O’Tapuk Le village, Pailin commune, Pailin city, Pailin province Phone: 0884873724 360 Samlout Branch Office Ou Tontuem village, Ta sanh commune, Samlout district, Battambang province Phone: 0884873767 Kratie Regional Office Oreussey Village, Kratie Ward, Kratie City, Kratie Province, Phone: 0888848041 Samraong Chong Kal Branch Office at Doun Kaen Village, Samraong Commune, Samraong District, Oddar Meanchey province Phone: 087666741 Kamrieng Branch Office Dong Village, Boeng Reang Commune, Kamrieng District, Battambang Province Phone: 090309180 Chhloung Branch Office Chrouy Thma Kraom village, Chhloung commune, Chhloung district, Kratie province Phone: 0888816546 Chi Kraeng Branch Office #079, Group 01, Kampong Kdey1 Village, Kampong Kdey Commune, Chikrek District, Siem Reap Province. Phone: 087555474 Preah Vihear Regional Office Lor Et village, Sangkat Kampong Branak, Preah Vihea city, Preah Vihea province Phone: 0884488844 Snuol Branch Office Kbal Snuol Village, Snuol Commune, Snuol District, Kratie Province Phone: 0884818019 Kuleaen Branch Office Kuleaen Tboung Village, Kuleaen Tboung commune, Kuleaen district, Preah Vihear province Phone: 0886007523 Keo Sema Branch Office Ou Arm Village, Sre Khtom Commune, Keo Sema District, Mondol Kiri Province Phone: 0884818026 Sangkum Thmey Satellite Office Tbeang Village, Chamraeun commune, Sangkom Thmei district, Preah Vihear province Phone: 060855749 Dambae Branch Office National Road no. 73,Thnal village, Dambae commune, Dambae district, Kampong Cham province Phone: 0884843373 Rovieng Branch Office Tang Trak Village, Robieb commune, Rovieng District, Preah Vihear Province Phone: 0884845242 Memot Branch Office Masin Tuek Village, Memot Cummune, Memot District, Kampong Cham Province Phone: 0884381224 Trapaing Prasat Branch Office Trapeang Prasat Village, Trapeang Prasat commune, Trapeang Prasat District, Oddar Meanchey Province Phone: 0884845248 Choam Khsant Branch Office National Road 69B, Choam Khsant village, Choam Khsant commune, Choam Khsant district, Preah Vihear province Phone: 0884845291 Banteay Mean Chey Regional Office National Road no.6, Kampong Svay village, Sangkat Kampong Svay, Serei Saophoan city, Banteay Mean Chey province Phone: 0884838900 Ou Chrov Branch Office #15A, National Road no.5, Palilai village, Sangkat Paoy Paet, Paoy Paet city, Banteay Mean Chey province Phone: 0884845706 Kampong Cham Regional Office National Road 7, village Boeng Snay, Kampong Cham city, Kampong Cham province Phone: 0884840089 Thma Puok Branch Office Kasen village, Thma Puok commune, Thma Puok district, Bantey Mean Chey province Phone: 0884839749 Prey Chhor Branch Office Doun Die village, Chrey Vean commune, Prey Chhor district, Kampong Cham province Phone: 0884842218 Bavel Branch Office #15, st. Aksor Te, Bavel 1village, Bavel commune, Bavel district, Battambang province Phone: 090281942 Stoeung Trang Branch Office Tnaot Ta Say Village, Preak Kak Commune, Stueng Trang District, Kampong Cham Province. Phone: 0884842804 Phnom Proek Branch Office Phnum Toch village, Pech Chenda commune, Phnum Proek district, Battambang province Phone: 090855342 Chulkiri Branch Office Prey Kri Tbong Village, Prey Kri commune, Chulkiri district, Kampong Chhnang province Phone: 0884839707 Siem Reap Regional Office #76, National Road no. 6, Chong Kao Sou village, Sangkat Slor Kram, Siem Reap city, Siem Reap province Phone: 0884845477 Tbong Khmom Branch Office National Road no. 7, Cheung Lang village, Sangkat Suong, Suong city, Kampong Cham province Phone: 0886007526 Puok Branch Office Puok Chas Village, Puok Commune, Puok District, Siem Reap Province Phone: 0884836879 Koh Sotin Branch Office Phsar Thmey Village, Pearm Pror Thnours Commune, Koh Sotin District, Kampong Cham Province Phone: 0883031098 Srey Snom Branch Office Chroy Neang Nguon village, Chroy Neang Nguon commune, Srey Snam district, Siem Reap province Phone: 060270442 Ponhea Kraek Branch Office National Road no. 7, Peao Srok village, Kaong Kang commune, Ponhea Kraek district, Thbong Khmom province Phone: 0979111030 Angkor Chum Branch Office Kbal Cham Village,Char Chhuk commune, Angkor Chum District, Siem Reap Province. Phone: 087555476 Preah Net Preah Branch Office National Road 6, Phnum Chonhcheang village, Chob Veari commune, Preah Netr Preah district, Banteay Mean Chey province Phone: 060855553 Phnom Penh (Tuol Kork) Regional Office #152B2, St 516, 13 Village, Sangkat Boeung Kork 1, Khan Toulkork, Phnom Penh. Phone: 0719833384 Stueng Mean Chey Branch Office No. 19 and 21 EoE1, Street Veng Sreng, Group 1, Ruessei Commune, Sangkat Stueng Mean Chey, Khan Mean Chey, Phnom Penh Phone: 087888277 Punhea Lueu Branch Office #87, National Road No. 5, Tep Pranom village, Vihea Luong commune, Ponhea Lueu district, Kandal province Phone: 0884843228 Mukh Kampoul Branch Office La Edth Village, Preaek Dambang Commune, Mukh Kampul District, Kandal Province Phone: 0884842169 Khsach Kandal (Preaek Tameak) Branch Office Knong village, Preaek Tameak commune, Khsach Kandal district, Kandal province Phone: 0884842027 Svay Pak Branch Office National Road No. 5, Lu Village Svay Pak, Khan Russey Keo, Phnom Penh Phone: 0884845604 Chaom Chau Branch Office Prey Svay Village, Sangkat Chaom Chau, Khan Pur SenChey, Phnom Penh Phone: 0884840208 Chruoy Changvar Branch Office lot No. A-01, Street 6A, Phum 3, Sangkat Chrouy Chang Var, Khan Chroy Chang Var, Phom Penh City Phone: 0884841986 Srey Sonthor Branch Office Santey village, Preaek Po commune, Srey Sonthor district, Kampong Cham Phone: 0884845245 Ratanakiri Regional Office Chey Chumnas Village, sangkat Labanseak, City Banlung, Ratanakiri Province Phone: 0884830845 Stoeung Treng Branch Office Spean Thmor Village, Stoeung Treng Commune, Stoeung Treng District Stoeung Treng Province Phone: 0713261010 Koh Nhek Branch Office Reangsei village, Srae Sangkum commune, Kaoh Nheaek district, Mondul Kiri province Phone: 0713855124 361 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Borkeo Branch Office Phum Muoy village, La Minh Commune, Bar Kaev District, Ratanakiri Province, Phone: 0713260505 Kean svay Branch House No. 330, National Road 1, Toul Tnaot village, Korkir Communce, Kien Svay district, Kandal province Phone: 855-23-720-632 Kandal Stueng Branch Land No. 5, St. 38, Svay Ming Village, Barku Commune, Kandal Stueng District, Kandal Province Phone: 855 024 900 066 Saen Monourom Branch Office Chambak Village, Spean Mean Chey Commune, Saen Monourom District, Mondul Kiri Province Phone: 0713855100 Takhmao Branch Building No. 31, National Road 2, Ta Khmau village, Sangkat Ta Khmau, Krong Ta Khmau, Kandal Province. Phone: 855-24-998-333 Odongk Branch National Road No. 5, Mlu Meun Village, Phsar Daek Commune, Ponhea Lueu District, Kandal Province Phone: 855 024 900 077 Kampot Branch Kampong Bay Khang Cheung Village, Kampong Bay Sangkat, Kampot City, Kampot Province Phone: 855-68-435555 PrekPhnov Branch National Road 5, Phum Kandal, Sangkat Preaek Phnov, Khan Preae Phnov, Phnom Penh. Phone: 855-23-900-345 Kamchaymear Branch National Road No. 8, Tean Phleung Village, Smaong Khang Cheung Commune, Kamchay Mear District, Prey Veng Province Phone: 855-10-855747 Ang Snoul Branch House No 183, National Road 4, Trapeang Krasang Village, Baek Chan Commune, Angk Snuol District, Kandal Province. Phone: 855-023-999-355 Thmakoul Branch National Road No. 5, Paoy Yong Village, Ta Pung Commune, Thma Koul District, Battambang Province Phone: 855-69-855755 Phsar Depo Branch House No 138D, St 215, Sangkat Veal Vong, Khan Prampir Meakkakra, Phnom Penh Phone: 855-23-900-455 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 MesseTurm, 29th floor, Friedrich-Ebert-Anlage 49, 60308, Frankfurt am Main, Germany Phone: +49(0)69 299 254 0 Khemarak Phoumin Branch Street Khemara Phoumin, Group 7, Phum Ti Pir Village, Sangkat Smach Mean Chey, Khemara Phoumin Municipality, Koh Kong Province Phone: 855-88-8558025 AreyKshat Branch House No 76, Road No.380, Preaek Lvea Village , Preaek Ta Kov Commune , Khsach Kandal District, Kanda! Province. Phone: 855-24 900-488 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 Cheungprey Branch National Road No.6 Skon Village, Soutlib Commune, Cheung Prey District, Kampong Cham Province Phone: 855-97-6447373 S’ang Brancch House No 154, National Road 21, Preaek Khsev Village, Rokar Khpos Commune, S’ang District, Kandal Province. Phone: 855-24 901-455 Krolkor Branch St 1 Thlok Village, Kraol kou Commune, Svay Chrum District, Svay Rieng Province Phone: 855-87-666945 Peraing Branch National Road No.8, Snay Pol Village, Roka Commune, Pea Reang District, PreyVeng Provice Phone: 855-81-709967 Prey Nop Branch Road No.4 Veal Meas Village, Veal Renh Commune, Prey Nop District, Preah Sihanouk Province Phone: 855-68-855997 Baphnom Branch #022 St317 Chheu Kach Village, Chheu Kach Commune, Ba phnom Distirict, Prey Veng Province Phone: 855-93-855773 Koh Thom Branch Kampong Svay Kraom Village, Preaek Thmei Commune, Koh Thom District, Kandal Province Phone: 855-87-777985 Chamkarmon Branch Building No. 119B, Street271, Sangkat Phsar Doeum Thkov Khan Chamkarmon, Phnom Penh. Phone: 855-23-999-661 Russey Keo Branch House No 1A, National Road 5, Phum Kraol Kou, Sangkat Kilomet Lekh Prammuoy, Khan Russey Keo, Phnom Penh. Phone: 855-23-999-664 Pursenchey Branch House No 6A, Russian Federation Blvd, Phum Ta Ngoun, Sangkat Kakab, Khan Pur Senchey, Phnom Penh. Phone: 855-23-999-803 362 Steung Meanchey Branch House No 19A, Samdech Preah Monireth Blvd, Phum Domnak Thum, Sangkat Stueng Meanchey 2, Khan Meanchey, Phnom Penh Phone: 855 23 901 345 Chom Chao Branch House No 4A, Veng Sreng Blvd, Phum Chrey Kaong, Sangkat Chaom Chau 2, Khan Pur Senchey, Phnom Penh Phone: 855 23 901 355 Char Ampov Branch 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 Toul Kork Branch House No 1C, St 355, Phum 1, Sangkat Boeng Kak Ti Muoy, Khan Tuol Kouk, Phnom Penh Phone: 855 023 999 025 Chamkar Doung Branch House No 2039, St 217, Ta lei Village, Sangkat Dangkao, Khan Dangkao, Phnom Penh Phone: 855 023 999 027 Kampongspeu Branch House No 751, National Highway No 4, Chambak Village, Voa Sar Commune, Samraong Tong District, Kampong Speu Province. Phone: 855 025 900 555 Pshar Dey Huy Branch House No. 11, Phnom Penh-Hanoi Friendship Blv (1019), Roung Chakr Village , Sangkat Kouk Kleang, Khan Saensokh, Phnom Penh. Phone: 855 023 900 466 Woori Card (Tutu Finance_WCI Myanmar) Head Office 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 No. 386/R 8, Sa Ward, Thudamar Street, North Okkalapa Township, Yangon Phone: +95-9420146551 Overseas Branch Yesagyo Branch No. 45, Pinlone Road, No.3 Ward, Yesagyo Township, Magway Phone: +95-9446944080 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 Thumingalar Football Studium, In Front of Thumingalar Chapel, Pyin Oo Lwin Township, Mandalay Phone: +95-9443365122 Patheingyi Branch No. 19, 58st, Between 19th and 20th street, A Nate Taw Quarter, Aungmyaytharzan Township, Mandalay Phone: +95-9405243993 Wundwin Branch No. 3, Myoma Ward, Myoma Street, Wundwin Township, Mandalay Phone: +95-9255450099 Kyaukse Branch No. 83, Tal Soe Gate, Aye Mya Kyi Lin(East)Ward, Railway Parallel Street, Kyaukse Township, Mandalay Phone: +95-9400208422 Letpadan branch No 57, Let Kok Pin, Myo Wart, Lan Ma Taw Street, Letpadan Phone: +95-9256923758 Kume Branch TharyarAye Ward, Yangon-Mandalay Highway Road, Near by B.E.H.S, Kume Township, Mandalay Phone: +95-9251902656 Tharyarwaddy Branch No. 204 , Yangon-Pyi Street(Lan Ma Taw) Middle Ward, Thone Sae, Tharyarwaddy Township, Bago Phone: +95-9400230933 Yamethin Branch No. 179, Khwar Nyo Street, Thilawa-1 Ward, Yamethin Township, Mandalay Phone: +95-9898291199 Pakokku Branch Corner of 4th Street and Myaing Street, Ward 11, Pakokku Township, Magway Phone: +95-9251902655 Shwebo Branch 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 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 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 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 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 Natogyi Branch No(8) Quarter, Beside of Myin Gyan-Myit Thar Road, Natogyi Township, Mandalay Division Phone: +95-9660078906 Woori Asset Management Head Office 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 363 INTROWOORI OVERVIEWBUSINESS OPERATIONSFINANCIAL REVIEWWOORI FINANCIAL GROUP ANNUAL REPORT 2020 Contact Information Directed by Hyunsoo, Ko Senior Manager & IR Officer Investor Relations Department, Woori Financial Group TEL : 82-2-2125-2055 hyunsoo.ko@woorifg.com Designed by Communication Dong-Gam TEL : 82-2-593-7008 www.dong-gam.co.kr 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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