Edgar Filing: WOORI BANK

Form 6-K

This Report on Form 6-K is incorporated by reference into the prospectus included in the Registration Statement on Form F-4 of Woori Bank (File No. 333-226345).

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2018

Woori Bank

(Translation of Registrant’s name into English)

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

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017


	September 30, 2018 (*)		December 31, 2017 (*)
	(Korean Won in millions)
ASSETS
Cash and cash equivalents (Note 6)		6,004,504		6,908,286
Financial assets at fair value through profit or loss (“FVTPL”) (IFRS 9) (Notes 4, 7, 11, 12, 18 and 26)		5,720,811		—
Financial assets at FVTPL (IAS 39) (Notes 4, 7, 11, 12, 18 and 26)		—		5,843,077
Financial assets at financial assets at fair value through other comprehensive income (“FVTOCI”) (Notes 4, 8, 11, 12, and 18)		16,167,617		—
Available-for-sale (“AFS”) financial assets (Notes 4,8,11,12 and 18)		—		15,352,950
Securities at amortized cost (Notes 4, 9, 11, 12 and 18)		19,121,604		—
Held to maturity (“HTM”) financial assets (Notes 4, 9, 11, 12 and 18)		—		16,749,296
Loans and other financial assets at amortized cost (Notes 4, 10, 11, 12, 18 and 44)		278,684,897		—
Loans and receivables (Notes 4,10,11,12,18 and 44)		—		267,106,204
Investments in joint ventures and associates (Note 13)		341,603		417,051
Investment properties (Note 14)		382,389		371,301
Premises and equipment (Notes 15 and 18)		2,438,294		2,477,545
Intangible assets and goodwill (Note 16)		620,195		518,599
Assets held for sale (Note 17)		6,765		48,624
Current tax assets		15,635		4,722
Deferred tax assets		38,660		280,130
Derivative assets (Held for hedging) (Notes 4,11,12 and 26)		13,716		59,272
Other assets (Notes 19 and 44)		244,946		158,404

Total assets		329,801,636		316,295,461

LIABILITIES
Financial liabilities at FVTPL (IFRS 9) (Notes 4, 11, 12, 20 and 26)		2,222,042		—
Financial liabilities at FVTPL (IAS 39) (Notes 4, 11, 12, 20 and 26)		—		3,427,909
Deposits due to customers (Notes 4,11,21 and 44)		237,359,059		234,695,084
Borrowings (Notes 4, 11, 12 and 22)		15,862,477		14,784,706
Debentures (Notes 4, 11 and 22)		28,102,679		27,869,651
Provisions (Notes 23, 43 and 44)		385,343		410,470
Net defined benefit liability (Note 24)		112,520		43,264
Current tax liabilities		223,280		232,600
Deferred tax liabilities		18,785		22,681
Derivative liabilities (Held for hedging) (Notes 4,11,12 and 26)		74,107		67,754
Other financial liabilities (Notes 4,11,12, 25 and 44)		23,197,293		13,892,461
Other liabilities (Notes 25 and 44)		332,155		283,981

Total liabilities		307,889,740		295,730,561

(Continued)

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017 (CONTINUED)


	September 30, 2018 (*)			December 31, 2017 (*)
	(Korean Won in millions)
EQUITY
Owners’ equity:		21,703,016			20,365,892
Capital stock (Note 28)		3,381,392			3,381,392
Hybrid securities (Note 29)		3,161,963			3,017,888
Capital surplus (Note 28)		285,887			285,880
Other equity (Note 30)		(2,158,221	)		(1,939,274	)
Retained earnings (Note 31)		17,031,995			15,620,006
Non-controlling interests		208,880			199,008

Total equity		21,911,896			20,564,900

Total liabilities and equity		329,801,636			316,295,461

The consolidated interim statements of financial position as of September 30, 2018 was prepared in accordance with IFRS 9; however, the comparative consolidated statements of financial position as of December 31, 2017 were not retrospectively restated accordance with IFRS 9.

See accompanying notes

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017


	2018 (*)						2017 (*)
	Three months ended September 30			Nine months ended September 30			Three months ended September 30			Nine months ended September 30
	(Korean Won in millions, except per share data)
Interest income		2,476,774			7,120,190			2,187,829			6,377,413
Financial assets at FVTPL (IFRS 9)		14,729			43,266			—			—
Financial assets at FVTOCI		71,951			191,397			—			—
Financial assets at amortized cost		2,390,094			6,885,527			—			—
Financial assets at FVTPL (IAS 39)		—			—			14,680			41,486
AFS financial assets		—			—			67,021			211,088
HTM financial assets		—			—			77,349			227,022
Loans and receivables		—			—			2,028,779			5,897,817
Interest expense		(1,044,099	)		(2,923,041	)		(836,273	)		(2,475,537	)

Net interest income (Notes 33 and 44)		1,432,675			4,197,149			1,351,556			3,901,876

Fees and commissions income		545,086			1,658,092			534,597			1,548,490
Fees and commissions expense		(279,337	)		(789,688	)		(257,728	)		(733,921	)

Net fees and commissions income (Notes 34 and 44)		265,749			868,404			276,869			814,569

Dividend Income (Note 35 and 44)		18,333			68,037			48,842			108,287
Net gain (loss) on financial instruments at FVTPL (IFRS 9) (Notes 11, 36 and 44)		(24,437	)		92,586			—			—
Net gain (loss) on financial instruments at FVTPL (IAS 39) (Notes 11, 36 and 44)		—			—			48,773			(97,636	)
Net gain on financial assets at FVTOCI (Notes 11 and 37)		886			2,173			—			—
Net gain on AFS financial assets (Notes 11 and 37)		—			—			44,273			148,445
Net gain arising on financial assets at amortized cost		8,732			39,618			—			—
Net gain on disposals of securities at amortized cost		—			431			—			—
Net gain on disposals of loans and other financial assets at amortized cost		8,732			39,187			—			—
Impairment losses due to credit loss (Notes 38 and 44)		(83,855	)		(55,417	)		(217,259	)		(501,022	)
General and administrative expenses (Notes 39 and 44)		(818,773	)		(2,386,111	)		(1,108,625	)		(2,647,052	)
Other net operating income (expenses) (Notes 39 and 44)		(33,496	)		252,910			(126,741	)		74,449

Operating income		765,814			2,573,529			317,688			1,801,916

Share of profits (losses) of joint ventures and associates (Note 13)		(471	)		(1,933	)		69,670			5,392

Net other non-operating income (expenses)		60,445			55,724			(15,720	)		(5,722	)

Non-operating income (expenses) (Note 40)		59,974			53,791			53,950			(330	)

Net income before income tax expense		825,788			2,627,320			371,638			1,801,586
Income tax expense (Note 41)		(221,252	)		(706,468	)		(88,212	)		(409,145	)

Net income		604,536			1,920,852			283,426			1,392,441

(Continued)

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017


	2018 (*)						2017 (*)
	Three months ended September 30			Nine months ended September 30			Three months ended September 30			Nine months ended September 30
	(Korean Won in millions, except per share data)
Net gain (loss) on valuation of equity securities at FVTOCI		(14,152	)		17,276			—			—
Net gain on valuation of financial liabilities designated as at FVTPL due to own credit risk		14			144			—			—
Items out of change in equity method securities due to change in equity of investee that will not be reclassified to profit or loss		(1,456	)		—			(278	)		(3,365	)
Remeasurement gain (loss) related to defined benefit plan		16,304			(43,269	)		22,820			13,143

Items that will not be reclassified to profit or loss		710			(25,849	)		22,542			9,778

Net gain on valuation of debt securities at FVTOCI		6,033			16,057			—			—
Net loss on valuation of AFS financial assets		—			—			(22,335	)		(51,041	)
Share of other comprehensive gain of joint ventures and associates		3,922			3,676			3,688			8,282
Net gain (loss) on foreign currency translation for foreign operations		(62,752	)		(27,226	)		14,488			(54,522	)
Net gain (loss) on valuation of cash flow hedge		2,703			(3,510	)		279			(1,247	)
Net gain (loss) on disposal of assets held for sale		564			(4,145	)		—			—

Items that may be reclassified to profit or loss		(49,530	)		(15,148	)		(3,880	)		(98,528	)

Other comprehensive income (loss), net of tax		(48,820	)		(40,997	)		18,662			(88,750	)

Total comprehensive income		555,716			1,879,855			302,088			1,303,691

Net income attributable to:
Net income attributable to owners		597,528			1,903,406			280,146			1,378,507
Net income attributable to non-controlling interests		7,008			17,446			3,280			13,934

Total comprehensive income attributable to:
Comprehensive income attributable to owners		553,248			1,868,570			299,649			1,295,391
Comprehensive income attributable to non-controlling interests		2,468			11,285			2,439			8,300
Basic and diluted earnings per share (In Korean Won) (Note 42)		833			2,661			358			1,855

The consolidated interim statements of comprehensive income for the three months and nine months ended September 30, 2018 was prepared in accordance with IFRS 9; however, the comparative consolidated interim statements of comprehensive income for the three months and nine months ended September 30, 2017 was not retrospectively restated in accordance with IFRS 9.

See accompanying notes

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017


	Capital Stock		Hybrid securities			Capital surplus		Other equity			Retained earnings			Owner’s equity			Non-controlling interests			Total equity
	(Korean Won in millions)
January 1, 2017		3,381,392		3,574,896			286,331		(1,468,025	)		14,611,566			20,386,160			159,793			20,545,953
Net income		—		—			—		—			1,378,507			1,378,507			13,934			1,392,441
Dividends to common stocks		—		—			—		—			(336,636	)		(336,636	)		(1,544	)		(338,180	)
Capital increase of subsidiaries		—		—			735		—			—			735			(144	)		591
Net gain (loss) on valuation of available-for-sale financial assets		—		—			—		(51,480	)		—			(51,480	)		439			(51,041	)
Changes in equity of joint ventures and associates		—		—			—		4,917			—			4,917			—			4,917
Loss on foreign currency translation of foreign operations		—		—			—		(48,506	)		—			(48,506	)		(6,016	)		(54,522	)
Loss on valuation of cash flow hedge		—		—			—		(1,247	)		—			(1,247	)		—			(1,247	)
Remeasurement gain (loss) related to defined benefit plan		—		—			—		13,200			—			13,200			(57	)		13,143
Dividends to hybrid securities		—		—			—		—			(129,921	)		(129,921	)		—			(129,921	)
Issuance of hybrid securities		—		559,565			—		—			—			559,565			—			559,565
Redemption of hybrid securities		—		(1,116,573	)		—		(208,158	)		—			(1,324,731	)		—			(1,324,731	)

September 30, 2017 (*)		3,381,392		3,017,888			287,066		(1,759,299	)		15,523,516			20,450,563			166,405			20,616,968

January 1, 2018		3,381,392		3,017,888			285,880		(1,939,274	)		15,620,006			20,365,892			199,008			20,564,900
Cumulative effect of change in accounting policy (Note 2)		—		—			—		(392,176	)		177,091			(215,085	)		723			(214,363	)
Adjusted balance, beginning of period		3,381,392		3,017,888			285,880		(2,331,450	)		15,797,097			20,150,807			199,731			20,350,538

Net income		—		—			—		—			1,903,406			1,903,406			17,446			1,920,852
Dividends to common stocks		—		—			—		—			(336,636	)		(336,636	)		(2,118	)		(338,754	)
Capital decrease of subsidiaries		—		—			7		—			—			7			(18	)		(11	)
Net gain on valuation of financial liabilities designated as at FVTPL due to own credit risk		—		—			—		144			—			144			—			144
Changes in other comprehensive income due to redemption of financial liabilities designated as at FVTPL		—		—			—		(4	)		4			—			—			—
Net gain (loss) on valuation of financial assets at FVTOCI		—		—			—		33,632			—			33,632			(299	)		33,333
Changes in other comprehensive income due to disposal of equity securities at FVTOCI		—		—			—		279			(279	)		—			—			—
Change in equity method securities due to change in equity of investees’		—		—			—		3,676			(10,649	)		(6,973	)		—			(6,973	)
Loss on foreign currency translation of foreign operations		—		—			—		(21,461	)		—			(21,461	)		(5,765	)		(27,226	)
Loss on valuation of cash flow hedge		—		—			—		(3,510	)		—			(3,510	)		—			(3,510	)
Remeasurement loss related to defined benefit plan		—		—			—		(43,172	)		—			(43,172	)		(97	)		(43,269	)
Net loss on disposal of assets held for sale		—		—			—		(4,145	)		—			(4,145	)		—			(4,145	)
Dividends to hybrid securities		—		—			—		—			(112,790	)		(112,790	)		—			(112,790	)
Issuance of hybrid securities		—		398,707			—		—			—			398,707			—			398,707
Redemption of hybrid securities		—		(254,632	)		—		(368	)		—			(255,000	)		—			(255,000	)
Appropriation of retained earnings		—		—			—		208,158			(208,158	)		—			—			—

September 30, 2018 (*)		3,381,392		3,161,963			285,887		(2,158,221	)		17,031,995			21,703,016			208,880			21,911,896

The consolidated interim statements of changes in equity for the nine months ended September 30, 2018 was prepared in accordance with IFRS 9; however, the comparative consolidated interim statements of changes in equity for the nine months ended September 30, 2017 was not retrospectively restated in accordance with IFRS 9.

See accompanying notes

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017


	For the nine months ended September 30
	2018 (*)			2017 (*)
	(Korean Won in millions)
Cash flows from operating activities:
Net income		1,920,852			1,392,441
Adjustments to net income:
Income tax expense		706,468			409,145
Interest income		(7,120,190	)		(6,377,413	)
Interest expense		2,923,041			2,475,537
Dividend income		(68,037	)		(108,287	)

		(3,558,718	)		(3,601,018	)

Additions of expenses not involving cash outflows:
Impairment losses due to credit loss		55,417			501,022
Loss on financial assets at FVTOCI		754			—
Share of losses of investments in joint ventures and associates		20,272			74,171
Loss on disposal of investments in joint ventures and associates		2,931			38,701
Loss on transaction and valuation of derivatives (hedging)		78,200			39,768
Loss on hedged items (fair value hedge)		—			6,856
Loss on provision		62,294			52,391
Retirement benefits		107,399			107,430
Depreciation and amortization		199,181			179,085
Loss on disposal of premises and equipment and other assets		967			8,574
Impairment loss on premises and equipment and other assets		36			269

		527,451			1,008,267

Deductions of income not involving cash inflows:
Gain on valuation of financial assets at FVTPL (IFRS 9)		117,512			—
Gain on valuation of financial instruments at FVTPL (IAS 39)		—			65,764
Gain on redemption of debentures		1,597			—
Gain on financial assets at FVTOCI		2,927			—
Gain on AFS financial assets		—			148,445
Gain on disposal of securities at amortized cost		431			—
Share of profits of investments in joint ventures and associates		18,339			79,563
Gain on disposal of investments in joint ventures and associates		49,767			33,194
Gain on transaction and valuation of derivatives (Held for hedging)		24,134			7,695
Gain on hedged items (fair value hedge)		83,531			25,055
Gain on provisions		1,718			2,000
Gain on disposal of premises and equipment and other assets		29,996			4,895
Reversal of impairment loss on premises and equipment and other assets		761			604

		330,713			367,215

Changes in operating assets and liabilities:
Financial assets at FVTPL (IFRS 9)		745,482			—
Financial assets at FVTPL (IAS 39)		—			(232,152	)
Loans and other financial assets at amortized cost		(12,054,546	)		—
Loans and receivables		—			(10,076,492	)
Other assets		(46,475	)		(86,535	)
Deposits due to customers		2,664,028			5,326,478
Provisions		(44,945	)		(98,616	)
Net defined benefit liability		(97,823	)		(19,952	)
Other financial liabilities		9,117,584			1,644,842
Other liabilities		64,487			14,749

		347,792			(3,527,678	)

Cash received from (paid for) operating activities:
Interest income received		7,026,679			6,445,201
Interest expense paid		(2,655,693	)		(2,535,668	)
Dividends received		68,250			110,855
Income tax paid		(413,899	)		(328,793	)
Net cash provided by (used in) operating activities		2,932,001			(1,403,608	)

(Continued)

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 (CONTINUED)


	For the nine months ended September 30
	2018 (*)			2017 (*)
	(Korean Won in millions)
Cash flows from investing activities:
Cash in-flows from investing activities:
Disposal of financial assets at FVTPL (IFRS 9)		8,209,468			—
Disposal of financial assets at FVTOCI		6,746,297			—
Disposal of AFS financial assets		—			18,991,381
Redemption of securities at amortized cost		7,077,432			—
Redemption of HTM financial assets		—			6,851,014
Disposal of investments in joint ventures and associates		56,556			78,204
Disposal of investment properties		3,483			356
Disposal of premises and equipment		314			6,425
Disposal of intangible assets		4,758			998
Disposal of assets held for sale		69,794			6,832

		22,168,102			25,935,210

Cash out-flows from investing activities:
Net cash in-flows of business combination		70,905			—
Acquisition of financial assets at FVTPL (IFRS 9)		8,447,712			—
Acquisition of financial assets at FVTOCI		8,912,434			—
Acquisition of AFS financial assets		—			15,777,632
Acquisition of securities at amortized cost		9,460,686			—
Acquisition of HTM financial assets		—			9,280,802
Acquisition of investments in joint ventures and associates		32,557			137,411
Acquisition of investment properties		10,225			5,080
Acquisition of premises and equipment		67,458			133,728
Acquisition of intangible assets		159,961			168,676

		27,161,938			25,503,329

Net cash provided by (used in) investing activities		(4,993,836	)		431,881

Cash flows from financing activities:
Cash in-flows from financing activities:
Increase in borrowings		7,621,283			9,856,662
Issuance of debentures		15,824,515			14,556,550
Issuance of hybrid securities		398,707			559,565
Capital increase of subsidiaries		—			635

		23,844,505			24,973,412

Cash out-flows from financing activities:
Repayment of borrowings		6,452,223			12,308,155
Repayment of debentures		15,753,950			10,581,681
Redemption of hybrid securities		255,000			1,323,400
Payment of dividends to common stocks		336,636			336,636
Dividends paid on hybrid securities		112,790			131,423
Dividends paid on non-controlling interests		2,118			1,544

		22,912,717			24,682,839

Net cash provided by financing activities		931,788			290,573

Net decrease in cash and cash equivalents		(1,130,047	)		(681,154	)
Cash and cash equivalents, beginning of the period		6,908,286			7,591,324
Effects of exchange rate changes on cash and cash equivalents		226,265			(97,681	)

Cash and cash equivalents, end of the period (Note 6)		6,004,504			6,812,489

The consolidated interim statements of cash flows for the nine months ended September 30, 2018 was prepared in accordance with IFRS 9; however, the comparative consolidated interim statements of cash flows for the nine months ended September 30, 2017 was not retrospectively restated to apply IFRS 9.

See accompanying notes

WOORI BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2018 AND FOR THE THREE MONTHS AND THE NINE MONTHS

ENDED SEPTEMBER 30, 2018 AND 2017

1.	GENERAL

(1)	Summary of the parent company

Woori Bank (hereinafter referred to the “Bank”), which is a controlling entity in accordance with International Financial Reporting Standards (“IFRS”) 10 – Consolidated Financial Statements, was established in 1899 and is engaged in the commercial banking business under the Banking Act, trust business and foreign exchange business under the Financial Investment Services and Capital Market Act.

Previously, Woori Finance Holdings Co., Ltd., the former holding company of Woori Financial Group, established on March 27, 2001 held a 100% ownership of the Bank. Effective November 1, 2014, Woori Finance Holdings Co., Ltd. completed its merger (the “Merger”) with and into the Bank. Accordingly, the shares of the Bank, 597 million shares, prior to the merger, were reduced to nil in accordance with capital reduction procedure, and then, in accordance with the merger ratio, the Bank newly issued 676 million shares. Since then, there have been no change in numbers of issued shares. As a result, as of September 30, 2018, the common stock of the Bank amounts to 3,381,392 million Korean Won.

During the year ended December 31, 2016, the Korea Deposit Insurance Corporation (“KDIC”), the majority shareholder of the Bank, sold its 187 million shares in the Bank in accordance with the contract of “Disposal of Woori Bank’s shares to Oligopolistic Shareholders”. In addition to the sale, during the year ended December 31, 2017, KDIC sold additional 33 million shares. As of September 30, 2018 and December 31, 2017, KDIC held 125 million shares (18.43% ownership interest), of the Bank’s shares issued.

On June 24, 2002, Woori Finance Holdings Co., Ltd. listed its common shares on the Korea Exchange through public offering. In addition, on September 29, 2003, the holding company registered with the Securities and Exchange Commission in the United States of America and, on the same day, listed its American Depositary Shares on the New York Stock Exchange. As Woori Finance Holdings Co., Ltd. was merged into the Bank, the Bank, which is the existing company, succeeded such rights and obligations as a listed company on the Korea Exchange and the New York Stock Exchange.

As a result of such merger, the Bank incorporated Woori Card Co., Ltd., Woori Investment Bank Co., Ltd., Woori FIS Co., Ltd., Woori Private Equity Asset Management Co., Ltd., and Woori Finance Research Institute Co., Ltd. as its subsidiaries.

The headquarters of the Bank is located in 51, Sogong-ro, Jung Gu, Seoul, Korea. The Bank has 878 branches and offices in Korea, and 23 branches and offices overseas as of September 30, 2018.

(2)	The consolidated financial statements for Woori Bank and its subsidiaries (the “Group”) include the following subsidiaries:

Percentage of ownership
(%)

Location

Financial
statements
as of
(2018)

Subsidiaries

Main business

September
30, 2018

December
31, 2017

Woori Bank:

Woori FIS Co., Ltd.

System software development
& maintenance

100.0

Korea

September 30

Woori Private Equity Asset Management Co., Ltd.

Finance

100.0

Korea

September 30

Woori Finance Research Institute Co., Ltd.

Other service business

100.0

Korea

September 30

Woori Card Co., Ltd.

Finance

100.0

Korea

September 30

Woori Investment Bank Co., Ltd.

Other credit finance business

59.8

Korea

September 30

Woori Credit Information Co., Ltd.

Credit information

100.0

Korea

September 30

Woori America Bank

Finance

100.0

U.S.A.

September 30

Woori Global Markets Asia Limited

”

100.0

Hong Kong

September 30

Woori Bank China Limited

”

100.0

China

September 30

AO Woori Bank

”

100.0

Russia

September 30

PT Bank Woori Saudara Indonesia 1906 Tbk

”

79.9

Indonesia

September 30

Banco Woori Bank do Brasil S.A.

”

100.0

Brazil

September 30

Korea BTL Infrastructure Fund

”

99.9

Korea

September 30

Woori Fund Service Co., Ltd.

”

100.0

Korea

September 30

Woori Finance Cambodia PLC.

”

100.0

Cambodia

September 30

Woori Finance Myanmar Co., Ltd.

”

100.0

Myanmar

September 30

Wealth Development Bank

”

51.0

Philippines

September 30

Woori Bank Vietnam Limited

”

100.0

Vietnam

September 30

WB Finance Co., Ltd.

”

100.0

—

Cambodia

September 30

Kumho Trust First Co., Ltd. (*1)

Asset securitization

0.0

Korea

September 30

Asiana Saigon Inc. (*1)

”

0.0

Korea

September 30

Consus Eighth Co., LLC (*1)

”

0.0

Korea

September 30

KAMCO Value Recreation First Securitization Specialty Co., Ltd. (*1)

”

15.0

Korea

September 30

Hermes STX Co., Ltd. (*1)

”

0.0

Korea

September 30

BWL First Co., LLC (*1)

”

0.0

Korea

September 30

Deogi Dream Fourth Co., Ltd. (*1)

”

0.0

Korea

September 30

Jeonju Iwon Ltd. (*1)

”

0.0

Korea

September 30

Wonju I one Inc. (*1)

”

0.0

Korea

September 30

Heitz Third Co., Ltd. (*1)

”

0.0

Korea

September 30

Woorihansoop 1st Co., Ltd. (*1)

”

0.0

Korea

September 30

Electric Cable First Co., Ltd. (*1)

”

0.0

Korea

September 30

Woori International First Co., Ltd. (*1)

”

0.0

Korea

September 30

Woori HJ First Co., Ltd. (*1)

”

0.0

Korea

September 30

Woori WEBST 1st Co., Ltd. (*1)

”

0.0

Korea

September 30

Wibihansoop 1st Co., Ltd. (*1)

”

0.0

Korea

September 30

Uri QS 1st Co., Ltd. (*1)

”

0.0

Korea

September 30

Uri Display 1st Co., Ltd. (*1)

”

0.0

Korea

September 30

Tiger Eyes 2nd Co., Ltd. (*1)

”

0.0

Korea

September 30

Woori Serveone 1st Co., Ltd. (*1)

”

0.0

Korea

September 30

Uri Display 2nd Co.,Ltd. (*1)

”

0.0

—

Korea

September 30

Woori the Colony Unjung Securitization Specialty Co., Ltd. (*1)

”

0.0

—

Korea

September 30

Woori Dream 1st Co., Ltd. (*1)

”

0.0

—

Korea

September 30

Woori HS 1st Co., Ltd. (*1)

”

0.0

—

Korea

September 30

Woori HJ Second Co.,Ltd. (*1)

”

0.0

—

Korea

September 30

Woori Sinnonhyeon 1st Inc. (*1)

”

0.0

—

Korea

September 30

Woori K 1st Co.,Ltd. (*1)

”

0.0

—

Korea

September 30

Uri S 1st Co.,Ltd. (*1)

”

0.0

—

Korea

September 30

Smart Casting Inc. (*1)

”

0.0

—

Korea

September 30

HeungkukWoori Tech Company Private Placement Investment Trust No. 1 and 3 beneficiary certificates (*2)

Securities investment and
others

—

Korea

September 30

Principle Guaranteed Trust (*3)

Trust

0.0

Korea

September 30

Percentage of ownership
(%)

Location

Financial
statements
as of
(2018)

Subsidiaries

Main business

September
30, 2018

December
31, 2017

Principle and Interest Guaranteed Trust (*3)

”

0.0

Korea

September 30

Woori Investment Bank:

Dongwoo First Securitization Specialty Co., Ltd. (*1)

Asset
securitization

5.0

Korea

September 30

Seari First Securitization Specialty Co., Ltd. (*1)

”

5.0

Korea

September 30

Namjong 1st Securitization Specialty Co., Ltd. (*1)

”

5.0

Korea

September 30

Bukgeum First Securitization Specialty Co., Ltd. (*1)

”

5.0

Korea

September 30

Seori Second Securitization Specialty Co., Ltd. (*1)

”

5.0

—

Korea

September 30

Bukgeum Second Securitization Specialty Co., Ltd. (*1)

”

5.0

—

Korea

September 30

Woori Card Co., Ltd.:

TUTU Finance-WCI Myanmar Co., Ltd.

Finance

100.0

Myanmar

September 30

Woori Card one of 2017-1 Securitization Specialty Co., Ltd. (*1)

Asset
securitization

0.5

Korea

September 30

Woori Card one of 2017-2 Securitization Specialty Co., Ltd. (*1)

”

0.5

Korea

September 30

(*1)

The entity was a structured entity for the purpose of asset securitization and was in scope for consolidation. Considering that, the Group 1) had the power over the investee, 2) was exposed, or had rights, to variable returns from its involvement with the investee, and 3) had the ability to use its power to affect its returns.

(*2)

The entity was a structured entity for the purpose of investment in securities and was in scope for consolidation, considering that the Group 1) had the power over the investee, 2) was exposed, or has rights, to variable returns from its involvement with the investee, and 3) has the ability to use its power to affect its returns.

(*3)

The entity was a money trust under the Financial Investment Services and Capital Markets Act and was in scope for consolidation. Although the Group was not a majority shareholder, the Group 1) has the power over the investee, 2) was exposed, or has rights, to variable returns from its involvement with the investee, and 3) has the ability to use its power to affect its returns.

(3)	As of September 30, 2018, and December 31, 2017, despite having more than 50% ownership interest, the Group has not consolidated the following companies as the Group does not have the ability to control following subsidiaries:

As of September 30, 2018

Subsidiaries

Location

Main
Business

Percentage of
ownership (%)

Golden Bridge NHN Online Private Equity Investment (*)

Korea

Securities Investment

60.0

Mirae Asset Maps Clean Water Private Equity Investment Trust 7th (*)

Korea

Securities Investment

58.5

Hana Walmart Real Estate Investment Trust 41-1 (*)

Korea

Securities Investment

77.0

Hangkang Sewage Treatment Plant Fund (*)

Korea

Securities Investment

55.7

IGIS Global Private Placement Real Estate Fund No. 163-2 (*)

Korea

Securities Investment

97.9

IGIS Global Private Placement Real Estate Fund No. 148-1 (*)

Korea

Securities Investment

75.0

IGIS Europe Private Placement Real Estate Fund No. 148-2 (*)

Korea

Securities Investment

75.0

Mirae Asset Seoul Ring Expressway Private Special Asset Fund I (*)

Korea

Securities Investment

66.2

Heungkuk Global Private Placement Investment Trust No. 1 (*)

Korea

Securities Investment

93.3

(*)

The Group owns the majority ownership interest in these structured entities, but has no power on the investees’ relevant activities. As results, it is deemed that the Group has no power or control on the structured entities.

As of December 31, 2017

Subsidiaries

Location

Main
Business

Percentage of
ownership (%)

Golden Bridge NHN Online Private Equity Investment (*)

Korea

Securities Investment

60.0

Mirae Asset Maps Clean Water Private Equity Investment Trust 7th (*)

Korea

Securities Investment

59.7

Kiwoom Yonsei Private Equity Investment Trust (*)

Korea

Securities Investment

88.9

Hana Walmart Real Estate Investment Trust 41-1 (*)

Korea

Securities Investment

90.1

IGIS Global Private Placement Real Estate Fund No. 148-1 (*)

Korea

Securities Investment

75.0

IGIS Global Private Placement Real Estate Fund No. 148-2 (*)

Korea

Securities Investment

75.0

(*)

(4)	The summarized financial information before the elimination of intercompany transactions of the subsidiaries whose financial information was prepared under IFRS for the Group’s consolidated financial statements is as follows (Unit: Korean Won in millions):


	As of and for the nine months ended September 30, 2018
	Assets		Liabilities		Operating revenue		Net income (loss) attributable to owners			Comprehensive income (loss) attributable to owners
Woori FIS Co., Ltd.		79,640		57,740		199,588		(10,645	)		(10,680	)
Woori Private Equity Asset Management Co., Ltd.		40,238		1,949		1,317		(1,909	)		(1,936	)
Woori Finance Research Institute Co., Ltd.		4,575		720		4,168		417			414
Woori Card Co., Ltd.		9,593,273		7,932,529		1,406,754		88,624			85,296
Woori Investment Bank Co., Ltd.		2,667,431		2,348,804		163,244		28,590			28,917
Woori Credit Information Co., Ltd.		34,331		6,159		26,827		1,114			1,049
Woori America Bank		2,216,713		1,917,262		66,713		16,996			27,448
Woori Global Markets Asia Limited		448,882		329,385		12,238		3,461			7,733
Woori Bank China Limited		5,218,846		4,711,178		339,386		15,609			9,749
AO Woori Bank		292,018		241,209		13,956		3,833			(1,686	)
PT Bank Woori Saudara Indonesia 1906 Tbk		2,219,505		1,742,356		144,492		29,475			2,051
Banco Woori Bank do Brasil S.A.		137,873		109,182		10,552		1,124			(3,619	)
Korea BTL Infrastructure Fund		777,412		299		22,299		19,535			19,535
Woori Fund Service Co., Ltd.		13,767		980		7,449		1,376			1,376
Woori Finance Cambodia PLC.		82,675		61,340		7,769		2,151			2,904
Woori Finance Myanmar Co., Ltd.		18,455		6,567		2,965		(1,510	)		(1,042	)
Wealth Development Bank		197,519		164,850		9,661		9			(1,571	)
Woori Bank Vietnam Limited		1,062,422		833,901		36,120		7,686			8,113
WB Finance Co., Ltd.		250,961		210,165		11,806		307			(14	)
Money trust under the FISCM Act (*)		1,578,686		1,548,667		38,366		108			108
Structured entity for the securitization of financial assets		1,388,441		1,806,251		43,186		4,654			(6,269	)
Structured entity for the investments in securities		63,028		98		1,434		(1,648	)		(2,954	)

(*)

FISCM Act: Financial Investment Services and Capital Markets Act


	As of and for the year ended December 31, 2017
	Assets		Liabilities		Operating revenue		Net income (loss) attributable to owners			Comprehensive income (loss) attributable to owners
Woori FIS Co., Ltd.		103,932		71,386		252,460		1,940			(2,963	)
Woori Private Equity Asset Management Co., Ltd.		42,894		2,670		7,257		(4,114	)		(4,074	)
Woori Finance Research Institute Co., Ltd.		3,790		350		4,733		83			64
Woori Card Co., Ltd.		8,605,993		6,973,705		1,771,157		101,214			107,321
Woori Investment Bank Co., Ltd.		1,880,157		1,588,610		183,376		20,023			20,210
Woori Credit Information Co., Ltd.		33,298		6,175		31,580		861			752
Woori America Bank		1,954,301		1,679,248		81,337		11,869			(16,833	)
Woori Global Markets Asia Limited		290,226		178,343		11,345		1,922			(12,544	)
Woori Bank China Limited		4,960,637		4,458,683		388,913		13,809			(15,252	)
AO Woori Bank		201,704		149,101		15,656		4,748			1,217
PT Bank Woori Saudara Indonesia 1906 Tbk		2,230,617		1,745,171		192,485		38,488			(18,689	)
Banco Woori Bank do Brasil S.A.		213,889		181,544		20,455		1,843			(2,840	)
Korea BTL Infrastructure Fund		786,480		301		30,240		26,390			26,390
Woori Fund Service Co., Ltd.		12,653		1,242		9,021		1,398			1,398
Woori Finance Cambodia PLC.		51,304		32,873		5,895		983			(473	)
Woori Finance Myanmar Co., Ltd.		18,236		5,307		2,506		791			15
Wealth Development Bank		191,049		156,808		13,632		1,323			(1,093	)
Woori Bank Vietnam Limited		775,758		632,160		29,698		2,436			(15,347	)
Money trust under the FISCM Act (*)		1,560,672		1,530,760		44,344		582			582
Structured entity for the securitization of financial assets		867,583		1,275,719		22,730		1,179			(2,800	)
Structured entity for the investments in securities		34,939		76		377		(475	)		(38,592	)

(*)

FISCM Act: Financial Investment Services and Capital Markets Act

(5)	The financial support that the Group provides to consolidated structured entities is as follows:

•

Structured entity for the securitization of financial assets

The structured entity is established for the purpose of securitization of project financing loans, corporate bonds, and other financial assets. The Group is involved with the structured entity through providing with credit facility over asset-backed commercial papers issued by the entity, originating loans directly to the structured entity, or purchasing 100% of the subordinated debts issued by the structured entity.

•

Structured entity for the investments in securities

The structured entity is established for the purpose of investments in securities. The Group acquires beneficiary certificates through its contribution of fund to the structured entity, and it is exposed to the risk that it may not be able to recover its fund depending on the result of investment performance of asset managers of the structured entity.

•

Money trust under the Financial Investment Services and Capital Markets Act

The Group provides with financial guarantee of principal and interest or principal only to some of its trust products. Due to the financial guarantees, the Group may be obliged to supplement when the principal and interest or principal of the trust product sold is short of the guaranteed amount depending on the result of investment performance of the trust product.

•

The Group is providing purchase commitment and credit facilities to structured entities that are subsidiaries of the Group. Purchase commitments guarantee the purchase and payment of outstanding commercial papers that were issued but were not repurchased by the structured entities. Credit facilities allow lending of funds to structured entities under certain conditions when there are grounds for discontinuing the issuance of commercial papers, or when structured entities default due to some reasons.

As of September 30, 2018, the Group is providing credit facilities (including ABCP purchase commitments, etc.) amounting to 1,325,904 million Won to aforementioned structured entities.

(6)

The Group has entered into various agreements with structured entities such as asset securitization vehicles, structured finance and investment funds, and monetary funds. Where it is determined in accordance with IFRS 10 that the Group has no controlling power over such structured entities, the entities are not consolidated. The nature of interests, which the Group retains, and the risks, to which the Group is exposed, of the unconsolidated structured entities are as follows:

The interests to unconsolidated structured entities, which the Group retains, are classified to asset securitization vehicles, structured finance and investment fund, based on the nature and the purpose of the structured entities.

Asset securitization vehicle issues asset-backed securities and redeems the principal and interest or distributes dividends on asset-backed securities with profits from collecting cash flows or sale of securitized assets. The Group, as a secondary guarantor, provides purchase commitments for its asset-backed securities or guarantees to such asset securitization vehicle and recognizes commission income or interest income related to the commitment or guarantees. Therefore, the Group would be exposed to risks to purchases or pays back asset-backed securities issued by the vehicles when a primary guarantor fails to provide the financing asset securitization vehicles.

Structured finance includes investments in project financing on real estates, social overhead capital (“SOC”), infrastructure and shipping finance. They are formed as special purpose entity by funding through equity investments and loans from various investors. Investment decisions are made by the Group based on business outlook of such projects. In relation to such investments, the Group recognizes interest income on loans, gains or losses on valuation of equity investments or dividend income. The structured finance is secured by additional funding agreement, guarantee or credit facilities. However, the structured financing project would fail to return the capital of equity investments or principal of loans to the Group if it is discontinued or did not achieve business outcome.

Investment funds include trusts and private equity funds. A trust is formed by contributions from various investors, operated by a manager engaged to the trust and distributed proceeds from sales of investments to the investors. A private equity fund is established in order to acquire ownership interests in a portfolio company with exit strategy after implementing financial and operational restructuring of the company. The Group recognizes unrealized gains or losses on change in value of investments in proposition of ownership interests in investments. The Group would be exposed to risks of loss when the value of portfolio investment is decreased.

Total assets of the unconsolidated structured entities, the carrying value of the related items recorded, the maximum exposure to risks, and the loss recognized in conjunction with the unconsolidated structured entities as of September 30, 2018 and December 31, 2017 are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Asset securitization vehicle		Structured finance		Investment Funds
Total asset of the unconsolidated structured entities		6,104,435		63,390,432		13,331,139
Assets recognized in the consolidated financial statements related to the unconsolidated structured entities		2,673,308		2,426,683		1,517,049
Financial assets at FVTPL		231,892		119,212		1,224,681
Financial assets at FVTOCI		286,490		—		—
Financial assets at amortized cost		2,154,481		2,304,510		38,833
Investments in joint ventures and associates		—		—		253,535
Derivative assets (Held for hedging)		445		2,961		—
Liabilities recognized in the consolidated financial statements related to the unconsolidated structured entities		1,249		1,678		74
Derivative liabilities (Held for hedging)		251		1,196		—
Other liabilities (including provisions)		998		482		74
The maximum exposure to risks		3,351,031		3,101,647		1,517,049
Investments		2,673,308		2,426,683		1,517,049
Credit facilities		659,723		674,964		—
Other commitments		18,000		—		—
Loss recognized on unconsolidated structured entities		83		10,200		2,531


	December 31, 2017
	Asset securitization vehicle		Structured finance		Investment Funds
Total asset of the unconsolidated structured entities		7,295,601		40,172,830		13,641,135
Assets recognized in the consolidated financial statements related to the unconsolidated structured entities		3,215,159		2,314,043		1,138,523
Loans and receivables		43,180		1,969,760		—
Financial assets held for trading		—		233,428		10,160
AFS financial assets		902,390		106,819		904,774
HTM financial assets		2,269,451		—		—
Investments in joint ventures and associates		—		—		223,589
Derivative assets (Held for hedging)		138		4,036		—
Liabilities recognized in the consolidated financial statements related to the unconsolidated structured entities		1,433		1,506		—
Derivative liabilities (Held for hedging)		575		968		—
Other liabilities (including provisions)		858		538		—
The maximum exposure to risks		4,032,531		2,918,448		1,138,523
Investments		3,215,159		2,314,043		1,138,523
Credit facilities		817,372		604,405		—
Loss recognized on unconsolidated structured entities		837		3,939		5,993

(7)	Subsidiaries of which non-controlling interests are significant to the Group’s consolidated financial statements are as follows (Unit: Korean Won in millions):

Accumulated non-controlling interests at the end of the reporting period


	September 30, 2018		December 31, 2017
Woori Investment Bank		131,447		191,111
PT Bank Woori Saudara Indonesia 1906 Tbk		63,208		64,877
Wealth Development Bank		16,008		16,778

Net income attributable to non-controlling interests


	For the nine months ended September 30, 2018		For the nine months ended September 30, 2017
Woori Investment Bank		11,482		6,520
PT Bank Woori Saudara Indonesia 1906 Tbk		5,931		6,731
Wealth Development Bank		4		653

Dividends to non-controlling interests


	For the nine months ended September 30, 2018		For the nine months ended September 30, 2017
PT Bank Woori Saudara Indonesia 1906 Tbk		2,082		1,513

2.	BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

(1)	Basis of presentation

The Group’s consolidated interim financial statements are prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting and IFRS 10, Consolidated Financial Statements. It is necessary to use the annual consolidated financial statements for the year ended December 31, 2017 for understanding of the accompanying interim financial statements.

Unless stated below, the accounting policies applied in preparing the accompanying consolidated interim financial statements have been applied consistently with the annual consolidated financial statements as of and for the year ended December 31, 2017.

1)	The Group has newly adopted the following adoption of IFRS that affected the Group’s accounting policies:

•

Adoption of IFRS 9 – Financial instruments (enacted)

The Group applied for the first time as of January 1, 2018, the adoption to IFRS 9 and other standards related to IFRS 9, which introduces new rules: 1) classification and measurement of financial assets and financial liabilities, 2) impairment of financial assets, and 3) hedge accounting.

The Group decided not to restate the prior period figures when applying the Standard for the first time, thus the comparative financial statements presented are not restated.

The main contents of the new accounting standard and the effect on the financial statements of the Group are as follows:

a) Classification and measurement of financial assets and financial liabilities

All financial assets included in the scope of IFRS 9 are subsequently measured at amortized cost or fair value based on the business model for the management of financial assets and the nature of the contractual cash flows.

Debt instruments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods (financial assets at amortized cost).

Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally measured at fair value through other comprehensive income (financial assets at fair value through other comprehensive income (“FVTOCI”)).

All other debt instruments and equity instruments are measured at their fair value at the end of subsequent accounting periods (financial assets at fair value through profit or loss (“FVTPL”)).

Notwithstanding the foregoing, the Group may make the following irrevocable choice or designation at the time of initial recognition of financial assets.

The Group may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of this Standard that is neither held for trading nor contingent consideration recognized by an acquirer in a business combination to which IFRS 3(R) applies.

At initial recognition, financial assets at amortized cost or FVTOCI may be irrevocably designated as financial assets at fair value through profit or loss mandatorily measured at fair value if doing so eliminate or significantly reduce a measurement or recognition inconsistency.

As of the date of first adoption of IFRS 9, there are no debt instruments classified either as financial assets at amortized cost or FVTOCI that are designated as financial assets at fair value through profit or loss.

When debt instruments measured at FVTOCI are derecognized, the cumulative gain or loss recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. On the other hand, for equity instruments designated as financial assets at fair value through other comprehensive income, cumulative gains or losses previously recognized in other comprehensive income are not subsequently reclassified to profit or loss. Debt instruments measured subsequently at amortized cost or fair value through other comprehensive income are subject to impairment provisions.

The classification and measurement of financial assets and financial liabilities in accordance with IFRS 9 and IAS 39 as of January 1, 2018 are as follows (Unit: Korean Won in millions):


	Classification according to IAS 39	Classification according to IFRS 9	Classification according to IAS 39		Reclassification			Remeasurement		Classification according to IFRS 9
Deposit	Loans and receivables	Loan and other financial assets at amortized cost		8,870,835		—			—		8,870,835
Deposit	Financial assets at FVTPL	Financial assets at FVTPL		25,972		—			—		25,972
Debt securities	Financial assets at FVTPL	Financial assets at FVTPL (*)		2,654,027		—			—		2,654,027
Equity securities	Financial assets at FVTPL	Financial assets at FVTPL (*)		47,304		—			—		47,304
Derivatives	Financial assets at FVTPL	Financial assets at FVTPL (*)		3,115,775		(2,137	)		—		3,113,638
Equity securities	AFS financial assets	Financial assets at FVTPL (*)		1,273,498		1,219			—		1,274,717
Equity securities	AFS financial assets	Financial assets at FVTOCI		850,207		—			—		850,207
Debt securities	AFS financial assets	Financial assets at FVTPL		46,855		—			—		46,855
Debt securities	AFS financial assets	Financial assets at FVTOCI		12,874,209		—			—		12,874,209
Debt securities	AFS financial assets	Securities at amortized cost		308,181		—			14,119		322,300
Debt securities	HTM financial assets	Securities at amortized cost		16,749,296		—			—		16,749,296
Loans	Loans and receivables	Financial assets at FVTPL (*)		279,032		918			50		280,000
Loans	Loans and receivables	Loan and other financial assets at amortized cost		253,014,491		—			—		253,014,491
Derivatives assets	Derivatives assets	Derivatives assets (Held for hedging)		59,272		—			—		59,272
Other financial assets	Loans and receivables	Loan and other financial assets at amortized cost		6,772,088		—			—		6,772,088

Total financial assets				306,941,042		—			14,169		306,955,211

(*)

Under IAS 39, the embedded derivatives out of hybrid financial instruments are accounted for as derivatives assets or liabilities if the criteria for separation of the embedded derivative are met and the rest of host contracts in those instruments are recorded as available-for-sale financial assets or loans and receivables respectively. Since IFRS 9 requires financial instruments be accounted for based on the terms of the entire financial instruments, the hybrid financial assets are revalued and recorded as financial assets at fair value through profit or loss.


	Classification according to IAS 39	Classification according to IFRS 9	Classification according to IAS 39		Reclassification		Remeasurement		Classification according to IFRS 9
Deposit due to customers	Financial liabilities at FVTPL	Financial liabilities at FVTPL		25,964		—		—		25,964
Deposit due to customers	Financial liabilities at amortized cost	Financial liabilities at amortized cost		234,695,084		—		—		234,695,084
Borrowings	Financial liabilities at amortized cost	Financial liabilities at amortized cost		14,784,706		—		—		14,784,706
Debentures	Financial liabilities at FVTPL	Financial liabilities at FVTPL		91,739		—		—		91,739
Debentures	Financial liabilities at amortized cost	Financial liabilities at amortized cost		27,869,651		—		—		27,869,651
Equity-linked securities	Financial liabilities at FVTPL	Financial liabilities at FVTPL		160,057		—		—		160,057
Derivatives liabilities	Financial liabilities at FVTPL	Financial liabilities at FVTPL		3,150,149		—		—		3,150,149
Derivatives liabilities	Derivatives liabilities	Derivatives liabilities (Held for hedging)		67,754		—		—		67,754
Other financial liabilities	Financial liabilities at amortized cost	Financial liabilities at amortized cost		13,892,461		—		—		13,892,461
Provision for financial guarantee	Provision for financial guarantee	Financial liabilities at amortized cost		71,697		—		—		71,697

Total financial liabilities				294,809,262		—		—		294,809,262

At the date of the initial application of IFRS 9, there were no financial assets or liabilities measured at FVTPL that were reclassified to FVTOCI or amortized cost category.

As of the date of first adoption of IFRS 9, the amount of valuation gain or loss and fair value of financial assets that would have been recognized in the book, had the entity decided not to reclassify financial assets at FVTPL or FVTOCI that has been reclassified into financial assets at amortized cost, is as follows: (Unit: Korean Won in millions)


Account subject	Category before the adoption of IFRS 9	Amount of valuation gain/loss had it not been reclassified			Fair value
Debt securities	AFS securities		(163	)		300,058

b) Impairment of financial assets

The impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the impairment approach in IFRS 9, it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, the Group accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses should be updated at each reporting date to reflect changes in credit risk since initial recognition.

The Group is required to recognize the expected credit losses for financial instruments measured at amortized cost or FVTOCI, and loan commitments and financial guarantee contracts that are subject to the impairment provisions of IFRS 9. In particular, when the credit risk of the financial instruments are significantly increased after initial recognition, or when the credit quality of the financial instruments are already impaired at acquisition, the loss allowance is measured as the expected credit loss for the whole life of the financial assets. If the credit risk of a financial instruments does not increase significantly after initial recognition (excluding purchased or originated credit-impaired loans—for financial assets already impaired at initial recognition), the Group measures the loss allowance on the financial instruments at the amount equivalent to the expected 12-month credit loss.

Management determined the credit risk at the date of initial recognition of the financial instrument in accordance with IFRS 9 and provided a reasonable and supportive measure that can be used without undue cost or effort in comparison with the credit risk of the initial application date (January 1, 2018) the Group used information that could be used to assess the impairment of the Group’s financial assets, lending arrangements and financial guarantees at the date of initial application. As of January 1, 2018, the evaluation results are as follows (Unit: Korean Won in millions):


	Classification according to IAS 39		Classification according to IFRS 9		Loss allowance per IAS 39(A)		Loss allowance per IFRS 9 (B)		Increases (B-A)
Deposit		Loans and receivables		Loans and other financial assets at amortized cost		2,458		3,092		634
Debt securities
AFS debt securities		AFS financial assets		Financial assets at FVTOCI		—		4,236		4,236
HTM securities		HTM financial assets		Securities at amortized cost		—		5,078		5,078
Loans and other financial assets		Loans and receivables		Loans and other financial assets at amortized cost		1,827,785		2,076,873		249,088
Payment guarantee						183,247		192,924		9,677
Loan commitment						66,115		104,985		38,870

Total						2,079,605		2,387,188		307,583

c) Classification and measurement of financial liabilities

One of the major changes related to the classification and measurement of financial liabilities as a result of the adoption of IFRS 9 is the change in the fair value of financial liabilities designated at fair value through profit or loss due to the changes in issuer’s own credit risk. The Group recognizes the effect of changes in the credit risk of financial liabilities designated as at FVTOCI in other comprehensive income, except for cases where it causes or disproves accounting mismatch of the profit or loss. Changes in fair value due to credit risk of financial liabilities are not subsequently reclassified to profit or loss, but are reclassified as retained earnings when financial liabilities are eliminated.

In accordance with IAS 39, the entire of changes in fair value of financial liabilities designated as at FVTPL are recognized in profit or loss. As of January 1, 2018, the Group designated 251,796 million Korean Won of FVTPL out of 294,813,795 million of financial liabilities, and recognized 133 million Korean Won as accumulated other comprehensive loss in relation to the changes in credit risk of financial liabilities.

d) Hedge accounting

The new hedge accounting model maintains three types of hedge accounting. However, it is introduced more flexibility in the types of transactions that are eligible for hedge accounting and is expanded the types of hedging instruments and non-financial hedge items that qualify for hedge accounting. As a whole, it has been amended and replaced by the principle of “economic relationship” between the hedged item and the hedging instrument. Retrospective assessment of the hedging effectiveness is no longer required. Additional disclosure requirements have been introduced in relation to the Group’s risk management activities.

In accordance with the transitional provisions of IFRS 9 on hedge accounting, the Group adopted the hedge accounting provisions of IFRS 9 prospectively from January 1, 2018. As of the date of initial application, the Group has considered that the hedging relationship in accordance with IAS 39 is appropriate for hedge accounting under IFRS 9, thus the hedging relationship is considered to exist continually. Since the major conditions for hedging instruments and the hedged items are consistent, all hedging relationships are consistent with the effectiveness assessment requirements of IFRS 9. The Group has not designated a hedging relationship in accordance with IFRS 9 in which the hedge relationship would not have met the requirements for hedge accounting under IAS 39.

Consistent with prior periods, the Group continues to designate fair value changes in interest rate swaps as hedging instruments in the fair value hedge relationship.

e) Effect on equity as a result of adoption of IFRS 9

The effect on equity due to the adoption of IFRS 9 as of January 1, 2018 is as follows (Unit: Korean Won in millions):

•

Impact on accumulated other comprehensive loss as result of financial assets at FVTOCI, etc.


	Amount
Beginning balance (prior to IFRS 9)		(89,724	)
Adjustments		(392,176	)
Reclassification of available-for-sale financial assets to financial assets at Amortized cost		494
Reclassification of available-for-sale financial assets to financial assets at FVTPL		(152,124	)
Recognition of expected credit losses of debt securities at FVTOCI		4,293
Reclassified of available for sale financial assets (equity securities) to financial assets at FVTOCI		(397,508	)
Effect on changes in credit risk of financial liabilities at fair value through profit or loss designated as upon initial recognition		(133	)
Others		3,006
Income tax effect		149,796

Ending balance (based on IFRS 9)		(481,900	)

•

Retained earnings impact


	Amount
Beginning balance (prior to IFRS 9)		15,620,006
Adjustments		177,091
Reclassification of available-for-sale financial assets to financial assets at Amortized cost		(494	)
Reclassification of available-for-sale financial assets to financial assets at FVTPL		152,067
Recognition of expected credit losses of debt instruments at FVTOCI		(4,236	)
Reclassified of available for sale financial assets (equity securities) to financial assets at FVTOCI		397,508
Effect on revaluation of financial assets at amortized cost from loan and receivables or AFS financial assets		282
Recognition of expected credit losses of financial assets at amortized cost which were previously loan and receivables		(240,683	)
Effect of payment guarantees / unused commitments on liabilities		(48,548	)
Effect on changes in credit risk of financial liabilities at fair value through profit or loss designated as upon initial recognition		133
Others		(4,456	)
Income tax effect		(74,482	)

Ending balance (based on IFRS 9)		15,797,097

•

Adoption of IFRS 15 – Revenue from contracts with customers (enacted)

The Group adopted IFRS 15 for the first time and decided to recognize the cumulative effect of applying the new standard at the beginning of the year of initial application (January 1, 2018), with no restatement of comparative periods, with a choice of practical expedients under the transition requirements of IFRS 15. In addition, the Group has applied the new standard to contractual modifications made prior to the first application date and applied the new standard to the contract modifications that occur after the date of initial application.

Accordingly, the Group has not retroactively restated the comparative consolidated financial statements presented herein.

•

Amendments to IFRS 2 – Classification and Measurement of Share-based Payment Transactions

The amendments clarify the following; i) In estimating the fair value of a cash-settled share-based payment, the accounting for the effects of vesting and non-vesting conditions should follow the same approach as for equity-settled share-based payments ii) Where tax law or regulation requires an entity to withhold a specified number of equity instruments equal to the monetary value of the employee’s tax obligation to meet the employee’s tax liability which is then remitted to the tax authority, i.e. the share-based payment arrangement has a ‘net settlement feature’, such an arrangement should be classified as equity-settled in its entirety, provided that the share-based payment would have been classified as equity-settled had it not included the net settlement feature, iii) A modification of a share-based payment that changes the transaction from cash-settled to equity-settled should be accounted for as follows; a) the original liability is derecognized; b) the equity-settled share-based payment is recognized at the modification date fair value of the equity instrument granted to the extent that services have been rendered up to the modification date; and c) any difference between the carrying amount of the liability at the modification date and the amount recognized in equity should be recognized in profit or loss immediately.

•

Amendments to IAS 40 – Transfers of Investment Property

The amendments clarify that a transfer to, or from, investment property necessitates an assessment of whether a property meets the definition of investment property, supported by observable evidence that a change in use has occurred. The amendments further clarify that the situations listed in IAS 40 are not exhaustive and that a change in use is possible for properties under construction (i.e. a change in use is not limited to completed properties).

•

Amendments to IFRIC 22 – Foreign Currency Transactions and Advance Consideration

IFRIC 22 addresses how to determine the ‘date of transaction’ for the purpose of determining the exchange rate to use on initial recognition of an asset, expense or income (or part of them), when consideration for that item has been paid or received in advance in a foreign currency which resulted in the recognition of a non-monetary asset or non-monetary liability (e.g. a non-refundable deposit or deferred revenue).

The Interpretation specifies that the date of transaction is the date on which the entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the Interpretation requires an entity to determine the date of transaction for each payment or receipt of advance consideration.

•

Annual Improvements to IFRS 2014-2016 Cycle

The amendments include partial amendments to IFRS 1 ‘First-time Adoption of IFRS’ and IAS 28 ‘Investments in Associates and Joint Ventures.’ Amendments to IAS 28 provide that an investment company such as a venture capital investment vehicle may selectively designate each of its investment in associates and/or joint ventures to be measured at fair value through profit or loss mandatorily measured at fair value, and that such designation must be made at the time of each investment’s initial recognition. In addition, when non-investment companies apply equity method to investment in associates and/or joint ventures that are investment companies, these companies may apply the same fair value measurement used by the said associates to value their own subsidiaries. This accounting treatment may be selectively applied to each associate.

There

are no significant impacts on financial statements due to newly adopted accounting standards except for IFRS 9.

2)	The Group has not applied the following IFRS that have been issued but are not yet effective:

•

IFRS 16 – Leases (enacted)

IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 will supersede the current lease guidance including IAS 17 Leases and the related interpretations, and will be applied to periods beginning on or after January 1, 2019.

IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by model where a right-of-use asset and corresponding liability have to be recognized for all leases by lessees except for short-term leases and leases of low value assets.

The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. Furthermore, the classification of cash flows will also be affected as operating lease payments under IAS 17 are presented as operating cash flows; whereas under the IFRS 16 model, the lease payments will be split into a principal and an interest portion which will be presented as financing and operating cash flows respectively.

In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, and continues to require a lessor to classify a lease either as an operating lease or a finance lease. Also, IFRS 16 requires expanded disclosures.

According to the preliminary assessment of the Group, the lease agreements entered into by the Group as of September 30, 2018 are expected to meet the definition of lease under the Standard, and accordingly, if the Group adopts the Standard, it applies to all leases except short-term leases and leases of low value assets, and the Group will recognize the right-of-use assets and related liabilities accordingly. The Group is currently analyzing the potential impact of this standards as of September 30, 2018.

3.	SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS

In the application of the Group’s accounting policies to the interim financial statements, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results can differ from those estimates based on such definitions.

The significant judgments which management has made about the application of the Group’s accounting policies and key sources of uncertainty in estimate do not differ from those used in preparing the consolidated financial statements for the year ended December 31, 2017, except the Group’s policy, accounting estimates and assumptions described below;

(1)	Income taxes

The Group is operating in numerous countries and the income generated from these operations is subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations which makes the ultimate tax determination uncertain. If certain portion of the taxable income is not used for investments, increase in wages, and others in accordance with the Tax System for Promotion of investment and Collaborative Cooperation (Recirculation of Corporate Income), the Group is liable to pay additional income tax calculated based on the tax laws. The new tax system is effective for three years from 2018. Accordingly, the measurement of current and deferred income tax is affected by the tax effects from the new system. As the Group’s income tax is dependent on the investments, increase in wages, and others, there exists uncertainty with regard to measuring the final tax effects.

(2)	Provisions for credit losses (allowances for loan losses, provisions for acceptances and guarantees, and unused loan commitments)

In accordance with IFRS 9, the Group tests impairment and recognizes allowances for losses on financial assets classified at amortized cost, and debt instruments measured at fair value through other comprehensive income and lease receivables through impairment testing and recognizes provisions for guarantees, and unused loan commitments. Accuracy of provisions for credit losses is dependent upon estimation of expected cash flows of the borrower for individually assessed allowances of loans, and upon assumptions and methodology used for collectively assessed allowances for the Group’s of loans, guarantees and unused loan commitments.

4.	RISK MANAGEMENT

The Group’s operating activity is exposed to various financial risks. The Group is required to analyze and assess the level of complex risks, and determine the permissible level of risks and manage such risks. The Group’s risk management procedures have been established to improve the quality of assets for holding or investment purposes by making decisions as how to avoid or mitigate risks through the identification of the source of the potential risks and their impact.

The Group has established an approach to manage the acceptable level of risks and reduce the excessive risks in financial instruments in order to maximize the profit given risks present, for which the Group has implemented processes for risk identification, assessment, control, and monitoring and reporting.

The risk is managed by the risk management department in accordance with the Group’s risk management policy. The Risk Management Committee makes decisions on the risk strategies such as the allocation of risk capital and the establishment of acceptable level of risk.

(1)	Credit risk

Credit risk represents the possibility of financial losses incurred when the counterparty fails to fulfill its contractual obligations. The goal of credit risk management is to maintain the Group’s credit risk exposure to a permissible degree and to optimize its rate of return considering such credit risk.

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.

Maximum exposure to credit risk

The Group’s maximum exposure to credit risk refers to net book value of financial assets net of allowances, which shows the uncertainties of maximum changes of net value of financial assets attributable to a particular risk without considering collateral and other credit enhancements obtained. However, the maximum exposure is the fair value amount (recorded on the books) for derivatives, maximum contractual obligation for payment guarantees and unused commitment.

The maximum exposure to credit risk is as follows (Unit: Korean Won in millions):


		September 30, 2018		December 31, 2017
Loans and other financial assets at amortized cost	Korean treasury and government agencies		18,001,232		—
	Banks		18,747,042		—
	Corporates		97,141,269		—
	Consumers		144,795,354		—

	Sub-total		278,684,897		—

Loans and receivables	Korean treasury and government agencies		—		8,823,584
	Banks		—		26,845,309
	Corporates		—		90,570,551
	Consumers		—		140,866,760

	Sub-total		—		267,106,204

Financial assets at FVTPL (IFRS 9)	Deposit		27,045		—
	Debt securities		1,818,868		—
	Loans		322,907		—
	Derivative assets		1,921,399		—

	Sub-total		4,090,219		—

Financial assets at FVTPL (IAS 39)	Deposit		—		25,972
	Debt securities		—		2,644,333
	Financial assets designated at FVTPL		—		9,694
	Derivative assets		—		3,115,775

	Sub-total		—		5,795,774

Financial assets at FVTOCI	Debt securities		15,148,280		—
AFS financial assets	Debt securities		—		13,229,244
Securities at amortized cost	Debt securities		19,121,604		—
HTM financial assets	Debt securities		—		16,749,296
Derivative assets	Derivative assets (Held for hedging)		13,716		59,272
Off-balance accounts	Guarantees		12,475,470		12,859,715
	Loan commitments		97,085,991		80,760,325

	Sub-total		109,561,461		93,620,040

	total		426,620,177		396,559,830

a) Credit risk exposure by geographical areas

The following tables analyze credit risk exposure by geographical areas (Unit: Korean Won in millions):


	September 30, 2018
	Korea		China		USA		UK		Japan		Others (*)		Total
Loans and other financial assets at amortized cost		259,175,016		4,849,590		4,229,635		1,336,132		549,769		8,544,755		278,684,897
Securities at amortized cost		18,968,281		—		71,295		—		—		82,028		19,121,604
Financial assets at FVTPL		3,897,918		3,583		—		107,099		—		81,619		4,090,219
Financial assets at FVTOCI		14,105,059		29,189		158,825		—		—		855,207		15,148,280
Derivative assets (Held for hedging)		9,391		—		—		4,325		—		—		13,716
Off-balance accounts		106,974,120		873,121		210,291		113,531		22,001		1,368,397		109,561,461

Total		403,129,785		5,755,483		4,670,046		1,561,087		571,770		10,932,006		426,620,177


	December 31, 2017
	Korea		China		USA		UK		Japan		Others (*)		Total
Loans and receivables		250,678,479		4,104,912		2,823,247		1,094,988		381,890		8,022,688		267,106,204
Financial assets at FVTPL		5,551,870		2,937		—		148,955		—		92,012		5,795,774
AFS debt securities		12,407,602		52,259		151,131		—		—		618,252		13,229,244
HTM securities		16,606,692		—		63,732		—		—		78,872		16,749,296
Derivative assets (Held for hedging)		16,590		—		—		42,682		—		—		59,272
Off-balance accounts		91,603,852		529,193		172,570		66,974		25,039		1,222,412		93,620,040

Total		376,865,085		4,689,301		3,210,680		1,353,599		406,929		10,034,236		396,559,830

(*)

Others consist of financial assets in Indonesia, Hong Kong, Singapore, and other countries.

b) Credit risk exposure by industries

The following tables analyze credit risk exposure by industries, which are service, manufacturing, finance and insurance, construction, individuals and others in accordance with the Korea Standard Industrial Classification Code (Unit: Korean Won in millions):


	September 30, 2018
	Service		Manufacturing		Finance and insurance		Construction		Individuals		Others		Total
Loans and other financial assets at amortized cost		48,718,620		35,526,804		40,303,976		3,587,102		140,628,975		9,919,420		278,684,897
Securities at amortized cost		1,124,406		—		11,503,510		416,341		—		6,077,347		19,121,604
Financial assets at FVTPL		97,326		104,668		2,925,489		49,797		3,735		909,204		4,090,219
Financial assets at FVTOCI		307,183		85,182		10,756,520		235,127		—		3,764,268		15,148,280
Derivative assets (Held for hedging)		—		—		13,716		—		—		—		13,716
Off-balance accounts		17,873,392		21,726,373		9,171,373		4,108,025		49,563,611		7,118,687		109,561,461

Total		68,120,927		57,443,027		74,674,584		8,396,392		190,196,321		27,788,926		426,620,177


	December 31, 2017
	Service		Manufacturing		Finance and insurance		Construction		Individuals		Others		Total
Loans and receivables		47,192,641		34,502,509		38,260,051		3,574,746		133,094,287		10,481,970		267,106,204
Financial assets at FVTPL		100,766		83,239		4,640,068		15,073		1,040		955,588		5,795,774
AFS debt securities		707,737		37,719		7,331,774		153,534		—		4,998,480		13,229,244
HTM securities		1,348,754		—		10,962,149		296,214		—		4,142,179		16,749,296
Derivative assets (Held for hedging)		—		—		59,272		—		—		—		59,272
Off-balance accounts		16,892,926		21,427,378		9,841,379		3,842,479		36,928,554		4,687,324		93,620,040

Total		66,242,824		56,050,845		71,094,693		7,882,046		170,023,881		25,265,541		396,559,830

Credit risk exposure

The allowance to be recognized under IFRS 9 is the amount of expected 12-month credit loss or the expected lifetime credit loss, according to the three stages of credit risk deterioration since initial recognition as shown below:


	Stage 1	Stage 2	Stage 3
	Credit risk has not significantly increased since initial recognition (*)	Credit risk has significantly increased since initial recognition	Credit has been impaired
Allowance for expected credit losses	Expected 12-month credit losses:	Expected lifetime credit losses:
Allowance for expected credit losses	Expected credit losses due to possible defaults on financial instruments within a 12-month period from the reporting date.	Expected credit losses due to 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 reporting date.

The Group has estimated the allowance for credit losses based on experience losses with taken account of forward-looking information.

The probability of default and loss at given default per financial assets considering account type of borrowers, credit rate grade, portfolio are used in estimation of allowance for expected credit losses and those factors are reviewed periodically to reduce the difference of expected losses and actual losses.

The Group also measures expected credit losses using supportive and reasonable macroeconomic indicators, such as economic growth rates, interest rates, and composite stock indices. The methods for the estimation of forward-looking are also regularly reviewed.

The Group undertakes the following procedures in order to predict and apply the forward-looking economic information:

•

Development of a prediction model by analyzing the correlation between macroeconomic data and yearly default rate of corporate and retail exposures.

•

Calculation of predicted default rate by applying forward-looking economic information, which includes estimated macroeconomic indices provided by verified institutions such as Bank of Korea and National Assembly Budget Office, to the prediction model developed.

At the end of each period the Group evaluates whether there has been a significant increase in the credit risk since initial recognition. The Group is assessing the change in the risk of a default occurring over the expected life of the financial instruments instead of the change in the amount of expected credit losses. The Group distinguishes corporates/consumers exposures when determining significant increase in credit risk, and the applied methodology is as follows:


Corporates exposure		Consumers exposure
Below the “precautionary” level in assets quality Classification under the Regulations on Supervision of Banking Business in Korea		Below the “precautionary” level in assets quality classification under the Regulations on Supervision of Banking Business in Korea
More than 30 days past due		More than 30 days past due
Watch grade in early warning system established by the Group		Significant decreases in credit ratings
Significant change of borrower financial situation (Working capital deficiencies, Adverse opinion, Disclaimer of opinion by the external auditors)
Significant decreases in credit ratings

At the end of each reporting period, the Group assesses whether there is a significant increase in credit risk.

The financial assets are impaired if the following conditions are met;

•

The principal and interest of the financial assets has been overdue for more than 90 days due to the serious deterioration of the credit condition,

•

It is deemed that the borrowers will not pay any portion of the debts without actions of recourse such as the disposition of the collateral is not taken

•

Objective evidence of impairment of financial assets are identified

The Group writes off assets when it is determined that the financial assets are virtually impossible to collect. The Group determines which receivable to write-off and subsequently writes them off in accordance with the company’s policy. Regardless of whether assets have been written off, the Group may continue to exercise its right of collection in accordance with company’s policy on receivables collection.

a)	Financial assets

The maximum exposure to credit risk, except for financial assets at FVTPL and derivative asset (Held for hedging) is as follows (Unit: Korean Won in millions):


	September 30, 2018
	Stage 1				Stage 2				Stage 3		Total		Loss allowance			Total, net		Collateral value of impaired property
	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		Collateral value of impaired property
Loans and other financial assets at amortized cost		248,120,312		17,913,994		6,371,302		6,481,329		1,585,639		280,472,576		(1,787,679	)		278,684,897		731,700
Korean treasury and government agencies		18,005,413		—		1		—		—		18,005,414		(4,182	)		18,001,232		—
Banks		18,267,000		141,080		346,390		—		11,531		18,766,001		(18,959	)		18,747,042		—
Corporates		76,487,768		16,164,069		539,329		4,145,546		943,624		98,280,336		(1,139,067	)		97,141,269		473,906
General business		43,816,454		6,749,706		454,214		2,120,784		676,237		53,817,395		(762,103	)		53,055,292		310,307
Small- and medium-sized enterprise		28,281,996		8,855,973		85,115		1,856,296		238,873		39,318,253		(337,333	)		38,980,920		144,189
Project financing and others		4,389,318		558,390		—		168,466		28,514		5,144,688		(39,631	)		5,105,057		19,410
Consumers		135,360,131		1,608,845		5,485,582		2,335,783		630,484		145,420,825		(625,471	)		144,795,354		257,794
Securities at amortized cost		19,127,191		—		—		—		—		19,127,191		(5,587	)		19,121,604		—
Financial assets at FVTOCI (*4)		15,091,002		42,126		15,152		—		—		15,148,280		(5,229	)		15,148,280		—

Total		282,338,505		17,956,120		6,386,454		6,481,329		1,585,639		314,748,047		(1,798,495	)		312,954,781		731,700

(*1)	Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6.

(*2)	Credit grade of corporates are BBB+ ~ BBB and consumers are grades 4 ~ 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.

•

Loans and receivables


	December 31, 2017
	Korean treasury and government agencies				Corporates
	Korean treasury and government agencies		Banks		General business		Small and medium sized enterprise		Project financing and others		Sub-total		Consumers		Total
Neither overdue nor impaired		8,825,767		26,861,286		50,463,112		34,107,547		5,547,950		90,118,609		139,886,407		265,692,069
Overdue but not impaired		8		—		65,616		63,067		—		128,683		878,406		1,007,097
Impaired		—		—		1,402,131		251,431		46,717		1,700,279		537,001		2,237,280

Total		8,825,775		26,861,286		51,930,859		34,422,045		5,594,667		91,947,571		141,301,814		268,936,446

Loss allowance		2,191		15,977		1,078,733		267,162		31,125		1,377,020		435,054		1,830,242

Total, net		8,823,584		26,845,309		50,852,126		34,154,883		5,563,542		90,570,551		140,866,760		267,106,204

•

Debt securities

The Group manages debt securities based on the external credit rating. Credit soundness of debt securities on the basis of External Credit Assessment Institution (ECAI)’s rating is as follows (Unit: Korean Won in millions):


	December 31, 2017
	Financial assets at FVTPL (*)		AFS debt securities		HTM securities		Total
AAA		1,685,099		9,897,689		15,806,327		27,389,115
AA- ~ AA+		722,923		2,386,567		888,547		3,998,037
BBB- ~ A+		236,311		876,482		52,188		1,164,981
Below BBB-		9,694		68,506		2,234		80,434

Total		2,654,027		13,229,244		16,749,296		32,632,567

(*)

Financial assets at FVTPL comprise debt securities held for trading and financial assets designated at FVTPL

b)	Guarantees and loan commitments

The credit quality of the guarantees and loan commitments as of September 30, 2018 as follows (Unit: Korean Won in millions):


	September 30, 2018
Financial assets	Stage 1				Stage 2				Stage 3		Total
Financial assets	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
Off-balance accounts
Guarantees		10,859,936		1,077,716		5,057		410,517		122,244		12,475,470
Loan commitments		91,170,081		3,516,699		1,486,696		893,759		18,756		97,085,991

Total		102,030,017		4,594,415		1,491,753		1,304,276		141,000		109,561,461

(*1)

Credit grade of corporates are above BBB, and consumers are grades above 6.

(*2)

Credit grade of corporates are BBB+ ~ BBB and consumers are grade 4 ~ 6.

(*3)

Credit grade of corporate are BBB- ~ C, and consumers are grades 7 ~ 10.

4) Collateral and other credit enhancements

During the current quarter, 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 September 30, 2018, there are no financial assets that do not recognize the allowance for losses just because financial assets have collateral.

(2)	Market risk

Market risk is the possible risk of loss arising from trading activities and non-trading activities in the volatility of market factors such as interest rates, stock prices and foreign exchange rates. Market risk occurs as a result of changes in the interest rates and foreign exchange rates for financial instruments that are not yet settled, and all contracts are exposed to a certain level of volatility according to changes in the interest rates, credit spreads, foreign exchange rates and the price of equity securities.

Market risk management

For trading activities and non-trading activities, the Group avoids, bears, or mitigates risks by identifying the underlying source of the risks, measuring parameters and evaluating their appropriateness.

On a yearly basis, the Risk Management Committee establishes a Value at Risk (“VaR”, maximum losses) limit, loss limit and risk capital limit by subsidiaries for its management purposes. The limit by investment desk/dealer is independently managed to the extent of the limit given to subsidiaries and the limit by investment and loss cut is managed by the risk management personnel within the department.

The Group uses both a standard-based and an internal model-based approach to measure market risk. The standard-based approach is used to calculate individual market risk of owned capital while the internal model-based approach is used to calculate general capital market risk and it is used to measure internal risk management measure. For the trading activities, the Risk Management department measures the VaR limit by department, risk factor and loss limit on a daily basis and reports regularly to the Risk Management Committee.

Sensitivity analysis of market risk

The Group performs the sensitivity analyses both for trading and for non-trading activities.

For trading activities, the Group uses a VaR model that uses certain assumptions of possible fluctuations in market condition and, by conducting simulations of gains and losses, under which the model estimates the maximum losses that may occur. A VaR model predicts based on statistics of possible losses on the portfolio at a certain period currently or in the future. It indicates the maximum expected loss with at least 99% confidence level. In short, there exists a one percent possibility that the actual loss might exceed the predicted loss generated from the VaR calculation. The actual results are periodically monitored to examine the validity of the assumptions, variables, and factors that are used in VaR calculations. However, this approach cannot prevent the loss when the market fluctuation exceeds expectation.

For the non-trading activities, interest rate Earning at Risk (“EaR”) and interest rate VaR, which is based on the simulations of the Net Interest Income (“NII”) and Net Portfolio Value (“NPV”), are calculated for the Bank and the consolidated trusts, and the risks for all other subsidiaries are measured and managed by the interest rate EaR and the interest rate VaR calculations based on the Bank for International Settlements (“BIS”) Framework.

NII is a profit-based indicator for displaying the profit changes in short term due to the short-term interest changes. It will be estimated as subtracting interest expenses of liabilities from the interest income of assets. NPV is an indicator for displaying risks in economic view according to unfavorable changes related to interest rate. It will be estimated as subtracting the present value of liabilities from the present value of assets.

EaR shows the maximum profit-loss amount, which indicates the maximum deduction amount caused by the unfavorable changes related to the interest rate of a certain period (i.e. 1 year). Interest rate VaR shows the potential maximum loss generated by the unfavorable changes during a certain period of time in the present or future.

Trading activities

The minimum, maximum and average VaR for the nine months ended September 30, 2018 and for the year ended December 31, 2017, respectively, and the VaR as of September 30, 2018 and December 31, 2017, respectively, are as follows (Unit: Korean Won in millions):


	September 30, 2018			For the nine months ended September 30, 2018									December 31, 2017			For the year ended December 31, 2017
Risk factor	September 30, 2018			Average			Maximum			Minimum			December 31, 2017			Average			Maximum			Minimum
Interest rate		4,955			3,794			5,528			1,730			4,183			3,799			4,918			2,467
Stock price		2,682			2,575			4,618			1,138			909			2,863			4,419			909
Foreign currencies		5,038			4,553			6,136			3,439			4,750			5,051			6,636			4,061
Commodity price		17			1			17			—			—			31			188			—
Diversification		(6,892	)		(4,788	)		(7,685	)		(1,815	)		(4,472	)		(4,621	)		(6,798	)		(2,067	)

Total VaR (*)		5,800			6,135			8,614			4,492			5,370			7,123			9,363			5,370

(*)

VaR(Value at Risk): Maximum expected losses

Non-trading activities

The NII and NPV are calculated for the assets and liabilities owned by the Bank and consolidated trusts, respectively, by using the simulation method. The scenario responding to interest rate (“IR”) changes are as follows (Unit: Korean Won in millions):


	September 30, 2018				December 31, 2017
	NII (*1)		NPV (*2)		NII (*1)		NPV (*2)
Base case		4,713,257		24,686,971		4,916,138		23,472,792
Base case (Prepay)		4,704,711		24,380,159		4,916,015		23,163,942
IR 100bp up		5,209,637		24,550,082		5,361,546		22,886,122
IR 100bp down		4,294,765		24,846,145		4,386,437		24,127,559
IR 200bp up		6,071,377		24,430,336		5,806,723		22,372,208
IR 200bp down		3,783,567		25,035,233		3,452,590		24,830,482
IR 300bp up		6,852,372		24,324,139		6,251,897		21,929,189
IR 300bp down		3,647,006		25,266,044		2,254,609		26,633,807

(*1)

NII: Net Interest Income

(*2)

NPV: Net Portfolio Value

The interest EaR and VaR calculated based on the BIS Framework of subsidiaries other than the Bank and consolidated trusts are as follows (Unit: Korean Won in millions):


September 30, 2018		December 31, 2017
EaR (*1)	VaR (*2)	EaR (*1)	VaR (*2)
258,121	168,335	255,679		130,821

(*1)

EaR(Earning at Risk): Change of Maximum expected income and expense

(*2)

VaR(Value at Risk): Maximum expected losses

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):


	September 30, 2018
	Within 3 months		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		151,532,534		44,044,660		8,844,675		8,524,447		46,037,186		3,678,776		262,662,278
Financial assets at FVTPL		270,110		84,149		57,810		33,077		58,007		20,364		523,517
Financial assets at FVTOCI		3,267,328		1,939,108		1,562,900		1,397,493		7,127,479		172,862		15,467,170
Securities at amortized cost		2,424,853		1,892,024		2,005,818		1,630,934		11,639,628		361,671		19,954,928

Total		157,494,825		47,959,941		12,471,203		11,585,951		64,862,300		4,233,673		298,607,893

Liability:
Deposits due to customers		110,001,139		41,385,423		29,385,954		18,678,082		38,131,534		66,279		237,648,411
Borrowings		8,538,594		2,927,614		585,676		502,485		2,917,602		696,275		16,168,246
Debentures		1,742,589		2,192,041		2,417,121		2,191,199		18,692,490		2,895,263		30,130,703

Total		120,282,322		46,505,078		32,388,751		21,371,766		59,741,626		3,657,817		283,947,360


	December 31, 2017
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Asset:
Loans and receivables		161,653,892		41,671,530		7,614,159		6,411,841		54,150,998		26,272,958		297,775,378
AFS financial assets		2,150,708		2,500,103		2,016,711		2,367,762		4,229,000		601,735		13,866,019
HTM financial assets		2,286,179		2,161,467		1,433,425		1,687,362		9,369,794		345,868		17,284,095

Total		166,090,779		46,333,100		11,064,295		10,466,965		67,749,792		27,220,561		328,925,492

Liability:
Deposits due to customers		106,815,564		37,750,367		25,117,556		27,585,458		37,518,878		91,246		234,879,069
Borrowings		9,865,249		1,056,579		412,966		437,431		2,709,010		479,827		14,961,062
Debentures		1,955,902		2,452,240		1,018,563		1,752,847		19,770,538		2,869,766		29,819,856

Total		118,636,715		41,259,186		26,549,085		29,775,736		59,998,426		3,440,839		279,659,987

Currency risk

Currency risk arises from the financial instruments denominated in foreign currencies other than the functional currency. Therefore, no currency risk arises from non-monetary items or financial instruments denominated in the functional currency.

Financial instruments in foreign currencies exposed to currency risk are as follows (Unit: USD in millions, JPY in millions, CNY in millions, EUR in millions, and Korean Won in millions):


		September 30, 2018
		USD				JPY				CNY				EUR				Others		Total
		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Korean Won equivalent		Korean Won equivalent
Asset	Loans and other financial assets at amortized cost		25,397		28,258,170		155,998		1,524,936		29,587		4,786,589		1,548		2,003,929		4,443,257		41,016,881
	Financial assets at FVTPL		38		42,294		509		4,993		—		—		10		13,468		182,009		242,764
	Financial assets at FVTOCI		1,730		1,924,581		—		—		180		29,189		—		—		334,657		2,288,427
	Securities at amortized cost		111		123,756		—		—		—		—		—		—		82,050		205,806

	Total		27,276		30,348,801		156,507		1,529,929		29,767		4,815,778		1,558		2,017,397		5,041,973		43,753,878

Liability	Financial liabilities at FVTPL		62		69,084		452		4,431		—		—		30		38,438		112,012		223,965
	Deposits due to customer		12,376		13,764,056		169,598		1,664,042		23,544		3,808,868		809		1,047,643		2,649,540		22,934,149
	Borrowings		6,229		6,930,726		1,260		12,365		470		76,103		247		319,850		324,670		7,663,714
	Debentures		4,042		4,497,903		—		—		—		—		—		—		283,701		4,781,604
	Other financial liabilities		3,152		3,502,190		35,886		352,103		1,318		213,252		160		207,313		86,478		4,361,336

	Total		25,861		28,763,959		207,196		2,032,941		25,332		4,098,223		1,246		1,613,244		3,456,401		39,964,768

Off-balance accounts			7,010		7,799,660		35,311		346,457		4,962		802,684		469		607,464		856,294		10,412,559


		December 31, 2017
		USD				JPY				CNY				EUR				Others		Total
		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Korean Won equivalent		Korean Won equivalent
Asset	Loans and receivables		23,000		24,642,900		126,944		1,204,843		25,224		4,127,936		1,156		1,479,351		3,937,733		35,392,763
	Financial assets at FVTPL		32		34,303		25		238		—		—		27		34,583		104,892		174,016
	AFS financial assets		1,966		2,105,972		—		—		319		52,259		—		590		302,801		2,461,622
	HTM financial assets		111		118,868		—		—		—		—		—		—		78,175		197,043

	Total		25,109		26,902,043		126,969		1,205,081		25,543		4,180,195		1,183		1,514,524		4,423,601		38,225,444

Liability	Financial liabilities at FVTPL		41		43,423		79		752		—		—		19		24,878		69,977		139,030
	Deposits due to customer		13,744		14,725,686		195,176		1,852,440		21,865		3,578,142		883		1,129,802		2,396,826		23,682,896
	Borrowings		6,604		7,080,118		2,218		21,056		—		—		247		315,685		242,874		7,659,733
	Debentures		3,467		3,714,411		—		—		700		114,555		—		—		375,749		4,204,715
	Other financial liabilities		2,392		2,562,740		16,125		153,043		1,802		294,950		129		165,189		588,625		3,764,547

	Total		26,248		28,126,378		213,598		2,027,291		24,367		3,987,647		1,278		1,635,554		3,647,051		39,450,921

Off-balance accounts			8,108		8,687,009		33,624		319,127		1,199		196,261		406		519,843		176,886		9,899,126

(3)	Liquidity risk

Liquidity risk refers to the risk that the Group may encounter difficulties in meeting obligations from its financial liabilities.

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.

Maturity analysis of non-derivative financial liabilities

Cash flows of principals and interests by remaining contractual maturities of non-derivative financial liabilities are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		214,941		82		—		—		—		—		215,023
Deposits due to customers		151,910,998		30,991,036		23,044,605		25,310,930		6,639,946		1,893,204		239,790,719
Borrowings		5,061,517		3,703,374		1,656,860		1,700,574		3,394,586		713,838		16,230,749
Debentures		1,742,589		2,192,041		2,417,121		2,191,199		18,692,490		2,895,263		30,130,703
Other financial liabilities		15,158,656		54,413		167,450		2,737		694,086		2,141,543		18,218,885

Total		174,088,701		36,940,946		27,286,036		29,205,440		29,421,108		7,643,848		304,586,079


	December 31, 2017
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		168,442		155,984		1,717		512		375		—		327,030
Deposits due to customers		148,008,777		29,563,310		18,175,348		32,468,110		7,409,118		2,624,594		238,249,257
Borrowings		6,115,732		1,893,173		1,489,272		1,178,107		3,924,681		479,568		15,080,533
Debentures		1,955,255		2,452,565		1,018,714		1,744,731		19,770,380		2,869,699		29,811,344
Other financial liabilities		7,121,342		162,871		825		1,003		128,940		2,730,001		10,144,982

Total		163,369,548		34,227,903		20,685,876		35,392,463		31,233,494		8,703,862		293,613,146

Cash flows of principals and interests by expected maturities of non-derivative financial liabilities are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		214,941		82		—		—		—		—		215,023
Deposits due to customers		162,280,313		32,668,245		19,937,299		18,869,178		5,320,582		116,506		239,192,123
Borrowings		5,061,517		3,703,374		1,656,860		1,700,574		3,394,586		713,838		16,230,749
Debentures		1,742,589		2,192,041		2,417,121		2,191,199		18,692,490		2,895,263		30,130,703
Other financial liabilities		15,158,656		54,413		167,450		2,737		694,086		2,141,543		18,218,885

Total		184,458,016		38,618,155		24,178,730		22,763,688		28,101,744		5,867,150		303,987,483


	December 31, 2017
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		168,442		155,984		1,717		512		375		—		327,030
Deposits due to customers		159,146,602		31,298,562		16,667,130		21,995,294		6,487,047		2,278,756		237,873,391
Borrowings		6,115,732		1,893,173		1,489,272		1,178,107		3,924,681		479,568		15,080,533
Debentures		1,955,255		2,452,565		1,018,714		1,744,731		19,770,380		2,869,699		29,811,344
Other financial liabilities		7,121,342		162,871		825		1,003		128,940		2,730,001		10,144,982

Total		174,507,373		35,963,155		19,177,658		24,919,647		30,311,423		8,358,024		293,237,280

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 held for hedging purpose are estimated by offsetting cash inflows and cash outflows.

The cash flow by the maturity of derivative financial liabilities as of September 30, 2018 and December 31, 2017 is as follows (Unit: Korean Won in millions):


	Remaining maturity
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
September 30, 2018		2,007,243		—		—		—		69,972		4,135		2,081,350
December 31, 2017		3,150,149		—		—		381		67,373		—		3,217,903

Maturity analysis of off-balance accounts

The Group provides guarantees on behalf of customers. A financial guarantee represents an irrevocable undertaking that the Group should meet a customer’s obligations to third parties if the customer fails to do so. Under a loan commitment, the Group agrees to make funds available to a customer in the future. Loan commitments may be unconditionally cancellable, provided all conditions in the loan facility are met and if one or more conditions are waived, the loan commitment may persist. Commitments to lend include commercial standby facilities and credit lines, liquidity facilities to commercial paper conduits and utilized overdraft facilities. The maximum limit to be paid by the Group in accordance with guarantees and loan commitment only applies to principal amounts. There are contractual maturities for financial guarantees, such as guarantees for debentures issued or loans, loan commitments, and other guarantees, however, under the terms of the guarantees and loan commitments, funds should be paid upon demand from the counterparty. Details of off-balance accounts are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Guarantees		12,475,470		12,859,715
Loan commitments		97,085,991		80,760,325

(4)	Operational risk

The Group defines the operational risk that could cause a negative effect on capital resulting from inadequate internal process, labor work and systematic problem or external factors.

Operational risk management

The Group has been running the operational risk management system under Basel II. The Group developed Advanced Measurement Approaches (“AMA”) to quantify required capital for operational risk. This system is used for reinforcement in foreign competitions, reducing the amount of risk capitals, managing the risk, and precaution for any unexpected occasions. This system has been tested by an independent third party, and this system approved by the Financial Supervisory Service.

Operational risk measurement

To quantify required capital for operational risk, the Group applies AMA using internal and external loss data, business environment and internal control factors, and scenario analysis. For the operational risk management for its subsidiaries, the Group adopted the Basic Indicator Approach.

(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 Bazel 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: Common Equity Tier 1 capital ratio of 7.13% and 6.25%, a minimum Tier 1 ratio of 8.63% and 7.75% and a minimum total regulatory capital of 10.63% and 9.75% as of September 30, 2018 and December 31, 2017, respectively.

Details of the Group’s capital adequacy ratio as of September 30, 2018 and December 31, 2017 are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Tier 1 capital		17,510,489			16,074,987
Other Tier 1 capital		3,146,975			3,041,664
Tier 2 capital		3,824,033			3,486,555

Total risk-adjusted capital		24,481,497			22,603,206

Risk-weighted assets for credit risk		141,904,674			134,767,711
Risk-weighted assets for market risk		2,381,287			2,316,938
Risk-weighted assets for operational risk		9,938,192			9,677,559

Total risk-weighted assets		154,224,153			146,762,208

Common Equity Tier 1 ratio		11.35	%		10.95	%

Tier 1 capital ratio		13.39	%		13.03	%

Total capital ratio		15.87	%		15.40	%

5.	OPERATING SEGMENTS

In evaluating the results of the Group and allocating resources, the Group’s Chief Operation Decision Maker (“CODM”) utilizes the information per type of customers. 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 customers

The Group’s reporting segments comprise the following customers: consumer banking, corporate banking, investment banking, capital market, credit card market and headquarters and others. The reportable segments are classified based on the target customers for whom the service is being provided.

•

Consumer banking: Loans/deposits and financial services for retail and individual consumers, etc.

•

Corporate banking: Loans/deposits and export/import, financial services for corporations, etc.

•

Investment banking: Domestic/foreign investment, structured finance, M&A, equity & fund investment related business, venture advisory related tasks, real estate SOC development practices, etc.

•

Capital market: Fund management, investment in securities and derivatives, etc.

•

Credit card: Credit card, cash service and card loan, etc.

•

Headquarter and others: Segments that do not belong to above operating segments

The details of operating income by each segment are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Consumer banking			Corporate banking			Investment banking			Capital market			Credit cards			Headquarters and others			Sub-total			Adjustments			Total
Net Interest income (expense)
Interest income		2,601,854			2,509,028			112,975			7,563			496,064			1,164,324			6,891,808			228,382			7,120,190
Interest expense		(761,336	)		(1,548,717	)		(134	)		—			(117,539	)		(721,401	)		(3,149,127	)		226,086			(2,923,041	)
Inter-segment		(445,593	)		589,252			(119,741	)		19,750			—			(43,668	)		—			—			—

		1,394,925			1,549,563			(6,900	)		27,313			378,525			399,255			3,742,681			454,468			4,197,149

Net non-interest Income (expense)
Non-interest income		543,436			598,600			172,658			5,488,289			894,604			944,744			8,642,331			(352,948	)		8,289,383
Non-interest expense		(134,910	)		(182,239	)		(46,517	)		(5,445,633	)		(844,787	)		(523,902	)		(7,177,988	)		(277,521	)		(7,455,509	)
Inter-segment		110,481			53,546			—			—			—			(164,027	)		—			—			—

		519,007			469,907			126,141			42,656			49,817			256,815			1,464,343			(630,469	)		833,874

Other income (expense)
General and administrative expense		(1,339,229	)		(624,811	)		(8,842	)		(12,014	)		(123,480	)		(482,200	)		(2,590,576	)		204,465			(2,386,111	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(80,723	)		103,293			54,630			(1,891	)		(181,119	)		75,613			(30,197	)		(41,186	)		(71,383	)

		(1,419,952	)		(521,518	)		45,788			(13,905	)		(304,599	)		(406,587	)		(2,620,773	)		163,279			(2,457,494	)

Operating income (expenses)		493,980			1,497,952			165,029			56,064			123,743			249,483			2,586,251			(12,722	)		2,573,529
Non-operating income (expenses)		(15,597	)		1,245			24,928			—			(5,947	)		71,593			76,222			(22,431	)		53,791
Net income (expense) before income tax expense		478,383			1,499,197			189,957			56,064			117,796			321,076			2,662,473			(35,153	)		2,627,320
Income tax expense		(131,555	)		(381,492	)		(52,239	)		(15,418	)		(29,172	)		(96,228	)		(706,104	)		(364	)		(706,468	)

Net income (expense)		346,828			1,117,705			137,718			40,646			88,624			224,848			1,956,369			(35,517	)		1,920,852


	For the nine months ended September 30, 2017
	Consumer banking			Corporate banking			Investment banking			Capital market			Credit cards			Headquarters and others			Sub-total			Adjustments			Total
Net Interest income
Interest income		2,332,134			2,196,051			108,570			14,328			442,903			1,053,361			6,147,347			230,066			6,377,413
Interest expense		(717,708	)		(1,238,742	)		(186	)		—			(100,153	)		(627,858	)		(2,684,647	)		209,110			(2,475,537	)
Inter-segment		(379,017	)		358,953			(100,697	)		11,402			—			109,359			—			—			—

		1,235,409			1,316,262			7,687			25,730			342,750			534,862			3,462,700			439,176			3,901,876

Net non-interest Income (expense)
Non-interest income		598,446			503,820			272,024			6,155,339			836,721			1,801,968			10,168,318			(195,768	)		9,972,550
Non-interest expense		(182,815	)		(104,265	)		(152,512	)		(6,125,701	)		(782,048	)		(1,348,035	)		(8,695,376	)		(372,448	)		(9,067,824	)
Inter-segment		73,469			44,857			—			—			—			(118,326	)		—			—			—

		489,100			444,412			119,512			29,638			54,673			335,607			1,472,942			(568,216	)		904,726

Other income (expense)
General and administrative expense		(1,337,680	)		(618,969	)		(8,434	)		(11,309	)		(118,846	)		(741,176	)		(2,836,414	)		189,362			(2,647,052	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(70,180	)		(240,903	)		15,005			20,356			(162,247	)		134,810			(308,159	)		(49,475	)		(357,634	)

		(1,407,860	)		(859,872	)		6,571			9,047			(286,093	)		(606,366	)		(3,144,573	)		139,887			(3,004,686	)

Operating income		316,649			900,802			133,770			64,415			111,330			264,103			1,791,069			10,847			1,801,916
Non-operating income (expense)		3,304			(3,097	)		32,832			—			(4,097	)		(25,334	)		3,608			(3,938	)		(330	)

Net income before income tax expense		319,953			897,705			166,602			64,415			107,233			238,769			1,794,677			6,909			1,801,586
Income tax expense		(77,429	)		(204,541	)		(40,318	)		(15,588	)		(25,900	)		(8,148	)		(371,924	)		(37,221	)		(409,145	)

Net income (expense)		242,524			693,164			126,284			48,827			81,333			230,621			1,422,753			(30,312	)		1,392,441

(2)	Information on products and services

The products of the Group are classified as interest-bearing products such as loans, deposits and debt securities and non-interest bearing products such as loan commitment, credit commitment, equity securities, and credit card service. This classification of products has been reflected in the segment information presenting interest income and non-interest income.

(3)	Information on geographical areas

Of the Group’s revenue (interest income and non-interest income) from services, revenue from the domestic customers for the nine months ended September 30, 2018 and 2017 amounted to 14,359,474 million Won and 15,525,861 million Won, respectively, and revenue from the foreign customers amounted to 1,050,099 million Won and 824,102 million Won, respectively. Of the Group’s non-current assets (investments in joint ventures and associates, investment properties, premises and equipment and intangible assets), non-current assets attributed to domestic subsidiaries as of September 30, 2018 and December 31, 2017 are 3,558,612 million Won and 3,550,764 million Won, respectively, and foreign subsidiaries are 223,869 million Won and 233,732 million Won, respectively.

6.	CASH AND CASH EQUIVALENTS

(1)	Details of cash and cash equivalents are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Cash		1,991,580		2,009,363
Foreign currencies		763,114		617,155
Demand deposits		2,934,296		3,423,355
Fixed deposits		315,514		858,413

Total		6,004,504		6,908,286

(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 nine months ended September 30, 2018			For the nine months ended September 30, 2017
Changes in other comprehensive gain due to remeasurement of financial assets designated at FVTOCI		33,333			—
Changes in other comprehensive loss due to valuation of AFS financial assets		—			(51,041	)
Changes in other comprehensive income of investment in associates		3,676			4,917
Changes in other comprehensive gain (loss) of foreign operations translation		(27,226	)		(54,522	)
Changes in other comprehensive loss related to valuation of cash flow hedging		(3,510	)		(1,247	)
Changes in other comprehensive loss due to remeasurement of the net defined benefit liability		(43,269	)		13,143
Changes in investments in associates due to debt-equity swap		—			51,227
Changes in investments in associates due to accounts transfer		(83,286	)		—
Changes in intangible assets related to accounts payable		37,752			—
Classified to assets held for sale from premises and equipment		6,243			—
Changes in unpaid dividends on hybrid equity securities		11,462			(1,502	)

7.	FINANCIAL ASSETS AT FVTPL

(1)	Financial assets at FVTPL are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Financial assets at fair value through profit or loss mandatorily measured at fair value		5,720,811		—
Financial assets held for trading		—		5,820,787
Financial assets designated at FVTPL		—		22,290

Total		5,720,811		5,843,077

(2)

Financial assets at fair value through profit or loss mandatorily measured at fair value and financial assets held for trading are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Deposits:
Gold banking asset		27,045		25,972
Securities:
Debt securities
Korean treasury and government agencies		565,592		540,438
Financial institutions		462,348		1,476,498
Corporates		790,928		627,397
Others		—		—
Equity securities		418,363		21,666
Capital contributions		380,470		—
Beneficiary certificates		831,759		13,041

Sub-total		3,449,460		2,679,040

Loans		322,907		—
Derivatives assets		1,921,399		3,115,775

Total		5,720,811		5,820,787

(3)

Financial assets at fair value through profit or loss designated as upon initial recognition is nil as of September 30, 2018 and financial assets at fair value through profit or loss designated as upon initial recognition as of December 31, 2017 is as follows (Unit: Korean Won in millions):


	December 31, 2017
Debt securities		9,694
Equity securities		12,596

Total		22,290

8.	FINANCIAL ASSETS AT FVTOCI AND AFS FINANCIAL ASSETS

(1)

Details of financial assets at FVTOCI as of September 30, 2018 and AFS financial assets as of December 31, 2017 are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Debt securities:
Korean treasury and government agencies		2,024,627		2,330,567
Financial institutions		9,157,435		5,217,266
Corporates		1,607,632		2,725,232
Asset-backed securities		—		308,181
Bond denominated in foreign currencies		2,288,376		2,442,579
Others		—		35,163

Sub-total		15,078,070		13,058,988

Equity securities		1,019,337		1,411,078
Beneficiary certificates		—		712,628
Securities loaned		70,210		170,256

Total		16,167,617		15,352,950

(2)

Details of equity securities designated as financial assets at FVTOCI are as follows (Unit: Korean Won in millions):


	September 30, 2018
Purpose of acquisition	Fair value
Strategic business partnership		712,988
Debt-equity swap		306,164
Others (*)		185

Total		1,019,337

(*)

Cooperate 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):

Loss allowance


	For the nine months ended September 30, 2018
	Stage 1			Stage 2			Stage 3		Total
Beginning balance (*1)		(4,107	)		(129	)		—		(4,236	)
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		(1,069	)		8			—		(1,061	)
Disposal		30			—			—		30
Others (*2)		38			—			—		38

Ending balance		(5,108	)		(121	)		—		(5,229	)

(*1)

The beginning balance was restated in accordance with IFRS 9.

(*2)

Others consist of foreign currencies translation, etc.

Gross carrying amount


	For the nine months ended September 30, 2018
	Stage 1			Stage 2			Stage 3		Total
Beginning balance		12,843,997			30,212			—		12,874,209
Transfer to 12-month expected credit losses		—			—			—		—
Transfer to lifetime expected credit losses		—			—			—		—
Transfer to credit-impaired financial assets		—			—			—		—
Acquisition		8,628,710			—			—		8,628,710
Disposal		(6,382,060	)		(15,047	)		—		(6,397,107	)
Gain (loss) on valuation		(2	)		(59	)		—		(61	)
Amortization on the effective interest method		4,800			47			—		4,847
Others (*)		37,682			—			—		37,682

Ending balance		15,133,127			15,153			—		15,148,280

(*)

Others consist of foreign currencies translation, etc.

(4)

The Group disposed equity securities designated as financial assets at FVTOCI as the creditors determined to sell the securities for the nine months ended September 30, 2018. The fair value and accumulative loss on valuation of that equity securities at disposal date are 5,319 million Won and 384 million Won, respectively.

9.	SECURITIES AT AMORTIZED COST AND HTM FINANCIAL ASSETS

(1)

Details of securities at amortized cost as of September 30, 2018 and HTM financial assets as of December 31, 2017 are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Korean treasury and government agencies		5,878,664			3,994,857
Financial institutions		7,704,827			7,245,426
Corporates		5,337,894			5,311,970
Bond denominated in foreign currencies		205,806			197,043
Loss allowance		(5,587	)		—

Total		19,121,604			16,749,296

(2)

Changes in the loss allowance and gross carrying amount of securities at amortized cost are as follows (Unit: Korean Won in millions):

Loss allowance


	For the nine months ended September 30, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance (*1)		(5,078	)		—		—		(5,078	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net provision of loss allowance		(584	)		—		—		(584	)
Disposal		22			—		—		22
Others (*2)		53			—		—		53

Ending balance		(5,577	)		—		—		(5,577	)

(*1)

The beginning balance was restated in accordance with IFRS 9.

(*2)

Others consist of foreign currencies translation, etc.

Gross carrying amount


	For the nine months ended September 30, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		16,749,296			—		—		16,749,296
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Acquisition		9,460,686			—		—		9,460,686
Disposal / Redemption		(7,077,432	)		—		—		(7,077,432	)
Amortization on the effective interest method		(10,047	)		—		—		(10,047	)
Others (*)		4,688			—		—		4,688

Ending balance		19,127,191			—		—		19,127,191

(*)

Others consist of foreign currencies translation, etc.

10.

LOANS AND OTHER FINANCIAL ASSETS AT AMORTIZED COST, AND LOANS AND RECEIVABLES

(1)	Details of loans and other financial assets at amortized cost as of September 30, 2018 and loans and receivables as of December 31, 2017 are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Due from banks		19,338,144		8,868,378
Loans		248,115,899		251,523,301
Other financial assets(other receivables)		11,230,854		6,714,525

Total		278,684,897		267,106,204

(2)	Details of due from banks are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Due from banks in local currency:
Due from The Bank of Korea (“BOK”)		16,030,233			6,246,496
Due from depository banks		90,988			30,003
Due from non-depository institutions		25			150
Due from the Korea Exchange		—			50,000
Others		76,181			97,365
Loss allowance		(3,849	)		(1,541	)

Sub-total		16,193,578			6,422,473

Due from banks in foreign currencies:
Due from banks on demand		884,932			794,353
Due from banks on time		1,408,823			972,915
Others		853,116			679,554
Loss allowance		(2,305	)		(917	)

Sub-total		3,144,566			2,445,905

Total		19,338,144			8,868,378

(3)	Details of restricted due from banks are as follows (Unit: Korean Won in millions):


	Counterparty	September 30, 2018		Reason of restriction
Due from banks in local currency:
Due from BOK	The BOK		16,030,233	Reserve deposits under the BOK Act
Others	The Korea Exchange and others		72,176	Central counterparty KRW margin and others

Sub-total			16,102,409


Due from banks in foreign currencies:

Due from banks on demand	The BOK and others		881,504	Reserve deposits under the BOK Act and others
Due from banks on time	National Bank of Cambodia		576	Fast And Secure Transfer (Payment system)
Others	The People’s Bank of China and others		853,116	Reserve deposits and others

Sub-total			1,734,746

Total			17,837,155


	Counterparty	December 31, 2017		Reason of restriction
Due from banks in local currency:
Due from BOK	The BOK		6,246,496	Reserve deposits under the BOK Act
Others	The Korea Exchange and others		94,394	Central counterparty KRW margin and others

Sub-total			6,340,890


Due from banks in foreign currencies:
Due from banks on demand	The BOK and others		787,520	Reserve deposits under the BOK Act and others
Others	The People’s Bank of China and others		367,108	Reserve deposits and others

Sub-total			1,154,628

Total			7,495,518

(4)	Changes in the loss allowance and gross carrying amount of due from banks are as follows (Unit: Korean Won in millions):

Loss allowance


	For the nine months ended September 30, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance (*1)		(3,092	)		—		—		(3,092	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net provision of loss allowance		(3,068	)		—		—		(3,068	)
Others (*2)		6			—		—		6

Ending balance		(6,154	)		—		—		(6,154	)

(*1)

The beginning balance was restated in accordance with IFRS 9.

(*2)

Others consist of foreign currencies translation and etc.

Gross carrying amount


	For the nine months ended September 30, 2018
	Stage 1		Stage 2		Stage 3		Total
Beginning balance		8,870,835		—		—		8,870,835
Transfer to 12-month expected credit losses		—		—		—		—
Transfer to lifetime expected credit losses		—		—		—		—
Transfer to credit-impaired financial assets		—		—		—		—
Net increase		10,473,463		—		—		10,473,463

Ending balance		19,344,298		—		—		19,344,298

(5)	Details of loans are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Loans in local currency		206,442,588			200,213,230
Loans in foreign currencies		14,978,419			13,147,888
Domestic banker’s letter of credit		3,026,098			2,516,907
Credit card accounts		7,506,559			6,827,295
Bills bought in foreign currencies		7,576,979			8,197,159
Bills bought in local currency		103,502			334,714
Factoring receivables		53,860			137,523
Advances for customers on guarantees		16,027			23,620
Private placement bonds		406,773			362,319
Securitized loans		1,396,892			563,152
Call loans		2,087,986			3,003,455
Bonds purchased under resale agreements		4,758,495			16,859,064
Others		923,941			607,325
Loan origination costs and fees		556,228			510,860
Discounted present value		(6,925	)		(10,988	)
Loss allowance		(1,711,523	)		(1,770,222	)

Total		248,115,899			251,523,301

(6)	Changes in the loss allowance on loans for the nine months ended September 30, 2018 are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance (*1)		(101,479	)		(41,358	)		(117,168	)		(365,246	)		(255,926	)		(905,243	)
Transfer to 12-month expected credit losses		(10,147	)		9,396			751			(23,865	)		22,207			1,658
Transfer to lifetime expected credit losses		6,515			(8,137	)		1,622			15,078			(416,866	)		401,788
Transfer to credit-impaired financial assets		40,836			39,038			(79,874	)		32,015			23,433			(55,448	)
Net reversal (provision) of loss allowance		(44,358	)		(45,067	)		(62,682	)		(50,100	)		212,801			28,132
Recoveries of loans previously charged off		—			—			(36,841	)		—			—			(89,329	)
Charge-off		—			—			153,239			—			—			179,656
Disposal		—			34			1,313			—			137			29,972
Unwinding effect		—			—			5,730			—			—			18,611
Others (*2)		(1,641	)		(6	)		(919	)		40,093			128			641

Ending balance		(110,274	)		(46,100	)		(134,829	)		(352,025	)		(414,086	)		(389,562	)


	For the nine months ended September 30, 2018
	Credit card accounts									Sub-total									Total
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3			Total
Beginning balance (*1)		(57,134	)		(71,463	)		(102,858	)		(523,859	)		(368,747	)		(1,125,269	)		(2,017,875	)
Transfer to 12-month expected credit losses		(13,620	)		13,517			103			(47,632	)		45,120			2,512			—
Transfer to lifetime expected credit losses		6,542			(6,902	)		360			28,135			(431,905	)		403,770			—
Transfer to credit-impaired financial assets		38,839			66,374			(105,213	)		111,690			128,845			(240,535	)		—
Net reversal (provision) of loss allowance		(36,353	)		(79,481	)		(40,043	)		(130,811	)		88,253			(74,593	)		(117,151	)
Recoveries of loans previously charged off		—			—			(42,661	)		—			—			(168,831	)		(168,831	)
Charge-off		—			—			165,347			—			—			498,242			498,242
Disposal		—			—			—			—			171			31,285			31,456
Unwinding effect		—			—			—			—			—			24,341			24,341
Others (*2)		(1	)		—			—			38,451			122			(278	)		38,295

Ending balance		(61,727	)		(77,955	)		(124,965	)		(524,026	)		(538,141	)		(649,356	)		(1,711,523	)

(*1)

The beginning balance was restated in accordance with IFRS 9.

(*2)

Others consist of debt-equity swap, foreign currencies translation and etc.

Changes in the loss allowances on loans and receivables for the nine months ended September 30, 2017, are as follows (Unit: Korean Won in millions):


	For nine months ended September 30, 2017
	Consumers			Corporates			Credit card			Others			Total
Beginning balance		(163,858	)		(1,498,842	)		(155,372	)		(209,024	)		(2,027,096	)
Net reversal (provision) of loss allowance		(96,177	)		(318,660	)		(140,061	)		4,057			(550,841	)
Recoveries of loans previously charged off		(32,485	)		(66,665	)		(37,987	)		(5	)		(137,142	)
Charge-off		95,191			307,347			154,891			52,029			609,458
Disposal		868			61,432			—			29,264			91,564
Unwinding effect		6,704			29,062			—			—			35,766
Others (*)		471			179,970			—			(366	)		180,075

Ending balance		(189,286	)		(1,306,356	)		(178,529	)		(124,045	)		(1,798,216	)

(*)

Others consist of debt-equity swap, foreign currencies translation and etc.

(7)	Changes in the gross carrying amount of loans are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		103,502,347			5,487,758			326,739			130,561,786			5,000,965			1,622,409
Transfer to 12-month expected credit losses		1,910,641			(1,902,485	)		(8,156	)		1,127,912			(1,124,134	)		(3,778	)
Transfer to lifetime expected credit losses		(3,111,258	)		3,126,663			(15,405	)		(2,601,487	)		3,071,267			(469,780	)
Transfer to credit-impaired financial assets		(161,096	)		(126,080	)		287,176			(226,207	)		(138,654	)		364,861
Charge-off		—			—			(153,239	)		—			—			(179,656	)
Disposal		—			(456	)		(23,692	)		—			(1,169	)		(108,176	)
Net increase (decrease)		4,446,898			(731,876	)		(26,747	)		(6,252,563	)		(846,435	)		(311,693	)

Ending balance		106,587,532			5,853,524			386,676			122,609,441			5,961,840			914,187


	For the nine months ended September 30, 2018
	Credit card accounts									Sub-total									Total
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3			Total
Beginning balance		5,721,743			935,266			177,983			239,785,876			11,423,989			2,127,131			253,336,996
Transfer to 12-month expected credit losses		234,714			(234,576	)		(138	)		3,273,267			(3,261,195	)		(12,072	)		—
Transfer to lifetime expected credit losses		(305,037	)		305,497			(460	)		(6,017,782	)		6,503,427			(485,645	)		—
Transfer to credit-impaired financial assets		(65,383	)		(82,398	)		147,781			(452,686	)		(347,132	)		799,818			—
Charge-off		—			—			(165,347	)		—			—			(498,242	)		(498,242	)
Disposal		—			—			—			—			(1,625	)		(131,868	)		(133,493	)
Net increase (decrease)		720,055			79,934			44,588			(1,085,610	)		(1,498,377	)		(293,852	)		(2,877,839	)

Ending balance		6,306,092			1,003,723			204,407			235,503,065			12,819,087			1,505,270			249,827,422

(8)	Details of other financial assets (other receivables) are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
CMA accounts		178,500			135,000
Receivables		8,184,878			4,459,318
Accrued income		1,125,163			1,026,273
Telex and telephone subscription rights and refundable deposits		981,606			984,620
Other receivables		830,710			166,877
Loss allowance		(70,003	)		(57,563	)

Total		11,230,854			6,714,525

(9)	Changes in the loss allowances on other financial assets are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance (*1)		(2,955	)		(1,832	)		(54,211	)		(58,998	)
Transfer to 12-month expected credit losses		(162	)		146			16			—
Transfer to lifetime expected credit losses		111			(425	)		314			—
Transfer to credit-impaired financial assets		2,329			146			(2,475	)		—
Net provision of loss allowance		(3,065	)		(208	)		(26,773	)		(30,046	)
Charge-off		—			—			17,876			17,876
Disposal		—			—			1,047			1,047
Others(*2)		(170	)		—			288			118

Ending balance		(3,912	)		(2,173	)		(63,918	)		(70,003	)

(*1)

The beginning balance was restated in accordance with IFRS 9.

(*2)

Others consist of foreign currencies translation and etc.

(10)	Changes in the gross carrying amount of other financial assets are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		6,662,335			29,124			79,912			6,771,371
Transfer to 12-month expected credit losses		7,935			(7,912	)		(23	)		—
Transfer to lifetime expected credit losses		(11,959	)		12,278			(319	)		—
Transfer to credit-impaired financial assets		(3,211	)		(1,002	)		4,213			—
Charge-off		—			—			(17,876	)		(17,876	)
Disposal		—			(2	)		(1,234	)		(1,236	)
Net increase and others		4,533,073			1,056			15,696			4,549,825
Others (*)		(1,230	)		3			—			(1,227	)

Ending balance		11,186,943			33,545			80,369			11,300,857

(*)

Others consist of foreign currencies translation and etc.

11.

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

(1)	The fair value hierarchy

The fair value hierarchy is determined by the levels of judgment involved in estimating fair values of financial assets and liabilities. The specific financial instruments characteristics and market condition such as volume of transactions and transparency are reflected to the market observable inputs. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities. The Group maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value of its financial assets and financial liabilities. Fair value is measured based on the perspective of a market participant. As such, even when market assumptions are not readily available, the Group’s own assumptions reflect those that market participants would use for measuring the assets or liabilities at the measurement date.

The fair value measurement is described in the one of the following three levels used to classify fair value measurements:

•

Level 1 – fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. The types of financial assets or liabilities generally included in Level 1 are publicly traded equity securities, derivatives, and debt securities issued by governmental bodies.

•

Level 2 – fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices). The types of financial assets or liabilities generally included in Level 2 are debt securities not traded in active markets and derivatives traded in OTC but not required significant judgment.

•

Level 3 – fair value measurements are those derived from valuation technique that include inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). The types of financial assets or liabilities generally included in Level 3 are non-public securities and derivatives and debt securities of which valuation techniques require significant judgments and subjectivity.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Group’s assessment of the significance of a particular input to a fair value measurement in its entirety requires judgment and consideration of inherent factors of the asset or liability.

(2)	Fair value hierarchy of financial assets and liabilities measured at fair value are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Level 1 (*1)		Level 2 (*1)		Level 3		Total
Financial assets:
Financial assets at fair value through profit or loss mandatorily measured at fair value
Deposits		27,045		—		—		27,045
Debt securities		270,647		1,542,673		5,548		1,818,868
Equity securities		53,695		—		364,668		418,363
Capital contributions		—		—		380,470		380,470
Beneficiary certificates		—		45,084		786,675		831,759
Loans		—		93,000		229,907		322,907
Derivative assets		1,579		1,883,776		36,044		1,921,399

Sub-total		352,966		3,564,533		1,803,312		5,720,811

Financial assets at FVTOCI
Debt securities		2,337,260		12,740,810		—		15,078,070
Equity securities		545,666		—		473,671		1,019,337
Securities loaned		—		70,210		—		70,210

Sub-total		2,882,926		12,811,020		473,671		16,167,617

Derivative assets (Held for hedging)		—		13,716		—		13,716

Total		3,235,892		16,389,269		2,276,983		21,902,144


	September 30, 2018
	Level 1 (*1)		Level 2 (*1)		Level 3		Total
Financial liabilities:
Financial liabilities at fair value through profit or loss mandatorily measured at fair value
Deposits due to customers		27,266		—		—		27,266
Derivative liabilities		743		1,963,067		43,433		2,007,243

Sub-total		28,009		1,963,067		43,433		2,034,509

Financial liabilities at fair value through profit or loss designated as upon initial recognition
Equity-linked securities		—		—		187,533		187,533

Derivative liabilities (Held for hedging)		—		74,107		—		74,107

Total		28,009		2,037,174		230,966		2,296,149


	December 31, 2017
	Level 1 (*1)		Level 2 (*1)		Level 3 (*2)		Total
Financial assets:
Financial assets held for trading
Deposits		25,972		—		—		25,972
Debt securities		405,942		2,238,391		—		2,644,333
Equity securities		21,666		—		—		21,666
Beneficiary certificates		—		13,041		—		13,041
Derivative assets		1,021		3,093,272		21,482		3,115,775

Sub-total		454,601		5,344,704		21,482		5,820,787

Financial assets designated at FVTPL
Debt securities		—		—		9,694		9,694
Equity securities		—		—		12,596		12,596

Sub-total		—		—		22,290		22,290

AFS financial assets
Debt securities		2,710,172		10,348,815		—		13,058,987
Equity securities		399,214		—		1,011,864		1,411,078
Beneficiary certificates		—		68,722		643,906		712,628
Securities loaned		69,778		100,478		—		170,256

Sub-total		3,179,164		10,518,015		1,655,770		15,352,949

Derivative assets (Held for hedging)		—		59,272		—		59,272

Total		3,633,765		15,921,991		1,699,542		21,255,298

Financial liabilities:
Financial liabilities held for trading
Deposits due to customers		25,964		—		—		25,964
Derivative liabilities		2,613		3,126,585		20,951		3,150,149

Sub-total		28,577		3,126,585		20,951		3,176,113

Financial liabilities designated at FVTPL
Equity-linked securities		—		—		160,057		160,057
Debentures		—		91,739		—		91,739

Sub-total		—		91,739		160,057		251,796

Derivative liabilities (Held for hedging)		—		67,754		—		67,754

Total		28,577		3,286,078		181,008		3,495,663

(*1)	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.

(*2)

Certain AFS unquoted equity securities were measured at cost as of December 31, 2017, that amounted to 37,092 million Won. These unquoted equity instruments mostly represent minority investments in structured entity vehicles, such as asset securitization structures. They are measured at cost because (a) observable inputs of financial information to measure fair value were not available to obtain, (b) there was a significant variance in likely estimated cash flows or (c) the probabilities for various estimated cash flows could not be measured reliably. In addition, the Group has no intention to dispose these investments in the foreseeable future.

Financial assets and liabilities at fair value through profit or loss mandatorily measured at fair value, financial liabilities at fair value through profit or loss designated as upon initial recognition, financial assets at FVTOCI, and derivative assets (Held for hedging) and liabilities (Held for hedging) are recognized at fair value. Fair value is the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

Financial instruments are measured at fair value using a quoted market price in active markets. If there is no active market for a financial instrument, the Group determines the fair value using valuation methods. Valuation methods and input variables for each type of financial instruments are as follows:


	Valuation methods	Input variables
Loans	The fair value of Loans is measured by the Binomial tree given the values of underlying assets and volatility.	Values of underlying assets, Volatility

Debt securities	The fair value is measured by discounting the projected cash flows of debt securities by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the issuers of the securities.	Risk-free market rate, credit spread

Equity securities, capital contributions and Beneficiary certificates	Among DCF (Discounted Cash Flow) Model, FCFE (Free Cash Flow to Equity) Model, Comparable Company Analysis, Dividend Discount Model, Risk-adjusted Rate of Return Method, and Net Asset Value Method, more than one method is used given the characteristic of the subject of fair value measurement.	Risk-free market rate, market risk premium, Beta, etc.

Derivatives	The in-house developed model which is based on the models that are used by market participants in the valuation of general OTC derivative products, such as options, interest rate swaps, currency swap and currency forward that are based on inputs observable in the market. However, for some complicated financial instruments of which valuation should be based on some assumptions since some significant or all inputs to be used in the model are not observable in the market, the in-house derived model which is developed from the general valuation models, such as Finite Difference Method (“FDM”) or Monte Carlo Simulation.	Risk-free market rate, forward rate, volatility, foreign exchange rate, stock prices, etc.

Equity-linked securities	The fair value of security linked to stock prices or derivatives is measured by the models such as DCF model, FDM, or Monte Carlo Simulation given the natures of the securities or underlying assets.	Values of underlying assets, risk-free market rate, market rate, dividend and convenience yield, volatility, correlation coefficient, credit spread, and foreign exchange rate

Debentures	The fair value is measured by discounting the projected cash flows of a debenture by applying the market discount rate that is reflecting credit rating of the Group.	Risk-free market rate, forward rate

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	Input variable	Range	Impact of changes in significant unobservable inputs on fair value measurement
Loans	Binomial tree	Price of stock, Volatility of underlying asset	14.84%~38.77%	Fair value increases as volatility of underlying asset increases.
Derivative assets	Option valuation model and others	Correlation coefficient	0.9~0.98	Variation of fair value increases as correlation coefficient increases.
Derivative assets	Option valuation model and others	Volatility of underlying asset	9.06%~25.69%	Variation of fair value increases as volatility increases.
Derivative liabilities	Option valuation model and others	Correlation coefficient	0.9~0.98	Variation of fair value increases as correlation coefficient increases.
Derivative liabilities	Option valuation model and others	Volatility of underlying asset	9.06%~25.69%	Variation of fair value increases as volatility increases.
Equity-linked securities	Monte Carlo Simulation and others	Correlation coefficient	0.005~0.674	Equity-linked securities’ variation of fair value increases if both volatility and correlation coefficient increase. However, when correlation coefficient decreases despite the increase in volatility, the variation of fair value of a compound financial instrument may decrease.
		Volatility of underlying asset	19.99%~24.81%
Equity securities, capital contributions and Beneficiary certificates	External appraisal value and others	Expected growth rate	0.00%	Fair value increases as expected growth rate increases.
		Discount rate	1.09%~18.71%	Fair value increases as discount rate decreases.
		Volatility of real estate sale price	0.00%	Fair value increases as volatility of real estate sale price 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.

(3)	Changes in financial assets and liabilities measured at fair value classified into Level 3 are as follows (Unit: Korean Won in millions):


	For nine months ended September 30, 2018
	January 1, 2018		Net Income (loss) (*1)		Other comprehensive income		Purchases/ issuances			Disposals/ settlements			Transfer to or out of Level 3 (*2)		September 30, 2018
Financial assets:
Financial assets at fair value through profit or loss mandatorily measured at fair value
Debt securities		9,694		131		—		—			(4,277	)		—		5,548
Equity securities		280,171		37,028		—		50,105			(2,636	)		—		364,668
Capital contributions		294,121		12,587		—		95,527			(21,765	)		—		380,470
Beneficiary certificates		654,066		15,000		—		3,249,833			(3,132,224	)		—		786,675
Loans		165,001		7,583		—		125,963			(68,640	)		—		229,907
Derivative assets		19,346		67,004		—		660			(50,966	)		—		36,044

Sub-total		1,422,399		139,333		—		3,522,088			(3,280,508	)		—		1,803,312

Financial assets at FVTOCI
Equity securities		451,287		—		22,080		334			(30	)		—		473,671

Total		1,873,686		139,333		22,080		3,522,422			(3,280,538	)		—		2,276,983

Financial liabilities:
Financial liabilities at fair value through profit or loss mandatorily measured at fair value
Derivative liabilities		20,951		76,718		—		(3,315	)		(50,921	)		—		43,433
Financial liabilities at fair value through profit or loss designated as upon initial recognition
Equity-linked securities		160,057		4,967		—		184,312			(161,803	)		—		187,533

Total		181,008		81,685		—		180,997			(212,724	)		—		230,966

(*1)

The losses that increase financial liabilities are presented as positive amounts, and the gains that decrease financial liabilities are presented as negative amounts. The gain amounting to 75,357 million Won for nine months ended September 30, 2018, which is from financial assets and liabilities that the Group holds as at the end of the periods, has been recognized in net gain (loss) on financial assets at FVTPL and net gain (loss) on financial assets at FVTOCI in the consolidated statement of comprehensive income.

(*2)

The Group recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed.


	For the nine months ended September 30, 2017
	January 1, 2017		Net Income (loss) (*1)			Other comprehensive income		Purchases/ Issuances		Disposals/ Settlements			Transfer to or out of level 3 (*2)		September 30, 2017
Financial assets:
Financial assets held for trading
Derivative assets		23,153		24,713			—		583		(17,837	)		—		30,612
Financial assets designed at FVTPL
Debt securities		4,348		127			—		2,000		—			—		6,475
Equity securities		12,652		(147	)		—		—		—			—		12,505

Sub-total		17,000		(20	)		—		2,000		—			—		18,980

AFS financial assets
Equity securities		1,024,935		22,182			17,595		47,700		(39,524	)		—		1,072,888
Beneficiary certificates		530,511		1,982			1,087		200,722		(90,330	)		—		643,972

Sub-total		1,555,446		24,164			18,682		248,422		(129,854	)		—		1,716,860

Derivative assets		99		185			—		—		(284	)		—		—

Total		1,595,698		49,042			18,682		251,005		(147,975	)		—		1,766,452

Financial liabilities:
Financial liabilities held for trading
Derivative liabilities		33,524		22,094			—		500		(18,294	)		—		37,824
Financial liabilities designated at FVTPL
Equity-linked securities		673,709		104,217			—		—		(428,517	)		—		349,409

Total		707,233		126,311			—		500		(446,811	)		—		387,233

(*1)

The losses that increase financial liabilities are presented as positive amounts, and the gains that decrease financial liabilities are presented as negative amounts. The loss amounting to 62,894 million Won for the nine months ended September 30, 2017, which is from financial assets and liabilities that the Group holds, has been recognized in net gain (loss) on financial instruments at FVTPL and net gain (loss) on AFS financial assets in the statement of comprehensive income.

(*2)

The Group recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed.

(4)	Sensitivity analysis on the unobservable inputs used for measuring Level 3 financial instruments

The sensitivity analysis of the financial instruments has been performed by classifying with favorable and unfavorable changes based on how changes in unobservable assumptions would have effects on the fluctuations of financial instruments’ value. When the fair value of a financial instrument is affected by more than one unobservable assumption, the below table reflects the most favorable or the most unfavorable changes which resulted from varying the assumptions individually. The sensitivity analysis was performed for two types of level 3 financial instruments: (1) interest rate related derivatives, currency related derivatives, equity related derivatives, equity-linked securities beneficiary certificates and loans of which fair value changes are recognized as net income; (2) equity securities of which fair value changes are recognized as other comprehensive income.

Included within the total equity investments classified as Level 3 equity securities (2,507,949 million Won and 1,880,550 million Won as of September 30, 2018 and December 31, 2017) are equity securities whose costs or net asset values are considered to provide the best estimate of fair value (1,583,825 million Won and 1,146,751 million Won as of September 30, 2018 and December 31, 2017). These have been excluded from the sensitivity analysis.

The following table presents the sensitivity analysis to disclose the effect of reasonably possible volatility on the fair value of a Level 3 financial instruments (Unit: Korean Won in millions):


	September 30, 2018
	Net income (loss)					Other comprehensive income (loss)
	Favorable		Unfavorable			Favorable		Unfavorable
Financial assets:
Financial assets at FVTPL
Derivative assets (*1)		2,923		(2,601	)		—		—
Loans		242		(197	)		—		—
Debt securities		890		(875	)		—		—
Equity securities (2)(3)		11,080		(7,913	)		—		—
Beneficiary certificates (*3)		1,581		(1,580	)		—		—
Financial assets at FVTOCI
Equity securities (2)(3)		—		—			20,905		(9,011	)

Total		16,716		(13,166	)		20,905		(9,011	)

Financial liabilities:
Financial liabilities at fair value through profit or loss mandatorily measured at fair value
Derivative liabilities (*1)		2,770		(3,081	)		—		—
Financial liabilities at fair value through profit or loss designated as upon initial recognition
Equity-linked securities (*1)		1,034		(1,103	)		—		—

Total		3,804		(4,184	)		—		—


	December 31, 2017
	Net income (loss)					Other comprehensive income (loss)
	Favorable		Unfavorable			Favorable		Unfavorable
Financial assets:
Financial assets held for trading
Derivatives assets (*1)		1,234		(526	)		—		—
Financial assets designated at FVTPL
Debt securities (*4)		265		(309	)		—		—
Equity securities (*4)		670		(624	)		—		—
AFS Financial assets
Equity securities (2)(3)		—		—			28,583		(15,246	)
Beneficiary certificates (*3)		—		—			1,861		(1,857	)

Total		2,169		(1,459	)		30,444		(17,103	)

Financial liabilities:
Financial liabilities held for trading
Derivative liabilities (*1)		5		(513	)		—		—
Financial liabilities designated at FVTPL
Equity-linked securities (*1)		8		(7	)		—		—

Total		13		(520	)		—		—

(*1)

Fair value changes of equity related derivatives assets and liabilities and equity-linked securities are calculated by increasing or decreasing historical volatility of the stock price and correlation, which are major unobservable variables, by 10%, respectively. In the case of interest rate related derivative assets and liabilities, fair value changes are calculated by increasing or decreasing the volatility of interest rate, which are major unobservable variables, by 10%.

(*2)

Fair value changes of equity securities are calculated by increasing or decreasing growth rate (0~1%) and discount rate or liquidation value (-1~1%). The growth rate, discount rate, and liquidation value are major unobservable variables.

(*3)

Even if the sensitivity analysis of the capital contributions and beneficiary certificates is not possible in practice, fair value changes of beneficiary certificates and other securities whose major unobservable variables are composed of the real estate are calculated by increasing or decreasing price fluctuation of real estate which is underlying assets and discount rate by 1%.

(*4)

Changes of fair value are measured by increasing or decreasing the discount rate by 10%, which is major unobservable variable, respectively.

(5)	Fair value and carrying amount of financial assets and liabilities that are recorded at amortized cost are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Fair value								Book value
	Level 1		Level 2		Level 3		Total		Book value
Financial assets:
Securities at amortized cost		2,469,807		16,681,848		—		19,151,655		19,121,604
Loans and other financial assets at amortized cost		—		—		279,093,530		279,093,530		278,684,897
Financial liabilities:
Deposits due to customers		—		237,381,794		—		237,381,794		237,359,059
Borrowings		—		15,894,783		—		15,894,783		15,862,477
Debentures		—		28,384,433		—		28,384,433		28,102,679
Other financial liabilities		—		23,194,928		—		23,194,928		23,197,293


	December 31, 2017
	Fair value								Book value
	Level 1		Level 2		Level 3		Total		Book value
Financial assets:
HTM financial assets		1,206,292		15,509,387		—		16,715,679		16,749,296
Loans and receivables		—		—		265,570,649		265,570,649		267,106,204
Financial liabilities:
Deposits due to customers		—		234,682,775		—		234,682,775		234,695,084
Borrowings		—		14,754,506		—		14,754,506		14,784,706
Debentures		—		27,889,781		—		27,889,781		27,869,651
Other financial liabilities		—		13,890,789		—		13,890,789		13,892,461

The fair values of financial instruments are measured using quoted market price in active markets. In case there is no active market for financial instruments, the Group determines the fair value using valuation methods. Valuation methods and input variables for financial assets and liabilities that are measured at amortized costs are given as follows:


	Valuation methods	Input variables
Securities at amortized cost (HTM financial assets in previous year)	The fair value is measured by discounting the projected cash flows of debt securities by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the issuers of the securities.	Risk-free market rate and credit spread

Loans and other f inancial assets at amortized cost (Loans and receivables in previous year)	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 and forward rate

(6)	Financial instruments by category

Carrying amounts of financial assets and liabilities are as follows (Unit: Korean Won in millions):


	September 30, 2018
Financial assets	Financial asset at FVTPL		Financial assets at FVTOCI		Financial assets at amortized cost		Derivatives assets (Held for hedging)		Total
Deposits		27,045		—		19,338,144		—		19,365,189
Securities		3,449,460		16,167,617		19,121,604				38,738,681
Loans		322,907		—		248,115,899		—		248,438,806
Derivative assets		1,921,399		—		—		13,716		1,935,115
Other financial assets		—		—		11,230,854		—		11,230,854

Total		5,720,811		16,167,617		297,806,501		13,716		319,708,645


Financial liabilities	September 30, 2018
Financial liabilities	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivatives liabilities (Held for hedging)		Total
Deposits due to customers		27,266		237,359,059		—		237,386,325
Borrowings		187,533		15,862,477		—		16,050,010
Debentures		—		28,102,679		—		28,102,679
Derivative liabilities		2,007,243		—		74,107		2,081,350
Other financial liabilities (*)		—		23,241,001		—		23,241,001

Total		2,222,042		304,565,216		74,107		306,861,365

(*)

Other financial liabilities include 43,708 million Won of financial guarantee liabilities measured at amortized cost included in provisions.


	December 31, 2017
Financial assets	Financial assets at FVTPL		AFS financial assets		HTM financial assets		Loans and receivables		Derivatives assets (Held for hedging)		Total
Deposits		25,972		—		—		8,868,378		—		8,894,350
Securities		2,701,330		15,352,950		16,749,296		—		—		34,803,576
Loans		—		—		—		251,523,301		—		251,523,301
Derivative assets		3,115,775		—		—		—		59,272		3,175,047
Other financial assets		—		—		—		6,714,525		—		6,714,525

Total		5,843,077		15,352,950		16,749,296		267,106,204		59,272		305,110,799


Financial liabilities	September 30, 2017
Financial liabilities	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivatives liabilities (Held for hedging)		Total
Deposits due to customers		25,964		234,695,084		—		234,721,048
Borrowings		160,057		14,784,706		—		14,944,763
Debentures		91,739		27,869,651		—		27,961,390
Derivative liabilities		3,150,149		—		67,754		3,217,903
Other financial liabilities (*)		—		13,964,158		—		13,964,158

Total		3,427,909		291,313,599		67,754		294,809,262

(*)

Other financial liabilities include 71,697 million Won of financial guarantee liabilities measured at amortized cost included in provisions.

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.

Disposal of securities under repurchase agreements

The financial instruments that were disposed but the Group agreed to repurchase at the fixed amounts at the same time, so that they did not meet the conditions of derecognition, are as follows (Unit: Korean Won in millions):


		September 30, 2018		December 31, 2017
Assets transferred	AFS financial assets		—		9,998
	Securities at amortized cost		5,548		—
	HTM financial assets		—		5,436

	Total		5,548		15,434

Related liabilities	Bonds sold under repurchase agreements		3,348		3,173

Securities loaned

When the Group loans its securities to outside parties, the legal ownerships of the securities are transferred; however, they should be returned at the end of lending period. Therefore, the Group does not derecognize them from the 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):

September 30,
2018

December 31,
2017

Loaned to

Financial assets at FVTOCI

Korean treasury, government bonds and others

70,210

—

Korea Securities Finance Corporation

AFS financial assets

Korean treasury, government bonds and others

—

170,256

Korea Securities Finance Corporation and others

Total

70,210

170,256

The details of the transferred financial assets that are not meet the condition of derecognition in their entirety, such as disposal of securities under repurchase agreement or securities loaned, are explained in Note 18.

(2)	The offset of financial assets and liabilities

The Group possesses both the uncollected domestic exchange receivables and the unpaid domestic exchange payable, which satisfy offsetting criteria of IAS 32. Therefore, the total number of uncollected domestic exchange receivables or unpaid domestic exchange payable has been offset with part of unpaid domestic exchange payable or uncollected domestic exchange receivables and has been disclosed in loans at amortized cost and other financial assets (loans and receivables in previous year) or other financial liabilities of the Group’s statements of financial position.

The Group possesses the derivative assets, derivative liabilities, receivable spot exchange and payable spot exchange that do not satisfy the offsetting criteria of IAS 32, but provide the Group under the circumstances of the trading party’s defaults, insolvency or bankruptcy, the right of offsetting. Item such as cash collateral cannot satisfy the offsetting criteria of IAS 32, 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 advance. The resale and repurchase agreements can have the offsetting right only under the trading party’s default, insolvency or bankruptcy, which do not satisfy the offsetting criteria of IAS 32. The Group recorded the collateralized borrowing in borrowings and the secured loans in loans and receivables. The Group under the repurchase agreements has 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 IAS 32. The Group disclosed bonds purchased under resale agreements as loan at amortized cost and other financial assets (loans and receivables in previous year) and bonds sold under repurchase agreements as borrowings.

As of September 30, 2018 and December 31, 2017, the financial instruments to be off set and may be covered by master netting agreements and similar agreements are as follows (Unit: Korean Won in millions):


	September 30, 2018
	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				Net amounts
	Gross amounts of recognized financial assets		Gross amounts of recognized financial assets setoff		Net amounts of financial assets presented		Netting agreements and others		Cash collateral received		Net amounts
Financial assets:
Derivative assets and others (*1)		1,846,834		—		1,846,834		8,392,198		21,770		407,473
Receivable spot exchange (*2)		6,974,607		—		6,974,607		8,392,198		21,770		407,473
Bonds purchased under resale agreements (*2)		4,758,495		—		4,758,495		4,758,495		—		—
Domestic exchanges receivable (2)(5)		27,364,546		26,697,317		667,229		—		—		667,229

Total		40,944,482		26,697,317		14,247,165		13,150,693		21,770		1,074,702


	September 30, 2018
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial liabilities setoff		Net amounts of financial liabilities presented		Related amounts not setoff in the consolidated statement of financial position				Net amounts
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial liabilities setoff		Net amounts of financial liabilities presented		Netting agreements and others		Cash collateral pledged		Net amounts
Financial liabilities:
Derivative liabilities and others (*1)		2,140,768		—		2,140,768		8,369,621		176,483		569,088
Payable spot exchange (*3)		6,974,424		—		6,974,424		8,369,621		176,483		569,088
Bonds sold under repurchase agreements (*4)		3,348		—		3,348		3,348		—		—
Domestic exchanges payable (3)(5)		32,395,185		26,697,317		5,697,868		3,408,953		—		2,288,915

Total		41,513,725		26,697,317		14,816,408		11,781,922		176,483		2,858,003

(*1)	The items include derivatives held for trading, derivatives held for hedging and equity-linked securities.

(*2)	The items are included in loan at amortized cost and other financial assets.

(*3)	The items are included in other financial liabilities.

(*4)	The items are included in borrowings.

(*5)	Certain financial assets and liabilities are presented as net amounts.


	December 31, 2017
	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				Net amounts
	Gross amounts of recognized financial assets		Gross amounts of recognized financial assets setoff		Net amounts of financial assets presented		Netting agreements and others		Cash collateral received		Net amounts
Financial assets:
Derivative assets and others (*1)		2,992,476		1,710		2,990,766		5,787,448		174,415		796,629
Receivable spot exchange (*2)		3,767,726		—		3,767,726		5,787,448		174,415		796,629
Bonds purchased under resale agreements (*2)		16,859,064		—		16,859,064		16,859,064		—		—
Domestic exchanges receivable (2)(5)		39,050,227		38,985,354		64,873		—		—		64,873

Total		62,669,493		38,987,064		23,682,429		22,646,512		174,415		861,502


	December 31, 2017
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial liabilities setoff		Net amounts of financial liabilities presented		Related amounts not setoff in the consolidated statement of financial position				Net amounts
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial liabilities setoff		Net amounts of financial liabilities presented		Netting agreements and others		Cash collateral pledged		Net amounts
Financial liabilities:
Derivative liabilities and others (*1)		3,160,217		1,710		3,158,507		5,866,682		157,750		857,961
Payable spot exchange (*3)		3,723,886		—		3,723,886		5,866,682		157,750		857,961
Bonds sold under repurchase agreements (*4)		3,173		—		3,173		3,173		—		—
Domestic exchanges payable (3)(5)		40,284,515		38,985,354		1,299,161		1,293,931		—		5,230

Total		47,171,791		38,987,064		8,184,727		7,163,786		157,750		863,191

(*1)	The items include derivatives held for trading, derivatives for hedging and equity linked securities.

(*2)	The items are included in loans and receivables.

(*3)	The items are included in other financial liabilities.

(*4)	The items are included in borrowings.

(*5)	Certain financial assets and liabilities are presented at as net amounts.

13.

INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

(1)	Investments in joint ventures and associates accounted for using the equity method of accounting are as follows:


		Percentage of ownership (%)				Financial statements as of (2018)
Joint ventures and Associates	Main business	September 30, 2018		December 31, 2017		Financial statements as of (2018)
Woori Bank:
Kumho Tire Co., Inc. (*1)	Manufacturing		—		14.2	—
Woori Service Networks Co., Ltd. (*4)	Freight & staffing services		4.9		4.9	August 31 (*3)
Korea Credit Bureau Co., Ltd. (*5)	Credit information		9.9		9.9	September 30
Korea Finance Security Co., Ltd. (*4)	Security service		15.0		15.0	August 31 (*3)
Chin Hung International Inc. (*2)	Construction		25.3		25.3	August 31 (*3)
Poonglim Industrial Co., Ltd. (*9)	Construction		—		29.4	—
STX Engine Co., Ltd. (*10)	Manufacturing		—		29.2	—
STX Corporation (*10)	Wholesale of non-specialized goods		—		19.7	—
Saman Corporation (*5)	General construction Technology service		9.2		9.2	June 30 (*3)
Dongwoo C & C Co., Ltd. (*6)	Construction		23.2		23.2	—
SJCO Co., Ltd. (*6)	Aggregate transportation and wholesale		26.5		26.5	—
G2 Collection Co., Ltd. (*6)	Wholesale and retail sales		28.9		28.9	—


		Percentage of ownership (%)				Financial statements as of (2018)
Joint ventures and Associates	Main business	September 30, 2018		December 31, 2017		Financial statements as of (2018)
The Base Enterprise Co., Ltd. (*6)	Manufacturing		48.4		48.4	—
Kyesan Engineering Co., Ltd. (*6)	Construction		23.2		23.2	—
Good Software Lab Co., Ltd. (*6)	Service		28.9		28.9	—
Wongwang Co., Ltd. (*6)	Wholesale and real estate		29.0		29.0	—
Sejin Construction Co., Ltd. (*6)	Construction		29.6		29.6	—
QTS Shipping Co., Ltd. (*6)	Complex transportation brokerage		49.4		49.4	—
DAEA SNC Co., Ltd. (*6)	Wholesale and retail sales		24.0		24.0	—
ARES-TECH Co., Ltd. (*6)	Electronic component manufacturing		23.4		23.4	—
Reading Doctors Co., Ltd. (*6)	Other services		35.4		35.4	—
PREXCO Co., Ltd. (*6)	Manufacturing		28.1		28.1	—
Hyunwoo International Co., Ltd. (*11)	Manufacturing		—		25.9	—
Jiwon Plating Co., Ltd. (*6)	Plating		20.5		20.5	—
Cultizm Korea LTD Co., Ltd. (*6)	Wholesale and retail sales		31.3		31.3	—
Gil Co.,Ltd. (*6)	Manufacturing		26.1		26.1	—
NK Eng Co., Ltd. (*6)	Manufacturing		23.1		23.1	—
Youngdong Sea Food Co., Ltd. (6)(7)	Processed sea food manufacturing		24.0		—	—
Woori Growth Partnerships New Technology Private Equity Fund	Other financial services		23.1		23.1	September 30
2016KIF-IMM Woori Bank Technology Venture Fund	Other financial services		20.0		20.0	September 30
K BANK Co., Ltd. (*5)	Finance		14.6		13.0	August 31 (*3)
Smart Private Equity Fund No.2	Other financial services		20.0		20.0	September 30
Woori Bank-Company K Korea Movie Asset Fund	Other financial services		25.0		25.0	September 30
Well to Sea No. 3 Private Equity Fund (*12)	Finance		50.0		50.0	June 30 (*3)
Partner One Value Up Ist Private Equity Fund (*8)	Other financial services		23.3		—	September 30
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership (*8)	Other financial services		20.0		—	September 30
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund (*8)	Other financial services		25.0		—	September 30
Woori Investment Bank Co., Ltd.
Nomura-Rifa Private Real Estate Investment Trust No.17	Other financial services		21.9		25.0	September 30
Woori Private Equity Asset Management Co., Ltd.
Uri Hanhwa Eureka Private Equity Fund (*8)	Other financial services		0.8		—	September 30

(*1)

The Group did not have significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution, and thus the entity was excluded from the investment in associates for the nine months ended September 30, 2018.

(*2)

The investments in associates that have quoted market prices are Chin Hung International Inc. (current period: KRW 1,970, previous year: KRW 1,915).

(*3)

The significant transactions and events between the end of reporting period of the associates and the Group have been properly incorporated.

(*4)

Most of the significant business transactions of associates are with the Group as of September 30, 2018 and December 31, 2017.

(*5)

The Group can participate in decision-making body and exercise significant influence over associates through business partnerships.

(*6)

The carrying values of investments in associates are nil as of September 30, 2018 and December 31, 2017.

(*7)

Even though the Group’s ownership ratio of the entity was more than 20%, the Group did not have significant influence over the entity because the entity was going through workout process under receivership and thus was excluded from the investment in associates as of December 31, 2017. However, as the workout process was completed for the nine months ended September 30, 2018, it has been included in the investment in associates.

(*8)

Due to capital contribution by the Group for the nine months ended September 30, 2018, the entities has been included in the investment in associates.

(*9)

The Group did not have significant influence over the entity due to the fact that the entity was going through workout process, and thus the entity was excluded from the investment in associates for the nine months ended September 30, 2018.

(*10)

The entity was sold after it was transferred to assets held for sale and was excluded from the investment in associates.

(*11)

The entity was excluded from investments in associates as the group sold its entire stake during the nine months ended September 30, 2018.

(*12)

The Group has entered into a contract whereas the Group (or a third party designated by the Group) obtains a preemptive right to acquire the base assets (Aju Capital Co. Ltd.) of Well to Sea No. 3 Private Equity Fund, an affiliate of the Group, when the Fund disposes them.

(2)	Changes in the carrying value of investments in joint ventures and associates accounted for using the equity method of accounting are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Acquisition cost		January 1, 2018		Share of profits (losses)			Acquisition		Disposal and others (*)			Dividends			Change in Capital			September 30, 2018
Kumho Tire Co., Inc.		175,652		98,933		(10,451	)		—		(83,286	)		—			(5,196	)		—
Woori Service Networks Co., Ltd.		108		158		2			—		—			(2	)		—			158
Korea Credit Bureau Co., Ltd.		3,313		5,816		933			—		—			(113	)		—			6,636
Korea Finance Security Co., Ltd.		3,267		3,519		36			—		—			(54	)		1			3,502
Chin Hung International Inc.		130,779		45,101		(729	)		—		—			—			(1,723	)		42,649
Poonglim Industrial Co., Ltd.		13,916		—		—			—		—			—			—			—
STX Corporation		50,760		6,947		(816	)		—		(5,865	)		—			(266	)		—
Saman Corporation		8,521		1,254		(87	)		—		—			—			34			1,201
Woori Growth Partnerships New Technology Private Equity Fund		28,833		27,611		1,162			—		(3,346	)		(484	)		—			24,943
2016KIF-IMM Woori Bank Technology Venture Fund		14,250		6,840		—			7,410		—			—			1,243			15,493
K BANK Co., Ltd.		55,397		31,735		(8,015	)		10,004		—			—			198			33,922
Smart Private Equity Fund No.2		3,000		2,932		(32	)		—		—			—			—			2,900
Woori Bank-Company K Korea Movie Asset Fund		3,000		2,957		22			—		—			—			—			2,979
Well to Sea No.3 Private Equity Fund		101,992		182,309		16,183			—		(508	)		(258	)		(6,447	)		191,279
Partner One Value Up Ist Private Equity Fund		10,000		—		(48	)		10,000		—			—			—			9,952
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		3,268		—		—			3,268		—			—			—			3,268
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		1,525		—		—			1,525		—			—			—			1,525
Nomura-Rifa Private Real Estate Investment Trust No.17		1,000		939		(83	)		—		—			—			—			856
Uri Hanhwa Eureka Private Equity Fund		350		—		(10	)		350		—			—			—			340

Total		608,931		417,051		(1,933	)		32,557		(93,005	)		(911	)		(12,156	)		341,603

(*)

Investments in joint ventures and associates decreased by 83,286 million Won through transfers to financial assets at FVTOCI(IFRS 9) which occurred during the nine months ended September 30, 2018.


	For the nine months ended September 30, 2017
	Acquisition cost		January 1, 2017		Share of profits (losses)			Acquisition (*)		Disposal and others			Dividends			Change in Capital			Others (*)			September 30, 2017
Woori Blackstone Korea Opportunity No.1 Private Equity Fund		—		15,289		(4,621	)		—		(7,333	)		(3,298	)		—			—			37
Kumho Tire Co., Inc.		175,652		200,332		(6,845	)		—		—			—			397			—			193,884
Woori Service Networks Co., Ltd.		108		145		10			—		—			(8	)		—			—			147
Korea Credit Bureau Co., Ltd.		3,313		5,592		457			—		—			(149	)		—			—			5,900
Korea Finance Security Co., Ltd.		3,266		3,376		106			—		—			(54	)		—			—			3,428
Chin Hung International Inc.		89,725		43,032		(18,098	)		41,053		—			—			1,562			(26,144	)		41,405
Poonglim Industrial Co., Ltd.		13,916		—		—			—		—			—			—			—			—
STX Engine Co., Ltd.		92,038		43,036		(300	)		—		—			—			4,230			—			46,966
SamHo Co., Ltd.		7,492		19,729		2,021			—		(16,354	)		—			(73	)		(5,323	)		—
STX Corporation		42,215		—		(28,520	)		8,546		—			—			690			27,772			8,488
Saman Corporation		8,521		8,699		(872	)		—		—			—			26			—			7,853
Woori Growth Partnerships New Technology Private Equity Fund		13,602		13,118		(376	)		15,099		(498	)		—			(156	)		—			27,187
2016KIF-IMM Woori Bank Technology Venture Fund		1,800		1,800		—			4,140		—			—			—			—			5,940
K BANK Co., Ltd.		32,500		30,442		(8,501	)		11,172		—			—			(139	)		25			32,999
Smart Private Equity Fund No.2		3,000		—		(58	)		3,000		—			—			—			—			2,942
Woori Bank-Company K Korea Movie Asset Fund		1,500		—		(28	)		1,500		—			—			—			—			1,472
Well to Sea No.3 Private Equity Fund		102,500		—		76,962			102,500		(250	)		—			—			—			179,212
Woori Renaissance Holdings		—		54,422		(622	)		—		—			(57,109	)		—			3,309			—

		591,148		439,012		10,715			187,010		(24,435	)		(60,618	)		6,537			(361	)		557,860

(*)

Changes in investments in joint ventures and associates due to debt-equity swap is 51,227 million Won.

(3)	Summary financial information relating to investments in joint ventures and associates accounted for using the equity method of accounting is as follows (Unit: Korean Won in millions):


	September 30, 2018
	Assets		Liabilities		Operating revenue		Net income (loss)
Woori Service Networks Co., Ltd.		5,013		1,809		11,543		843
Korea Credit Bureau Co., Ltd.		86,617		22,155		55,849		8,354
Korea Finance Security Co., Ltd.		33,817		10,481		43,588		185
Chin Hung International Inc.		389,473		317,354		442,614		(1,263	)
Saman Corporation		97,340		69,417		54,579		(751	)
Woori Growth Partnerships New Technology Private Equity Fund		108,524		439		6,423		5,035
2016KIF-IMM Woori Bank Technology Venture Fund		74,944		—		12		(750	)
K BANK Co., Ltd.		1,941,827		1,727,813		41,684		(44,317	)
Smart Private Equity Fund No.2		14,554		52		1		(158	)
Woori Bank-Company K Korea Movie Asset Fund		11,918		—		1,002		818
Well to Sea No.3 Private Equity Fund		5,616,196		5,060,956		279,833		26,075
Partner One Value Up Ist Private Equity Fund		42,951		158		186		(206	)
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		15,292		379		197		(1,008	)
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		6,103		89		1		(86	)
Nomura-Rifa Private Real Estate Investment Trust No.17		20,232		16,333		53		(62	)
Uri Hanhwa Eureka Private Equity Fund		42,331		63		—		(1,232	)


	December 31, 2017
	Assets		Liabilities		Operating revenue		Net income (loss)
Kumho Tire Co., Inc.		5,105,107		3,928,327		2,136,569		(61,748	)
Woori Service Networks Co., Ltd.		4,982		1,780		14,887		1,003
Korea Credit Bureau Co., Ltd.		75,504		19,323		68,750		3,580
Korea Finance Security Co., Ltd.		33,915		10,461		55,610		1,071
Chin Hung International Inc.		341,284		259,454		513,285		28,698
Poonglim Industrial Co., Ltd.		241,063		309,925		107,360		(29,812	)
STX Corporation		595,348		543,458		1,371,272		342,869
Saman Corporation		98,435		69,929		76,135		(6,096	)
Woori Growth Partnerships New Technology Private Equity Fund		120,133		485		1,024		(3,199	)
2016KIF-IMM Woori Bank Technology Venture Fund		32,815		380		6		(1,515	)
K BANK Co., Ltd.		1,244,270		1,001,121		19,231		(74,403	)
Smart Private Equity Fund No.2		14,711		51		1		(340	)
Woori Bank-Company K Korea Movie Asset Fund		11,830		2		16		(172	)
Well to Sea No.3 Private Equity Fund		5,068,424		4,534,957		131,488		162,743
Nomura-Rifa Private Real Estate Investment Trust No.17		20,265		16,507		62		(242	)

(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 September 30, 2018 and December 31, 2017, are as follows:


	September 30, 2018
Associate (*)	Number of shares owned		Ownership (%)
Orient Shipyard Co., Ltd.		464,812		21.4
Saenuel Co., Ltd.		3,531		37.4
E Mirae Tech Co., Ltd.		7,696		41.0
Jehin Trading Co., Ltd.		81,610		27.3
The Season Company Co., Ltd.		18,187		30.1
Yuil PESC Co., Ltd.		8,642		24.0
Sinseong Trading Co., Ltd.		2,584		27.2
CL Tech Co., Ltd.		13,759		38.6
Force TEC Co., Ltd.		4,780,907		25.8
Poonglim Industrial Co., Ltd.		4,142,782		29.1

(*)

Even though the Group’s ownership interest of the entity is more than 20%, the Group does not have significant influence over the entity since it is going through work-out process under receivership, thus it is excluded from the investment in associates.


	December 31, 2017
Associate (*)	Number of shares owned		Ownership (%)
Orient Shipyard Co., Ltd.		465,050		21.4
Saenuel Co., Ltd.		3,531		37.4
E Mirae Tech Co., Ltd.		7,696		41.0
Jehin Trading Co., Ltd.		81,610		27.3
The Season Company Co., Ltd.		18,187		30.1
Yuil PESC Co., Ltd.		8,642		24.0
Youngdong Sea Food Co., Ltd.		12,106		24.0
Sinseong Trading Co., Ltd.		2,584		27.2
CL Tech Co., Ltd.		13,759		38.6
Force TEC Co., Ltd.		4,780,907		25.8
Protronics Co., Ltd.		95,921		48.1
Instern Co., Ltd.		14,296		20.1

(*)

(5)	As of September 30, 2018 and December 31, 2017, the reconciliations from the net assets of associates based on the ownership ratio of the Group to its corresponding book value of investment in joint ventures and associates are as follows (Unit: Korean Won in millions except for ownership):


	September 30, 2018
	Total net asset		Ownership (%)		Ownership portion of net assets		Basis difference		Impairment			Intercompany transaction			Book value
Woori Service Networks Co., Ltd.		3,204		4.9		158		—		—			—			158
Korea Credit Bureau Co., Ltd.		64,462		9.9		6,390		246		—			—			6,636
Korea Finance Security Co., Ltd.		23,336		15.0		3,502		—		—			—			3,502
Chin Hung International Inc. (*)		71,975		25.3		18,214		24,565		—			(130	)		42,649
Saman Corporation		27,923		9.2		2,566		5,373		(6,738	)		—			1,201
Woori Growth Partnerships New Technology Private Equity Fund		108,085		23.1		24,943		—		—			—			24,943
2016 KIF-IMM Woori Bank Technology Venture Fund		74,944		20.0		14,989		—		—			504			15,493
K BANK Co., Ltd.		214,014		14.6		31,199		2,529		—			194			33,922
Smart Private Equity Fund No. 2		14,502		20.0		2,900		—		—			—			2,900
Woori Bank-Company K Korea Movie Asset Fund		11,918		25.0		2,979		—		—			—			2,979
Well to Sea No.3 Private Equity Fund (*)		383,495		50.0		191,654		—		—			(375	)		191,279
Partner One Value Up 1st Private Equity Fund		42,793		23.3		9,952		—		—			—			9,952
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		14,913		20.0		2,983		—		—			285			3,268
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		6,014		25.0		1,504		—		—			21			1,525
Nomura-Rifa Private Real Estate Investment Trust No. 17		3,899		21.9		854		—		—			2			856
Uri Hanhwa Eureka Private Equity Fund		42,268		0.8		338		—		—			2			340

(*)

The net asset amount is after reflecting debt-equity swap and others.


	December 31, 2017
	Total net asset			Ownership (%)		Ownership portion of net assets			Basis difference		Impairment			Intercompany transaction			Book value
Kumho Tire Co., Inc. (*)		1,065,421			14.2		150,767			48,459		(102,843	)		2,549			98,932
Woori Service Networks Co., Ltd.		3,202			4.9		158			—		—			—			158
Korea Credit Bureau Co., Ltd.		56,181			9.9		5,568			248		—			—			5,816
Korea Finance Security Co., Ltd.		23,454			15.0		3,519			—		—			—			3,519
Chin Hung International Inc. (*)		81,686			25.3		20,671			24,565		—			(136	)		45,100
Poonglim Industrial Co., Ltd. (*)		(168,154	)		29.4		(49,446	)		54,542		(20,504	)		15,408			—
STX Corporation		51,890			19.7		10,232			24,614		(27,904	)		5			6,947
Saman Corporation		28,506			9.2		2,619			5,373		(6,738	)		—			1,254
Woori Growth Partnerships New Technology Private Equity Fund		119,648			23.1		27,611			—		—			—			27,611
2016 KIF-IMM Woori Bank Technology Venture Fund		32,435			20.0		6,487			—		—			353			6,840
K BANK Co., Ltd.		243,149			13.0		31,535			—		—			200			31,735
Smart Private Equity Fund No. 2		14,660			20.0		2,932			—		—			—			2,932
Woori Bank-Company K Korea Movie Asset Fund		11,828			25.0		2,957			—		—			—			2,957
Well to Sea No.3 Private Equity Fund (*)		364,909			50.0		182,366			—		—			(57	)		182,309
Nomura-Rifa Private Real Estate Investment Trust No. 17		3,758			25.0		939			—		—			—			939

(*)

The net asset amount is after reflecting debt-equity swap and others.

14.

INVESTMENT PROPERTIES

(1)	Details of investment properties are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Acquisition cost		419,911			404,741
Accumulated depreciation		(37,522	)		(33,440	)

Net carrying value		382,389			371,301

(2)	Changes in investment properties are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30
	2018			2017
Beginning balance		371,301			358,497
Acquisition		10,225			5,080
Disposal		(3,040	)		(397	)
Depreciation		(3,022	)		(2,986	)
Reversal of impairment loss		—			112
Transfers		7,025			1,580
Classified to held for sale		—			(464	)
Foreign currencies translation adjustments		(173	)		(67	)
Others		73			—

Ending balance		382,389			361,355

(3)	Rental fee earned from investment properties is amounting to 3,738 million Won and 3,789 million Won for the nine months ended September 30, 2018 and 2017, respectively.

15.

PREMISES AND EQUIPMENT

(1)	Details of premises and equipment are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Land		Building			Equipment and vehicles			Leasehold improvement			Construction in progress		Structures			Total
Acquisition cost		1,481,566		866,829			1,097,022			441,584			8,324		20			3,895,345
Accumulated depreciation		—		(203,942	)		(868,794	)		(384,298	)		—		(17	)		(1,457,051	)

Net carrying value		1,481,566		662,887			228,228			57,286			8,324		3			2,438,294


	December 31, 2017
	Land		Building			Equipment and vehicles			Leasehold improvement			Construction in progress		Structures			Total
Acquisition cost		1,487,278		867,804			1,024,186			429,665			64,559		20			3,873,512
Accumulated depreciation		—		(186,958	)		(844,114	)		(364,878	)		—		(17	)		(1,395,967	)

Net carrying value		1,487,278		680,846			180,072			64,787			64,559		3			2,477,545

(2)	Details of changes in premises and equipment are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Land			Building			Equipment and vehicles			Leasehold improvement			Construction in progress			Structures		Total
Beginning balance		1,487,278			680,846			180,072			64,787			64,559			3		2,477,545
Acquisitions		933			9,192			40,304			9,645			7,384			—		67,458
Disposals		—			—			(144	)		(740	)		—			—		(884	)
Depreciation		—			(19,464	)		(56,183	)		(24,358	)		—			—		(100,005	)
Classified to held for sale		(3,651	)		(2,592	)		—			—			—			—		(6,243	)
Transfer		(2,473	)		(4,552	)		63,432			—			(63,432	)		—		(7,025	)
Foreign currencies translation adjustments		(521	)		(534	)		(343	)		204			(187	)		—		(1,381	)
Acquisition through business combination		—			—			969			661			—			—		1,630
Others		—			(9	)		121			7,087			—			—		7,199

Ending balance		1,481,566			662,887			228,228			57,286			8,324			3		2,438,294


	For the nine months ended September 30, 2017
	Land			Building			Equipment and vehicles			Leasehold improvement			Construction in progress			Structures			Total
Beginning balance		1,488,745			691,699			189,902			68,958			18,717			4			2,458,025
Acquisitions		4,244			17,932			46,917			16,851			47,736			—			133,680
Disposals		(891	)		(2,593	)		(319	)		(606	)		—			—			(4,409	)
Depreciation		—			(19,602	)		(56,447	)		(24,887	)		—			(1	)		(100,937	)
Classified to assets held for sale		(3,642	)		(1,059	)		614			—			—			—			(4,087	)
Transfer		4,200			(58	)		5,471			—			(5,624	)		—			3,989
Foreign currencies translation adjustments		(674	)		(624	)		(665	)		(545	)		(274	)		—			(2,782	)
Others		—			(9	)		1,212			6,043			—			—			7,246

Ending balance		1,491,982			685,686			186,685			65,814			60,555			3			2,490,725

16.

INTANGIBLE ASSETS

(1)	Details of intangible assets are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Goodwill		Software			Industrial property rights			Development cost			Others			Membership deposit			Construction in progress		Total
Acquisition cost		150,350		208,878			1,213			463,905			721,916			26,961			9,026		1,582,249
Accumulated amortization		—		(173,965	)		(654	)		(213,965	)		(569,957	)		—			—		(958,541	)
Accumulated impairment losses		—		—			—			—			(137	)		(3,376	)		—		(3,513	)

Net carrying value		150,350		34,913			559			249,940			151,822			23,585			9,026		620,195


	December 31, 2017
	Goodwill		Software			Industrial property rights			Development cost			Others			Membership deposit			Construction in progress		Total
Acquisition cost		108,707		203,418			1,063			260,087			634,150			27,337			153,209		1,387,971
Accumulated amortization		—		(162,746	)		(524	)		(182,846	)		(516,467	)		—			—		(862,583	)
Accumulated impairment losses		—		—			—			—			(137	)		(6,652	)		—		(6,789	)

Net carrying value		108,707		40,672			539			77,241			117,546			20,685			153,209		518,599

(2)	Details of changes in intangible assets are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Goodwill			Software			Industrial property rights			Development cost			Others			Membership deposit			Construction in progress			Total
Beginning balance		108,707			40,672			539			77,241			117,546			20,685			153,209			518,599
Acquisitions		—			4,982			150			27,019			39,070			5,117			82,960			159,298
Disposal		—			—			—			—			—			(2,937	)		—			(2,937	)
Amortization (*)		—			(11,027	)		(130	)		(31,111	)		(53,885	)		—			—			(96,153	)
Reversal of impairment loss		—			—			—			—			—			725			—			725
Transfer		—			—			—			176,791			50,352			—			(227,143	)		—
Acquisition through business combination		46,752			763			—			—			—			—			—			47,515
Foreign currencies translation adjustment		(5,109	)		(477	)		—			—			(637	)		(5	)		—			(6,228	)
Others		—			—			—			—			(624	)		—			—			(624	)

Ending balance		150,350			34,913			559			249,940			151,822			23,585			9,026			620,195

(*)

Amortization of other intangible assets amounting to 38,483 million Won is included in other operating expenses.


	For the nine months ended September 30, 2017
	Goodwill			Software			Industrial property rights			Development cost			Others			Membership deposit			Construction in progress			Total
Beginning balance		124,803			35,477			313			70,697			164,364			20,086			67,999			483,739
Acquisitions		105			9,351			170			21,735			17,824			560			80,316			130,061
Disposal		—			—			—			—			(38	)		(866	)		—			(904	)
Amortization (*)		—			(12,212	)		(87	)		(17,326	)		(45,539	)		—			—			(75,164	)
Impairment loss		—			—			—			—			—			(181	)		—			(181	)
Transfer		—			8,072			—			—			36			—			(8,108	)		—
Foreign currencies translation adjustment		(8,364	)		(99	)		—			—			(968	)		(33	)		(402	)		(9,866	)
Others		—			3,521			—			(55	)		(6,232	)		(5	)		—			(2,771	)

Ending balance		116,544			44,110			396			75,051			129,447			19,561			139,805			524,914

(*)

Amortization of other intangible assets amounting to 36,419 million Won is included in other operating expenses.

17.

ASSETS HELD FOR SALE

Assets held for sale are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Investments in joint ventures and associates		—		46,217
Premises and equipment, etc. (*)		6,765		2,407

Total		6,765		48,624

(*)

As of September 30, 2018 and December 31, 2017, non-operating assets of the subsidiaries include land and buildings classified as assets held for sale amounting to 4,450 million Won and 840 million Won, respectively.

18.

ASSETS SUBJECT TO LIEN AND ASSETS ACQUIRED THROUGH FORECLOSURES

(1)	Assets subjected to lien are as follows (Unit: Korean Won in millions):


		September 30, 2018
		Collateral given to	Amount		Reason for collateral
Loan at amortized cost and other financial assets	Due from banks on time in local currency	DaishinAMC and others		1,500	Right of pledge
	Due from banks in local currencies	Samsung Securities Co., Ltd. and others		19,151	Margin deposit for futures or option
	Due from banks in foreign currencies	Korea Investment & Securities Co., Ltd. and others		127,478	Foreign margin deposit for future or option and others
Financial assets at FVTOCI	Korean treasury and government bonds and others	The BOK and others		1,984,057	Settlement risk and others
Securities at amortized cost	Korean treasury and government bonds	Korea Securities Depository		5,548	Related to bonds sold under repurchase agreements (*)
Securities at amortized cost	Korean treasury and government bonds and others	The BOK and others		5,324,952	Settlement risk and others
Premises and equipment	Land and building	Credit Counselling & Recovery Service and others		6,064	Right to collateral and others

		Total		7,468,750

(*)

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).


		December 31, 2017
		Collateral given to	Amount		Reason for collateral
Loan and receivables	Due from banks on time in local currency	Bank of China and others		6,629	Collaterals for issuing letter of guarantee and others
	Due from banks in local currencies	Samsung Securities Co., Ltd. and others		10,809	Margin deposit for futures or option
	Due from banks in foreign currencies	Korea Investment & Securities Co., Ltd. and others		9,136	Foreign margin deposit for future or option and others
Financial assets at FVTPL	Korean financial institutions’ debt securities and others	Yuanta Securities Co., Ltd. and others		501,523	Substitute securities and others
AFS financial assets	Korean treasury and corporate bonds	Korea Securities Depository and others		9,998	Related to bonds sold under repurchase agreements (*)
AFS financial assets	Korean treasury and government bonds and others	The BOK and others		1,570,608	Settlement risk and others
HTM financial assets	Korean treasury and government bonds	Korea Securities Depository		5,436	Related to bonds sold under repurchase agreements (*)
HTM financial assets	Korean financial institutions’ debt securities and others	The BOK and others		7,605,292	Settlement risk and others
Premises and equipment	Land and building	Credit Counselling & Recovery Service and others		6,186	Leasehold rights and others

		Total		9,725,617

(*)

(2)	There are no the carrying amounts of assets acquired through foreclosure as of September 30, 2018 and the carrying amounts of assets acquired through foreclosure of December 31, 2017 are as follows. (Unit: Korean Won in millions):


	December 31, 2017
Land		332
Buildings		44

Total		376

(3)	Securities loaned are as follows (Unit: Korean Won in millions):

September 30,
2018

December 31,
2017

Loaned to

Financial assets at FVTOCI

Korean treasury, government bonds and others

70,210

—

Korea Securities Finance Corporation

AFS financial assets

Korean treasury, government bonds and others

—

170,256

Korea Securities Finance Corporation and others

Total

70,210

170,256

Securities loaned are lending of specific securities to borrowers who agree to return the same quantity of the same security at the end of lending period. As the Group does not derecognize these securities, there are no liabilities recognized through such transactions relates to securities loaned.

(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 September 30, 2018 and December 31, 2017 are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Fair values of collaterals		Fair values of collaterals were disposed or re-subjected to lien
Securities		5,084,088		—


	December 31, 2017
	Fair values of collaterals		Fair values of collaterals were disposed or re-subjected to lien
Securities		17,671,490		—

19.

OTHER ASSETS

Details of other assets are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Prepaid expenses		223,051		130,245
Advance payments		10,920		18,363
Non-operative assets		—		376
Others		10,975		9,420

Total		244,946		158,404

20.

FINANCIAL LIABILITIES AT FVTPL

(1)	Financial liabilities at FVTPL are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Financial liabilities at fair value through profit or loss mandatorily measured at fair value		2,034,509		—
Financial liabilities held for trading		—		3,176,113
Financial liabilities at fair value through profit or loss designated as upon initial recognition		187,533		—
Financial liabilities designated as at FVTPL		—		251,796

Total		2,222,042		3,427,909

(2)	Financial liabilities at fair value through profit or loss mandatorily measured at fair value (Financial liabilities held for trading) are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Deposits
Gold banking liabilities		27,266		25,964
Derivative liabilities		2,007,243		3,150,149

Total		2,034,509		3,176,113

(3)	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):


	September 30, 2018		December 31, 2017
Equity-linked securities index
Equity-linked securities index in short position		187,533		160,057
Debentures
Debentures in local currency		—		91,739

Total		187,533		251,796

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)	Accumulated changes in credit risk adjustments to financial liabilities at fair value through profit or loss designated as upon initial recognition are as follows (Unit: Korean Won in millions):


	September 30, 2018
Accumulated changes in credit risk adjustments		(60	)

The adjustment to reflect Group’s credit risk is considered in measuring the fair value of equity-linked securities index and debentures. The Group’s credit risk is determined by adjusting credit spread observed in credit rating of Group.

(5)	The difference between financial liabilities at fair value through profit or loss designated as upon initial recognition’s (Financial liabilities designated as at FVTPL) carrying amount and nominal amount at maturity are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Carrying amount		187,533			251,796
Nominal amount at maturity		219,154			255,408

Difference		(31,621	)		(3,612	)

(6)	Changes in equity in relation to financial liabilities at fair value through profit or loss designated as upon initial recognition

Realized cumulative gain or loss designated in other comprehensive income due to derecognition of financial liabilities at fair value through profit or loss designated as upon initial recognition is nil for the nine months ended September 30, 2018.

Cumulative gains on financial liabilities at fair value through profit or loss designated as upon initial recognition replaced to retained earnings from other comprehensive income are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
Equity-linked securities index:		(5	)

21.

DEPOSITS DUE TO CUSTOMERS

Details of deposits due to customers by type are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Deposits in local currency:
Deposits on demand		8,617,162			9,349,070
Deposits at termination		197,915,725			194,292,679
Mutual installment		31,475			34,055
Deposits on notes payables		1,743,588			1,323,679
Deposits on CMA		144,652			164,431
Certificate of deposits		4,631,356			4,436,443
Other deposits		1,401,241			1,451,841

Sub-total		214,485,199			211,052,198

Deposits in foreign currency:
Deposits in foreign currencies		22,934,149			23,682,896

Present value discount		(60,289	)		(40,010	)

Total		237,359,059			234,695,084

22.

BORROWINGS AND DEBENTURES

(1)	Details of borrowings are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Lenders	Interest rate (%)		Amount
Borrowings in local currency:
Borrowings from The BOK	The BOK		0.5 ~ 0.8		1,454,339
Borrowings from government funds	Small Enterprise And Market Service and others		0.0 ~ 3.5		1,814,404
Others	The Korea Development Bank and others		0.0 ~ 3.8		4,860,081

Sub-total					8,128,824

Borrowings in foreign currencies:
Borrowings in foreign currencies	The Export-Import Bank of Korea and others		0.0 ~ 6.8		6,890,314
Offshore borrowings in foreign currencies	JPMORGAN CHASE BANK		2.8		33,381

Sub-total					6,923,695

Bills sold	Others		0.7 ~ 1.2		22,010
Call money	Bank and others		0.2 ~ 6.5		784,657
Bonds sold under repurchase agreements	Other financial institutions		0.8 ~ 12.7		3,348
Present value discount					(57	)

Total					15,862,477


	December 31, 2017
	Lenders	Interest rate (%)		Amount
Borrowings in local currency:
Borrowings from The BOK	The BOK		0.5 ~ 0.8		1,404,087
Borrowings from government funds	Small Enterprise And Market Service and others		0.0 ~ 2.9		1,723,340
Others	The Korea Development Bank and others		0.0 ~ 3.2		3,957,421

Sub-total					7,084,848

Borrowings in foreign currencies:
Borrowings in foreign currencies	The Export-Import Bank of Korea and others		0.0 ~ 6.8		6,996,551
Offshore borrowings in foreign currencies	Commonwealth Bank		1.8		28,285

Sub-total					7,024,836

Bills sold	Others		0.0 ~ 1.2		36,953
Call money	Bank and others		1.5 ~ 2.7		635,061
Bonds sold under repurchase agreements	Other financial institutions		0.6 ~ 12.7		3,173
Present value discount					(165	)

Total					14,784,706

(2)	Details of debentures are as follows (Unit: Korean Won in millions):


	September 30, 2018					December 31, 2017
	Interest rate (%)		Amount			Interest rate (%)		Amount
Face value of bond (*):
Ordinary bonds		1.5 ~ 4.5		22,156,256			1.5 ~ 5.8		22,468,908
Subordinated bonds		3.0 ~ 12.6		5,309,423			3.4 ~ 12.6		4,781,301
Other bonds		1.9 ~ 17.0		670,752			1.6 ~ 17.0		649,615

Sub-total				28,136,431					27,899,824

Discounts on bonds				(33,752	)				(30,173	)

Total				28,102,679					27,869,651

(*)

Included debentures under fair value hedge relationships are 3,439,515 million Won and 3,089,751 million Won as of September 30, 2018 and December 31, 2017, respectively. Also, debentures under cash flow hedge amounting to 719,101 million Won and 694,548 million Won are included as of September 30, 2018 and December 31, 2017.

23.

PROVISIONS

(1)	Details of provisions are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Asset retirement obligation		67,197		61,872
Provisions for guarantees (*1)		80,724		183,247
Provisions for unused commitments		119,143		66,115
Provisions for customer reward credits		51,950		40,445
Other provisions (*2)		66,329		58,791

Total		385,343		410,470

(*1)

Provisions for guarantees include provision for financial guarantee of 43,708 million Won and 71,697 million Won as of September 30, 2018 and December 31, 2017, respectively, and remaining balances are for non-financial guarantee.

(*2)

Other provisions consist of provision for litigation and others.

(2)	Changes in provisions for guarantees and loan commitments are as follows (Unit: Korean Won in millions):

Provisions for guarantees


	For the nine months ended September 30, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance (*)		47,132			18,281			127,511			192,924
Transferred to 12-month expected credit loss		99			(99	)		—			—
Transferred to expected credit loss for the entire period		(922	)		91,944			(91,022	)		—
Transferred to credit-impaired financial assets		(18	)		(29	)		47			—
Provisions used		(15,772	)		—			—			(15,772	)
Net reversal of unused amount		(4,886	)		(83,320	)		(22,423	)		(110,629	)
Others		14,203			(2	)		—			14,201

Ending balance		39,836			26,775			14,113			80,724

(*)

The beginning balance was restated in accordance with IFRS 9.


	For the nine months ended September 30, 2017
Beginning balance		238,117
Provisions		1,773
Payments		(17,260	)
Reversal of provisions		(48,964	)
Foreign currencies translation adjustments		53
Others		19,571

Ending balance		193,290

Provisions for unused commitment


	For the nine months ended September 30, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance (*)		75,232			27,875			1,878			104,985
Transferred to 12-month expected credit loss		7,605			(7,232	)		(373	)		—
Transferred to expected credit loss for the entire period		(2,565	)		2,738			(173	)		—
Transferred to credit-impaired financial assets		(187	)		(280	)		467			—
Net provision (reversal) of unused amount		(6,259	)		20,655			(260	)		14,136
Others		22			—			—			22

Ending balance		73,848			43,756			1,539			119,143

(*)

The beginning balance was restated in accordance with IFRS 9.


	For the nine months ended September 30, 2017
Beginning balance		87,909
Provisions		2,043
Payments		(35	)
Reversal of provisions		(4,671	)
Foreign currencies translation adjustments		14

Ending balance		85,260

(3)	Changes in asset retirement obligation are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30
	2018			2017
Beginning balance		61,872			58,076
Provisions		1,309			1,479
Payments		(767	)		(987	)
Reversal of provisions		(1,036	)		(732	)
Amortization		413			313
Increase in restoration costs and others		5,406			3,610

Ending balance		67,197			61,759

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 September 30, 2018, 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 average inflation rate for last year in order to estimate future recovery cost.

(4)	Changes in other provisions are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Provisions for customer reward credits			Other provisions			Total
Beginning balance		40,445			58,791			99,236
Provisions		52,591			9,217			61,808
Payments		(75,792	)		(7,521	)		(83,313	)
Reversal of provisions		—			(33	)		(33	)
Foreign currencies translation adjustments		—			(20	)		(20	)
Transfer (*)		21,018			—			21,018
Others		13,688			5,895			19,583

Ending balance		51,950			66,329			118,279

(*)

As the credits of the affiliates were transferred to the Group, the allowance for the provisions for customer reward credits increased for the nine months ended September 30, 2018.


	For the nine months ended September 30, 2017
	Provisions for customer reward credits			Other provisions			Total
Beginning balance		22,093			22,282			44,375
Provisions		46,713			3,970			50,683
Payments		(65,228	)		(7,136	)		(72,364	)
Reversal of provisions		—			(57	)		(57	)
Foreign currencies translation adjustments		—			(153	)		(153	)
Transfer (*)		17,507			—			17,507
Others		18,701			2,184			20,885

Ending balance		39,786			21,090			60,876

(*)

As the credits of the affiliates were transferred to the Group, the allowance for the provisions for customer reward credits increased for the nine months ended September 30, 2017.

24.

NET DEFINED BENEFIT LIABILITY

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 pay at the time of termination. The assets of the plans are measured at their fair value at the end of reporting date. The plan liabilities are measured using the projected unit method, which takes account of projected earnings increases, using actuarial assumptions that give the best estimate of the future cash flows that will arise under the plan liabilities.

The Group is exposed to various risks through defined benefit retirement pension plan, and the most significant risks are as follows:


Volatility of asset		The defined benefit obligation was estimated with an interest rate calculated based on blue chip corporate bonds earnings. A deficit may occur if the rate of return of plan assets falls short of the interest rate.

Decrease in profitability of blue chip bonds		A decrease in profitability of blue chip bonds will be offset by some increase in the value of debt securities that the employee benefit plan owns but will bring an increase in the defined benefit obligation.

Risk of inflation		Defined benefit obligations are related to inflation rate; the higher the inflation rate is, the higher the level of liabilities. Therefore, deficit occurs in the system if an inflation rate increases.

(1)	Details of net defined benefit liability are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Present value of defined benefit obligation		1,191,529			1,071,170
Fair value of plan assets		(1,079,009	)		(1,027,906	)

Net defined benefit liability		112,520			43,264

(2)	Changes in the carrying value of defined benefit obligation are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018			For the nine months ended September 30, 2017
Beginning balance		1,071,170			984,381
Current service cost		108,652			110,279
Interest cost		23,760			19,709
Remeasurements		46,260			(29,030	)
Foreign currencies translation adjustments		(84	)		(124	)
Retirement benefit paid		(59,369	)		(33,563	)
Curtailment or settlement		—			(10,928	)
Others		1,140			259

Ending balance		1,191,529			1,040,983

(3)	Changes in the plan assets are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018			For the nine months ended September 30, 2017
Beginning balance		1,027,906			990,653
Interest income		25,013			22,682
Remeasurements		(12,585	)		(11,301	)
Employer’s contributions		96,273			18,000
Retirement benefit paid		(57,596	)		(31,611	)
Curtailment or settlement		—			(11,052	)
Others		(2	)		43,113

Ending balance		1,079,009			1,020,484

(4)	Plan assets wholly consist of fixed deposits as of September 30, 2018 and December 31, 2017, respectively. Among plan assets, realized returns on plan assets amount to 12,428 million Won and 11,381 million Won for the nine months ended September 30, 2018 and 2017, respectively.

Meanwhile, the contribution expected to be paid in the current accounting year amounts to 125,818 million Won.

(5)	Current service cost, net interest income, loss (gain) on the curtailment or settlement and remeasurements recognized in the consolidated statements of net income and total comprehensive income are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018			For the nine months ended September 30, 2017
Current service cost		108,652			110,279
Net interest income		(1,253	)		(2,973	)
Loss (gain) on the curtailment or settlement					124

Cost recognized in net income		107,399			107,430

Remeasurements (*)		58,845			(17,729	)

Cost recognized in total comprehensive income		166,244			89,701

(*)

This is an amount before considering the tax effects.

Retirement benefit service costs related to defined contribution plans amount to 1,943 million Won and 3,317 million Won for the nine months ended September 30, 2018 and 2017, respectively.

(6)	Key actuarial assumptions used in defined benefit liability measurement are as follows:


	September 30, 2018	December 31, 2017
Discount rate	3.03%	3.18%
Future wage growth rate	6.18%	6.18%
Mortality rate	Issued by Korea Insurance Development Institute	Issued by Korea Insurance Development Institute
Retirement rate	Experience rate for each employment classification	Experience rate for each employment classification

The weighted average maturity of defined benefit liability is 12.91 years.

(7)	The sensitivity to actuarial assumptions used in the assessment of defined benefit obligation is as follows (Unit: Korean Won in millions):


		September 30, 2018			December 31, 2017
Discount rate	Increase by 1% point		(102,653	)		(116,405	)
	Decrease by 1% point		119,460			137,151
Future wage growth rate	Increase by 1% point		118,777			136,707
	Decrease by 1% point		(104,000	)		(117,765	)

25.

OTHER FINANCIAL LIABILITIES AND OTHER LIABILITIES

Other financial liabilities and other liabilities are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Other financial liabilities:
Accounts payable		8,513,360			4,692,320
Accrued expenses		1,997,133			2,049,861
Borrowings from trust accounts		3,983,363			3,271,817
Agency business revenue		846,848			344,591
Foreign exchange payables		678,710			590,667
Domestic exchange payables		5,707,855			1,309,646
Other miscellaneous financial liabilities		1,472,472			1,635,156
Present value discount		(2,448	)		(1,597	)

Sub-total		23,197,293			13,892,461

Other liabilities:
Unearned income		178,096			180,664
Other miscellaneous liabilities		154,059			103,317

Sub-total		332,155			283,981

Total		23,529,448			14,176,442

26.

DERIVATIVES

(1)	Derivative assets and derivative liabilities are as follows (Unit: Korean Won in millions):


	September 30, 2018
	Nominal amount		Assets				Liabilities
	Nominal amount		For fair value hedge		For trading		For cash flow hedge		For fair value hedge		For trading
Interest rate:
Futures		92,637		—		—		—		—		—
Swaps		149,663,241		13,716		219,611		—		38,094		211,377
Purchase options		580,000		—		9,547		—		—		—
Written options		565,000		—		—		—		—		10,862

Currency:
Futures		528,844		—		—		—		—		—
Forwards		86,551,077		—		761,780		—		—		817,625
Swaps		63,300,098		—		794,912		36,013		—		763,702
Purchase options		2,184,281		—		20,039		—		—		—
Written options		3,605,850		—		—		—		—		25,875

Equity:
Futures		304,270		—		—		—		—		—
Swaps		364,847		—		491		—		—		8,972
Purchase options		5,567,550		—		114,833		—		—		—
Written options		6,548,368		—		—		—		—		168,656

Others:
Futures		855		—		—		—		—		—
Swaps		3,603		—		186		—		—		174

Total		319,860,521		13,716		1,921,399		36,013		38,094		2,007,243


	December 31, 2017
	Nominal amount		Assets				Liabilities
	Nominal amount		For fair value hedge		For trading		For cash flow hedge		For fair value hedge		For trading
Interest rate:
Futures		75,845		—		—		—		—		—
Swaps		130,197,378		59,272		223,935		—		12,103		253,972
Purchase options		630,000		—		12,346		—		—		—
Written options		795,000		—		—		—		—		12,869

Currency:
Futures		318,217		—		—		—		—		—
Forwards		72,526,956		—		1,314,368		—		—		1,375,799
Swaps		48,176,306		—		1,352,924		55,651		—		1,347,905
Purchase options		2,291,154		—		64,267		—		—		—
Written options		4,038,237		—		—		—		—		58,687

Equity:
Futures		91,436		—		—		—		—		—
Swaps		15,000		—		103		—		—		10
Purchase options		5,060,706		—		146,775		—		—		—
Written options		4,504,290		—		—		—		—		99,770

Others:
Futures		—		—		—		—		—		—
Swaps		7,805		—		1,056		—		—		1,037
Purchase options		—		—		—		—		—		—
Written options		5,000		—		—		—		—		100

Total		268,733,330		59,272		3,115,774		55,651		12,103		3,150,149

Derivatives held for trading are classified into financial assets at FVTPL (Note 7) and financial liabilities at FVTPL (Note 20), and derivatives held for hedging are presented as a separate line item in the consolidated interim statements of financial position.

(2)	Overview of the Group’s hedge accounting

Fair value hedge

As of the current period end, the Group has applied fair value hedge on fixed interest rate foreign currency denominated debentures amounting to 3,439,515 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 to the face value of the hedging instrument.

In this hedging relationship, only the market interest rate fluctuation, which is the most significant part of the fair value change of the hedged item, is designated as the hedged risk, and other risk factors including credit risk are not included in the hedged risk. Therefore, the ineffective portion of the hedge could arise from fluctuations in the timing of the cash flow of the hedged item, the change in the total amount and price of the hedged item, or significant credit risk fluctuation of either party of the hedging instrument.

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 using the yield curve at the end of the reporting period and the credit risk embedded in the contract and the average interest rate is determined based on the outstanding balance at the end of the reporting period. The variable interest rate applied to the interest rate swap is USD Libor 3M (6M) plus spread. In accordance with the terms of each interest rate swap contract designated as a hedging instrument, the Group receives interest at a fixed interest rate and pays interest at a variable interest rate.

Cash Flow Hedge

As of the current period end, the Group has applied Cash Flow hedge on foreign currency denominated bonds amounting to 719,101 million Won. The Group’s objectives of hedging are to ① Mitigate risks of cash flow fluctuation from principal and interest of variable interest rate debentures denominated in foreign currency, which arise from changes in foreign exchange rate and market interest rate; and ② Mitigate the risks of cash flow fluctuation from principal and interest of fixed-interest rate debentures denominated in foreign currency, which arise from changes in foreign exchange rates. The Group has designated foreign currency swap contracts as hedging instruments in order to achieve such objectives.

(3)	The nominal amounts of the hedging instrument as of September 30, 2018 are as follows (Unit: USD, SGD):


	1 year or less		1 year to 5 years		More than 5 years		Total
Fair value hedge
Interest rate risk
Interest rate swap (USD)		500,000,000		1,350,000,000		1,300,000,000		3,150,000,000
Cash flow hedge
Foreign currencies translation risk and interest rate risk
Currency swap (USD)		50,000,000		450,000,000		—		500,000,000
Foreign currencies translation risk
Currency swap (SGD)		—		204,000,000		—		204,000,000

(4)	The average interest rate and average currency rate of the hedging instrument as of September 30, 2018 are as follows:


		Average interest rate and average currency rate
Fair value hedge
Interest rate risk
Interest rate swaps (USD)		Fixed 4.09% receipt and 4.07% floating paid
Cash flow hedge
Foreign currencies translation risk and interest rate risk
Currency swap (USD)		USD 2.81% receipt, KRW 1.71% paid, USD/KRW = 1,173 Won
Foreign currencies translation risk
Currency swap (SGD)		SGD 1.91% receipt, KRW 1.98% paid, SGD/KRW = 828 Won

(5)	The amounts related to items designated as hedging instruments as of September 30, 2018 are as follows (Unit: USD, SGD and Korean Won in millions):

Nominal amounts of
the hedging
instrument

Carrying amounts of the hedging
instrument

Line item in the
statement of financial
position where the
hedging instrument is located

Changing in fair
value used for
calculating hedge
ineffectiveness

Assets

Liabilities

Fair value hedge

Interest rate risk

Interest rate swaps

USD3,150,000,000

13,716

38,094

Derivative assets

(Held for hedging)

Derivative liabilities

(Held for hedging)

(77,215

)

Cash flow hedge

Foreign currencies translation risk and interest rate risk

Currency swap

USD500,000,000

—

30,140

Derivative liabilities

(Held for hedging)

19,291

Foreign currencies translation risk

Currency swap

SGD204,000,000

—

5,872

Derivative liabilities

(Held for hedging)

590

(6)	Details of carrying amount to hedged and amount adjusted due to hedge accounting as of September 30, 2018 are as follows (Unit: Korean won in millions):


	Carrying amounts of the hedging item				Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item				Line item in the statement of financial position in which the hedged item is included		Changing in fair value used for calculating hedge ineffectiveness			Cash flow hedge reserve (*)
	Assets		Liabilities		Assets		Liabilities							Cash flow hedge reserve (*)
Fair value hedge
Interest rate risk
Debenture		—		3,439,515		—		13,405		Debentures		83,431			—
Cash flow hedge
Foreign currencies translation risk and interest rate risk
Debenture		—		554,121		—		—		Debentures		(23,968	)		196
Foreign currencies translation risk
Debenture		—		164,980		—		—		Debentures		(1,307	)		(2,929	)

(*)

Amount after tax deduction

(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):


		Hedge ineffectiveness recognized in profit or loss		Line item in the profit that includes hedge ineffectiveness
Fair value hedge	Interest rate risk		6,216	Other net operating income

(8)	Reclassification of profit or loss from other comprehensive income and equity related to cash flow hedges is as follows (Unit: Korean Won in millions):


		Changes in the value of hedging instruments recognized in cash flow hedge reserve		Hedge ineffectiveness recognized in profit or loss		Changes in the value of foreign basis spread recognized in OCI			Line item in the profit or loss that includes hedge ineffectiveness	Amounts reclassified from cash flow hedge reserve to profit or loss		Line item affected in profit or loss because of the reclassification
Cash flow hedge	Foreign currencies translation risk and interest rate risk		19,260		31		176		Other net operating expense		20,566	Other net operating income
	Foreign currencies translation risk		590		—		(418	)	Other net operating income		2,552	Other net operating income

(9)	The reserves of cash flow hedge are as follows (Unit: Korean Won in millions):


	September 30, 2018
Beginning balance		777
Profit of hedge recognized in OCI		19,608
Fair value of hedging instruments		19,850
Changes in the value of foreign basis spread recognized in OCI		(242	)
Tax effect		—
Amounts of reclassification		(23,118	)

Ending balance		(2,733	)

27.

DEFERRED DAY 1 PROFITS OR LOSSES

Changes in deferred day 1 profits or losses are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30
	2018			2017
Beginning balance		7,416			13,422
New transactions		19,644			500
Amounts recognized in losses		(3,749	)		(5,271	)

Ending balance		23,311			8,651

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 at the transaction price as at the time of acquisition, even though there are difference noted between the transaction price and the fair value. The table above presents the difference yet to be realized as profit or losses.

28.

CAPITAL STOCK AND CAPITAL SURPLUS

(1)	The number of shares authorized and others are as follows:


	September 30, 2018		December 31, 2017
Shares of common stock authorized		5,000,000,000 Shares		5,000,000,000 Shares
Par value		5,000 Won		5,000 Won
Shares of common stock issued		676,000,000 Shares		676,000,000 Shares
Capital stock		3,381,392 million Won		3,381,392 million Won

(2)	There is no change to be disclosed in numbers of issued and outstanding shares of common stock for the nine months ended September, 2018 and 2017.

(3)	Details of capital surplus are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Capital in excess of par value		269,533		269,533
Other capital surplus		16,354		16,347

Total		285,887		285,880

29.

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 (%)		September 30, 2018			December 31, 2017
Securities in local currency		June 20, 2008		June 20, 2038		7.7		—			255,000
		April 25, 2013		April 25, 2043		4.4		500,000			500,000
		November 13, 2013		November 13, 2043		5.7		200,000			200,000
		December 12, 2014		December 12, 2044		5.2		160,000			160,000
		June 3, 2015		June 3, 2045		4.4		240,000			240,000
		July 26, 2018		—		4.4		400,000			—
Securities in foreign currencies		June 10, 2015		June 10, 2045		5.0		559,650			559,650
		September 27, 2016		—		4.5		553,450			553,450
		May 16, 2017		—		5.3		562,700			562,700
Issuance cost								(13,837	)		(12,912	)

Total								3,161,963			3,017,888

The hybrid securities mentioned above are either without a maturity date or its maturity can be extended indefinitely at the maturity date without change of terms. Further, if a resolution is passed not to pay dividends on common stock, interest payments on the hybrid securities may be not occur.

30.

OTHER EQUITY

(1)	Details of other equity are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Accumulated other comprehensive loss:
Net loss on valuation of financial assets at FVTOCI		(54,995	)		—
Gain on valuation of AFS financial assets		—			301,930
Gain on financial liabilities at fair value through profit or loss designated as upon initial recognition due to own credit risk		44			—
Share of other comprehensive gain (loss) of joint ventures and associates		1,020			(1,251	)
Loss on foreign currency translation of foreign operations		(264,267	)		(242,700	)
Remeasurement loss related to defined benefit plan		(195,530	)		(152,624	)
Gain (loss) on valuation of derivatives designated as cash flow hedges		(2,733	)		777
Equity related to non-current assets held for sale		—			4,145

Sub-total		(516,461	)		(89,723	)

Treasury shares		(34,113	)		(34,113	)
Other capital adjustments		(1,607,647	)		(1,815,438	)

Total		(2,158,221	)		(1,939,274	)

(2)	Changes in the accumulated other comprehensive loss are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30, 2018
	Beginning balance (*1)			Increase (decrease) (2)(3)			Reclassification adjustments			Income tax effect			Ending balance
Net gain (loss) on valuation of financial assets at FVTOCI		(88,906	)		51,429			2,120			(19,638	)		(54,995	)
Gain (loss) on financial liabilities at fair value through profit or loss designated as upon initial recognition due to own credit risk		(96	)		193			—			(53	)		44
Share of other comprehensive gain (loss) of joint ventures and associates		(2,656	)		5,070			—			(1,394	)		1,020
Gain (loss) on foreign currency translation of foreign operations		(242,806	)		(29,601	)		—			8,140			(264,267	)
Remeasurement gain (loss) related to defined benefit plan		(152,358	)		(59,547	)		—			16,375			(195,530	)
Gain (loss) on valuation of derivatives designated as cash flow hedges		777			27,045			(23,118	)		(7,437	)		(2,733	)
Transfer to non-current assets held for sale		4,145			(5,717	)		—			1,572			—

Total		(481,900	)		(11,128	)		(20,998	)		(2,435	)		(516,461	)

(*1)

The beginning balance was restated in accordance with IFRS 9.

(*2)

Net gain (loss) on valuation of financial assets at FVTOCI included the 279 million Won transfer to retained earnings due to disposal of equity securities.

(*3)

Gain (loss) on financial liabilities designated at fair value through profit or loss upon initial recognition due to own credit risk included the 5 million Won transfer to retained earnings due to redemption.


	For the nine months ended September 30, 2017
	Beginning balance			Increase (decrease)(*)			Reclassification adjustments (*)			Income tax effect			Ending balance
Gain (loss) on valuation of AFS financial assets		386,981			60,151			(122,975	)		11,344			335,501
Share of other comprehensive income (loss) of joint ventures and associates		(1,863	)		6,537			—			(1,620	)		3,054
Gain (loss) on foreign currency translation of foreign operations		(48,353	)		(61,194	)		—			12,688			(96,859	)
Remeasurement gain (loss) related to defined benefit plan		(163,397	)		17,504			—			(4,304	)		(150,197	)
Gain (loss) on valuation of cash flow hedges		—			(18,544	)		16,899			398			(1,247	)

Total		173,368			4,454			(106,076	)		18,506			90,252

(*)

For the change in gain (loss) on valuation of AFS financial assets, “increase (decrease)” represents change due to the valuation during the period, and “reclassification adjustments” represents disposal or recognition of impairment losses on AFS financial assets.

31.

RETAINED EARNINGS

(1)	Details of retained earnings are as follows (Unit: Korean Won in millions):


		September 30, 2018			December 31, 2017
Legal reserve	Earned surplus reserve		1,857,754			1,729,754
	Other legal reserve		46,384			45,668

	Sub-total		1,904,138			1,775,422

Voluntary reserve	Business rationalization reserve		8,000			8,000
	Reserve for financial structure improvement		235,400			235,400
	Additional reserve		7,759,804			7,418,806
	Regulatory reserve for credit loss		2,578,457			2,438,191
	Revaluation reserve		715,860			751,964
	Other voluntary reserve		—			11,700

	Sub-total		11,297,521			10,864,061

Conversion of loss on disposal of equity securities at FVTOCI to retained earnings			(279	)		—
Derecognition of the credit risk on financial liabilities designated at FVTPL			4			—
Retained earnings before appropriation			3,830,611			2,980,523

Total			17,031,995			15,620,006

Earned surplus reserve

In accordance with the Banking Act, earned surplus reserve is appropriated at least one tenth of the earnings after tax on every dividend declaration, not exceeding the paid in capital. This reserve may not be used other than for offsetting a deficit or transferring to capital.

ii.

Other legal reserve

Other legal reserves were appropriated in the branches located in Japan, Vietnam and Bangladesh according to the banking laws of Japan, Vietnam and Bangladesh, and may be used to offset any deficit incurred in those branches.

iii.

Business rationalization reserve

Pursuant to the Restriction of Special Taxation Act, the Group was previously required to appropriate, as a reserve for business rationalization, amounts equal to tax reductions arising from tax exemptions and tax credits up to December 31, 2001. The requirement was no longer effective from 2002.

iv.

Reserve for financial structure improvement

From 2002 to 2014, the Finance Supervisory Services recommended banks in Korea to appropriate at least 10 percent of net income after accumulated deficit for financial structure improvement, until tangible common equity ratio equals 5.5 percent. But this reserve is not available for payment of cash dividends; however, it can be used to reduce a deficit or be transferred to capital. The reserve and appropriation are an Autonomous judgment matter of the Group since 2015.

Additional reserve

Additional reserve was appropriated for capital adequacy and other management purpose.

vi.

Regulatory reserve for credit loss

In accordance with paragraphs 1 and 2 of Article 29 of the Regulation on Supervision of Banking Business (“RSBB”), if provisions for credit loss under IFRS for the accounting purpose are lower than provisions under RSBB, the Bank limits such shortfall amount as regulatory reserve for credit loss.

vii.

Revaluation reserve

Revaluation reserve is the amount of limited dividends set by the board of directors to be recognized as complementary capital when the gain or loss occurred in the property revaluation by adopting IFRS.

(2)	Changes in retained earnings are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30
	2018 (*)			2017
Beginning balance		15,797,097			14,611,566
Net attributable to owners		1,903,406			1,378,507
Dividends on common stock		(336,636	)		(336,636	)
Dividends on hybrid securities		(112,790	)		(129,921	)
Loss on disposal of equity securities at FVTOCI		(279	)		—
Derecognition of the credit risk on financial liabilities designated at FVTPL		4			—
Capital adjustments due to appropriation of retained earnings		(218,807	)		—

Ending balance		17,031,995			15,523,516

(*)

The beginning balance as of 2018 was restated in accordance with IFRS 9.

32.

DIVIDENDS

At the shareholders’ meeting on March 23, 2018, dividend payment for the year ended December 31, 2017 amounting to 336,636 million Won (500 Won per share) was approved and paid for the nine months ended September 30, 2018.

33.

NET INTEREST INCOME

(1)	Interest income recognized is as follows (Unit: Korean Won in millions):


	2018				2017
	Three months ended September 30		Nine months ended September 30		Three months ended September 30		Nine months ended September 30
Financial assets at FVTPL (IFRS 9)		14,729		43,266		—		—
Financial assets at FVTPL (IAS 39)		—		—		14,680		41,486
Financial assets at FVTOCI		71,951		191,397		—		—
AFS financial assets		—		—		67,021		211,088
Securities at amortized cost		95,601		264,390		—		—
HTM financial assets		—		—		77,349		227,022
Financial assets at amortized cost:
Interest on due from banks		27,556		89,017		—		—
Interest on loans		2,259,803		6,511,300		—		—
Interest of other receivables		7,134		20,820		—		—

Sub-total		2,294,493		6,621,137		159,050		479,596

Loans and receivables:
Interest on due from banks		—		—		21,869		63,272
Interest on loans		—		—		1,999,561		5,809,569
Interest of other receivables		—		—		7,349		24,976

Sub-total		—		—		2,028,449		5,897,817

Total		2,476,774		7,120,190		2,187,829		6,377,413

(2)	Interest expense recognized are as follows (Unit: Korean Won in millions):


	2018				2017
	Three months ended September 30		Nine months ended September 30		Three months ended September 30		Nine months ended September 30
Interest on deposits due to customers		748,318		2,107,282		596,923		1,771,307
Interest on borrowings		89,040		218,969		59,575		175,123
Interest on debentures		186,408		533,356		162,556		468,360
Other interest expense		20,333		63,434		17,219		60,747

Total		1,044,099		2,923,041		836,273		2,475,537

34.

NET FEES AND COMMISSIONS INCOME

(1)	Details of fees and commissions income recognized are as follows (Unit: Korean Won in millions):


	2018				2017
	Three months ended September 30		Nine months ended September 30		Three months ended September 30		Nine months ended September 30
Fees and commissions received (*)		173,049		519,974		172,487		508,809
Fees and commissions received for provision of guarantee		17,129		47,392		16,538		48,238
Fees and commissions received on project financing		2,360		19,305		5,466		11,800
Fees and commissions received on credit card		281,705		838,689		270,229		797,795
Fees and commissions received on securities		22,234		72,472		19,984		60,251
Other fees and commissions received		48,609		160,260		49,893		121,597

Total		545,086		1,658,092		534,597		1,548,490

(*)

Fees and commissions received include fees income from agency commission, fees income from electronic finance, fees income related to loan, fees for import letter of credit dealing, commission received on foreign exchange and others.

(2)	Details of fees and commissions expense incurred are as follows (Unit: Korean Won in millions):


	2018				2017
	Three months ended September 30		Nine months ended September 30		Three months ended September 30		Nine months ended September 30
Fees and commissions paid		43,016		123,882		44,128		117,295
Credit card commission		234,786		659,990		212,123		612,472
Brokerage commission		411		1,679		214		562
Others		1,124		4,137		1,263		3,592

Total		279,337		789,688		257,728		733,921

35.

DIVIDEND INCOME

(1)	Details of dividend income recognized are as follows (Unit: Korean Won in millions):


	2018				2017
	Three months ended September 30		Nine months ended September 30		Three months ended September 30		Nine months ended September 30
Financial assets at FVTPL (IFRS 9)		15,341		47,329		—		—
Financial assets at FVTPL (IAS 39)		—		—		23		213
Financial assets at FVTOCI		2,992		20,708		—		—
AFS financial assets		—		—		48,819		108,074

Total		18,333		68,037		48,842		108,287

(2)	Details of dividends related to financial assets at FVTOCI are as follows (Unit: Korean Won in millions):


	Nine month ended September 30, 2018
Dividend income recognized from assets held
Equity securities		20,434
Dividend income recognized in assets derecognized		274

Total		20,708

36.

NET GAIN OR LOSS ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS MANDATORILY MEASURED AT FAIR VALUE (IFRS 9 AND IAS 39)

(1)	Details of gain or loss related to net gain or loss on financial instruments at FVTPL (IFRS 9 and IAS 39) are as follows (Unit: Korean Won in millions):


	2018						2017
	Three months ended September 30			Nine months ended September 30			Three months ended September 30			Nine months ended September 30
Gain (loss) on financial instruments at fair value through profit or loss mandatorily measured at fair value		(17,905	)		96,241			—			—
Gain on financial instruments held for trading		—			—			67,214			7,028
Loss on financial instrument at fair value through profit or loss designated as upon initial recognition		(6,532	)		(3,655	)		—			—
Loss on financial instruments designated as at fair value through profit or loss		—			—			(18,441	)		(104,664	)

Total		(24,437	)		92,586			48,773			(97,636	)

(2)	Details of net gain or loss on financial instrument at fair value through profit or loss mandatorily measured at fair value and financial instruments held for trading are as follows (Unit: Korean Won in millions):


			2018						2017
			Three months ended September 30			Nine months ended September 30			Three months ended September 30			Nine months ended September 30
Financial assets at FVTPL (financial assets held for trading)	Securities	Gain on valuation		15,809			97,670			(2,220	)		3,675
		Gain on disposals		13,677			36,054			6,954			16,814
		Loss on valuation		3,745			(20,050	)		(1,498	)		(8,009	)
		Loss on disposals		(11,034	)		(20,214	)		(1,543	)		(3,600	)

		Sub-total		22,197			93,460			1,693			8,880

	Loans	Gain on valuation		1,129			4,193			—			—
		Loss on disposal		(117	)		(117	)		—			—

		Sub-total		1,012			4,076			—			—

	Other financial assets	Gain on valuation		46			2,015			1,742			4,813
		Gain on disposals		26			431			954			1,887
		Loss on valuation		(7	)		(2,200	)		(2,243	)		(5,833	)
		Loss on disposals		—			(83	)		(317	)		(551	)

		Sub-total		65			163			136			316

	Total of financial assets held for trading			23,274			97,699			1,829			9,196

Derivatives (for trading)	Interest rates derivatives	Gain on transactions and valuation		340,234			940,596			242,785			676,134
		Loss on transactions and valuation		(322,925	)		(917,450	)		(236,425	)		(658,159	)

		Sub-total		17,309			23,146			6,360			17,975

	Currency derivatives	Gain on transactions and valuation		311,003			3,846,109			821,443			4,595,008
		Loss on transactions and valuation		(379,380	)		(3,885,270	)		(774,537	)		(4,718,146	)

		Sub-total		(68,377	)		(39,161	)		46,906			(123,138	)

	Equity derivatives	Gain on transactions and valuation		75,481			324,845			95,483			398,410
		Loss on transactions and valuation		(65,331	)		(309,394	)		(83,339	)		(294,890	)

		Sub-total		10,150			15,451			12,144			103,520

	Other derivatives	Gain on transactions and valuation		728			3,518			2,084			14,396
		Loss on transactions and valuation		(989	)		(4,412	)		(2,109	)		(14,921	)

		Sub-total		(261	)		(894	)		(25	)		(525	)

	Total of derivatives (for trading)			(41,179	)		(1,458	)		65,385			(2,168	)

	Total			(17,905	)		96,241			67,214			7,028

(3)	Details of net gain (loss) on financial instrument 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):


	2018						2017
	Three months ended September 30			Nine months ended September 30			Three months ended September 30			Nine months ended September 30
Gain (loss) on equity-linked securities:
Loss on disposals of equity-linked securities		(254	)		(1,788	)		(27,988	)		(43,865	)
Gain (loss) on valuation of equity-linked securities		(6,278	)		(3,464	)		8,901			(60,813	)

Sub-total		(6,532	)		(5,252	)		(19,087	)		(104,678	)

Loss on other securities:
Loss on valuation of other securities		—			—			(4	)		(20	)

Gain on other financial instruments:
Gain on valuation of other financial instruments		—			1,597			650			34

Total		(6,532	)		(3,655	)		(18,441	)		(104,664	)

37.

NET GAIN OR LOSS ON FINANCIAL ASSETS AT FVTOCI AND AFS FINANCIAL ASSETS

Details of net gain on financial assets at FVTOCI and AFS financial assets recognized are as follows (Unit: Korean Won in millions):


	2018				2017
	Three months ended September 30		Nine months ended September 30		Three months ended September 30			Nine months ended September 30
Gains on redemption of securities		8		24		150			697
Gains on disposal of securities		878		2,149		48,753			165,015
Impairment loss on securities		—		—		(4,630	)		(17,267	)

Total		886		2,173		44,273			148,445

38.

IMPAIRMENT REVERSAL (LOSS) DUE TO CREDIT LOSS

Impairment reversal (loss) due to credit loss are as follows (Unit: Korean Won in millions):


	2018						2017
	Three months ended September 30			Nine months ended September 30			Three months ended September 30			Nine months ended September 30
Impairment loss due to credit loss on financial assets measured at FVTOCI		(538	)		(1,061	)		—			—
Impairment loss due to credit loss on securities at amortized cost		(393	)		(584	)		—			—
Provision for credit loss on loans and other financial assets at amortized cost		(89,272	)		(150,265	)		—			—
Impairment loss due to credit loss		—			—			(216,865	)		(550,841	)
Reversal of provision on guarantee		23,639			110,629			2,223			47,191
Reversal of provision on (provision for) unused commitment		(17,291	)		(14,136	)		(2,617	)		2,628

Total		(83,855	)		(55,417	)		(217,259	)		(501,022	)

39.

GENERAL ADMINISTRATIVE EXPENSES AND OTHER NET OPERATING INCOME (EXPENSES)

(1)	Details of general and administrative expenses recognized are as follows (Unit: Korean Won in millions):


			2018				2017
			Three months ended September 30		Nine months ended September 30		Three months ended September 30		Nine months ended September 30
Salaries	Short term employee benefits	Salaries		357,538		1,002,201		334,986		989,177
	Short term employee benefits	Employee benefits		110,696		324,323		144,596		358,196
	Retirement benefit service costs			36,406		109,342		36,690		110,747
	Termination			204		21,198		298,780		304,257

	Sub-total			504,844		1,457,064		815,052		1,762,377

Depreciation and amortization				57,978		157,676		44,753		139,680
Other general and administrative expenses	Rent			79,558		238,684		77,971		234,679
	Taxes and public dues			25,259		92,644		23,637		86,815
	Service charges			55,564		160,534		50,240		146,658
	Computer and IT related			14,813		58,394		18,998		49,475
	Telephone and communication			17,634		51,363		16,501		48,091
	Operating promotion			9,466		29,234		9,981		31,034
	Advertising			15,185		35,678		12,426		42,306
	Printing			2,050		5,942		1,877		6,114
	Traveling			3,596		9,630		3,688		9,712
	Supplies			1,561		4,784		1,624		4,741
	Insurance premium			2,027		6,029		2,193		6,362
	Reimbursement			5,793		11,695		5,657		14,834
	Maintenance			4,516		12,543		5,860		12,742
	Water, light, and heating			3,981		11,184		3,835		10,981
	Vehicle maintenance			2,802		7,396		2,519		7,483
	Others			12,146		35,637		11,813		32,968

	Sub-total			255,951		771,371		248,820		744,995

	Total			818,773		2,386,111		1,108,625		2,647,052

(2)	Details of other operating income recognized are as follows (Unit: Korean Won in millions):


	2018					2017
	Three months ended September 30			Nine months ended September 30		Three months ended September 30			Nine months ended September 30
Gains on transaction of foreign exchange		297,436			1,144,833		623,165			2,322,152
Gains (losses) on disposal of loans and receivables (*1)		—			—		(907	)		200,953
Gains (losses) related to derivatives (Held for hedging)		(4,809	)		24,134		(3,961	)		7,695
Gains on fair value hedged items		16,976			83,531		13,195			25,055
Others (*2)		36,160			53,682		4,294			72,962

Total		345,763			1,306,180		635,786			2,628,817

(*1)

Gain (loss) on disposal of loan and receivables occurred during the nine month ended September 30, 2018 was presented as a separate account named ‘Net gain related to financial assets at amortized cost’ in accordance with the adoption of IFRS 9.

(*2)

Other income includes income amounting to 29,316 million Won and 28,800 million Won, for the nine months ended September 30, 2018 and 2017, respectively, that the Group recognized for it is to receive from other creditor financial institutions in accordance with the creditor financial institutions committee agreement.

(3)	Details of other operating expenses recognized are as follows (Unit: Korean Won in millions):


	2018				2017
	Three months ended September 30		Nine months ended September 30		Three months ended September 30			Nine months ended September 30
Losses on transactions of foreign exchange		161,553		887,901		579,896			1,954,660
KDIC deposit insurance premium		79,545		236,310		77,125			227,381
Contribution to miscellaneous funds		76,018		222,799		70,741			215,003
Losses (gains) on disposals of loans and receivables (*1)		—		—		7,574			7,602
Losses related to derivatives (Held for hedging)		15,924		78,290		8,637			39,768
Losses on fair value hedged items		—		—		(8,990	)		6,856
Others (*2)		46,219		133,790		27,544			103,098

Total		379,259		1,559,090		762,527			2,554,368

(*1)

Loss on disposal of loan and receivables occurred during the nine month ended September 30, 2018 was presented as a separate account named ‘Net gain related to financial assets at amortized cost’ in accordance with the adoption of IFRS 9.

(*2)

Other expense includes such expenses amounting to 1,412 million Won and 5,237 million Won for the nine months ended September 30, 2018 and 2017, respectively, which are related to the Group’s expected payments to other creditor financial institutions in accordance with the creditor financial institutions committee agreement. In addition, it includes 38,483 million Won and 36,419 million Won for the nine months ended September 30, 2018 and 2017, respectively, of intangible asset amortization expense.

40.

OTHER NON-OPERATING INCOME (EXPENSES)

(1)	Details of gains or losses on valuation of investments in joint ventures and associates are as follows (Unit: Korean Won in millions):


	2018						2017
	Three months ended September 30			Nine months ended September 30			Three months ended September 30			Nine months ended September 30
Gain on valuation of investments in joint ventures and associates		2,992			18,339			76,247			79,563
Loss on valuation of investments in joint ventures and associates		(3,463	)		(20,272	)		(6,577	)		(68,848	)
Impairment loss of investments in joint ventures and associates		—			—			—			(5,323	)

Total		(471	)		(1,933	)		69,670			5,392

(2)	Details of other non-operating income and expenses recognized are as follows (Unit: Korean Won in millions):


	2018						2017
	Three months ended September 30			Nine months ended September 30			Three months ended September 30			Nine months ended September 30
Other non-operating incomes		76,653			115,694			19,894			97,079
Other non-operating expenses		(16,208	)		(59,970	)		(35,614	)		(102,801	)

Total		60,445			55,724			(15,720	)		(5,722	)

(3)	Details of other non-operating income recognized are as follows (Unit: Korean Won in millions):


	2018				2017
	Three months ended September 30		Nine months ended September 30		Three months ended September 30		Nine months ended September 30
Rental fee income		1,810		5,013		2,025		5,725
Gains on disposal of investments in joint ventures and associates		49,767		49,767		308		33,194
Gains on disposal of premises and equipment, intangible assets and other assets		12,959		29,996		3,220		4,895
Reversal of impairment loss of premises and equipment, intangible assets and other assets		420		761		572		604
Others		11,697		30,157		13,769		52,661

Total		76,653		115,694		19,894		97,079

(4)	Details of other non-operating expenses recognized are as follows (Unit: Korean Won in millions):


	2018				2017
	Three months ended September 30		Nine months ended September 30		Three months ended September 30		Nine months ended September 30
Depreciation on investment properties		1,012		3,022		995		2,986
Interest expense of refundable deposits		160		452		111		334
Loss on disposal of investment in joint ventures and associates		—		2,931		10,971		38,701
Loss on disposal of premises and equipment, intangible assets and other assets		746		967		7,966		8,574
Impairment loss of premises and equipment, intangible assets and other assets		34		36		109		269
Donation		9,935		31,977		9,356		24,336
Others		4,321		20,585		6,106		27,601

Total		16,208		59,970		35,614		102,801

41.

INCOME TAX EXPENSE

(1)	Details of income tax expenses are as follows (Unit: Korean Won in millions):


	For the nine months ended September 30
	2018			2017
Current tax expense
Current tax expense with respect to the current period		390,571			419,793
Adjustments recognized in the current period in relation to the current tax of prior periods		5,439			(5,122	)

Sub-total		396,010			414,671

Deferred tax expense (income)
Changes in deferred tax assets (liabilities) relating to temporary differences		237,574			(25,745	)
Deferred tax expense charged directly to equity		(2,434	)		20,219
Others (tax effect charged directly to other equity due to the adoption of IFRS 9)		75,318			—

Sub-total		310,458			(5,526	)

Income tax expense		706,468			409,145

(2)	Income tax expense reconciled to net income before income tax expense is as follows (Unit: Korean Won in millions):


	For the nine months ended September 30
	2018			2017
Net income before income tax expense		2,627,320			1,801,586
Tax calculated at statutory tax rate (*)		714,742			435,522
Adjustments
Effect of income that is exempt from taxation		(29,014	)		(45,268	)
Effect of expense not deductible in determining taxable income		12,110			20,409
Adjustments recognized in the current period in relation to the current tax of prior periods		5,439			(5,122	)
Others		3,191			3,604

Sub-total		(8,274	)		(26,377	)

Income tax expense		706,468			409,145

Effective tax rate		26.9	%		22.7	%

(*)

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.

(3)	Details of accumulated deferred tax charged directly to other equity are as follows (Unit: Korean Won in millions):


	September 30, 2018			December 31, 2017
Net gain on valuation of financial assets at FVTOCI		21,692			—
Loss on valuation of AFS securities		—			(114,169	)
Share of other comprehensive loss of and associates		(558	)		(954	)
Gain on foreign currency translation of foreign operations		9,429			15,855
Remeasurements of the net defined benefit liability		72,450			56,317
Gain (loss) on derivatives designated as cash flow hedge		1,149			(248	)

Total		104,162			(43,199	)

42.

EARNINGS PER SHARE (“EPS”)

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):


	2018						2017
	Three months ended September 30			Nine months ended September 30			Three months ended September 30			Nine months ended September 30
Net income attributable to Owners		597,528			1,903,406			280,146			1,378,507
Dividends to hybrid securities		(37,187	)		(112,790	)		(39,098	)		(129,921	)
Net income attributable to common shareholders		560,341			1,790,616			241,048			1,248,586
Weighted-average number of common shares outstanding		673 shares in million			673 shares in million			673 shares in million			673 shares in million
Basic EPS (Unit: Korean Won)		833			2,661			358			1,855

Diluted EPS is equal to basic EPS because there is no dilution effect for the nine months ended September 30, 2018 and 2017.

43.

CONTINGENT LIABILITIES AND COMMITMENTS

(1)	Details of guarantees are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Confirmed guarantees
Guarantee for loans		140,876		157,299
Acceptances		290,959		320,519
Guarantees in acceptances of imported goods		133,132		108,238
Other confirmed guarantees		6,120,664		6,288,965

Sub-total		6,685,631		6,875,021

Unconfirmed guarantees
Local letter of credit		341,948		383,117
Letter of credit		3,427,080		3,637,787
Other unconfirmed guarantees		814,655		505,689

Sub-total		4,583,683		4,526,593

Commercial paper purchase commitments and others		1,206,156		1,458,101

Total		12,475,470		12,859,715

(2)	Details of loan commitments and others are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017
Loan commitments		97,085,991		80,760,325
Other commitments		5,283,594		4,546,090

(3)	Litigation case

Legal cases where the Group is involved are as follows (Unit: Korean Won in millions):

September 30, 2018

December 31, 2017

As plaintiff

As defendant

As plaintiff

As defendant

Number of cases (*)

79 cases

167 cases

83 cases

155 cases

Amount of litigation

454,100

260,202

413,267

244,767

Provisions for litigations

19,338

9,277

(*)

The number of lawsuits as of September 30, 2018 and December 31, 2017 does not include fraud lawsuits, etc. and those lawsuits that are filed only to extend the statute of limitation.

(4)

Other

The Group provides settlement services for payments in Korean Won to facilitate trade transactions between Korea and Iran. In connection with these services, the Group is currently being investigated by US government agencies including US prosecutors (United States Attorney’s Office and New York State Attorney General’s Office) as to whether the Group has violated United States laws by participating in prohibited transactions involving countries sanctioned by the US.

44.

RELATED PARTY TRANSACTIONS

Related parties of the Group as of September 30, 2018 and December 31, 2017, and assets and liabilities recognized, guarantees and commitments, and major transactions with related parties for the nine months ended September 30, 2018 and 2017 are as follows:

(1)	Related parties


		Related parties
Associates		Woori Service Networks Co., Ltd., Korea Credit Bureau Co., Ltd., Korea Finance Security Co., Ltd., Chin Hung International Inc., 2016KIF-IMM Woori Bank Technology Venture Fund, K BANK Co., Ltd., Well to Sea No. 3 Private Equity Fund, and Others (Dongwoo C & C Co., Ltd. and other 26 associates)

(2)	Assets and liabilities from transactions with related parties are as follows (Unit: Korean Won in millions):


Related party		A title of account	September 30, 2018			December 31, 2017
Associates	Kumho Tire Co., Inc. (*1)	Loans		—			170,917
		Loss allowance		—			(156,712	)
		Deposits due to customers		—			666
		Other liabilities		—			50

	Woori Service Networks Co., Ltd.	Loans		31			45
		Deposits due to customers		1,792			1,311
		Other liabilities		328			357

	Korea Credit Bureau Co., Ltd.	Loans		2			6
		Deposits due to customers		7,219			5,586
		Other liabilities		14			54

	Korea Finance Security Co., Ltd.	Loans		54			56
		Loss allowance		(4	)		—
		Deposits due to customers		3,291			2,854
		Other liabilities		17			7

Associates	Chin Hung International Inc.	Loans		336			408
		Loss allowance		(252	)		(22	)
		Deposits due to customers		12,141			46,220
		Other liabilities		2,900			1,658
	Poonglim Industrial Co., Ltd. (*2)	Deposits due to customers		—			4

	STX Engine Co., Ltd. (*3)	Loans		—			106,176
		Loss allowance		—			(88,734	)
		Deposits due to customers		—			18,092
		Other liabilities		—			29


Related party		A title of account	September 30, 2018			December 31, 2017
	STX Corporation (*3)	Loans		—			47,711
		Loss allowance		—			(31,210	)
		Deposits due to customers		—			77,555
		Other liabilities		—			80

	K BANK Co., Ltd.	Loans		181			212
		Deposits due to customers		3			—

	Well to Sea No.3 Private Equity Fund	Loans		70,632			73,810
		Loss allowance		(73	)		(39	)
		Deposits due to customers		1,788			61
		Other liabilities		72			27

	Others (*4)	Loans		260			499
		Loss allowance		(234	)		(471	)
		Other assets		—			1
		Deposits due to customers		5,868			2,906
		Other liabilities		159			73

(*1)

The Group lost significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution during the nine months ended September 30, 2018, and thus the entity was excluded from the list of associates.

(*2)

The Group does not have significant influence over the entity due to the fact that the entity went through workout process during the nine months ended September 30, 2018, and thus the entity was excluded from the list of associates.

(*3)

The shares of the entity were sold after it was transferred to assets held for sale during the nine months ended September 30, 2018 and thus was excluded from the list of associates.

(*4)

Others include Saman Corporation, Kyesan Engineering Co., Ltd., DAEA SNC Co., Ltd., etc., as of September 30, 2018 and December 31, 2017.

(3)	Gain or loss from transactions with related parties are as follows (Unit: Korean Won in millions):


			For the nine months ended September 30
Related party		A title of account	2018			2017
Corporation that has significant influence over the Group	KDIC (*1)	Interest expenses		—			15,331

Associates	Kumho Tire Co., Inc. (* 2)	Interest income		1,098			2,155
		Fees income		—			6
		Interest expenses		—			1
		Impairment losses due to credit loss (reversal of allowance for credit loss)		(156,712	)		42,218

	Woori Blackstone Korea Opportunity Private Equity Fund No.1 (*3)	Fees income		—			36

	Woori Service Networks Co., Ltd.
Associates		Other income		22			22
		Interest expenses		10			19
		Fees expenses		437			335
		Other expenses		379			307

	Korea Credit Bureau Co., Ltd.	Interest expenses		29			60
		Fees expenses		1,718			1,023

	Korea Finance Security Co., Ltd.	Interest expenses		8			8
		Impairment losses due to credit loss		4			—
		Other expenses		109			—


		For the nine months ended September 30
Related party	A title of account	2018			2017
Chin Hung International Inc.	Interest income		—			364
	Fees income		—			1
	Interest expenses		35			18
	Impairment losses due to credit loss (reversal of allowance for credit loss)		230			(4,275	)
STX Engine Co., Ltd. (*4)	Interest income		333			1,011
	Fees income		—			28
	Interest expenses		86			109
	Impairment losses due to credit loss (reversal of allowance for credit loss)		(88,734	)		7,651
Samho International Co., Ltd. (*5)	Interest income		—			486
	Fees income		—			5
	Interest expenses		—			334
	Reversal of allowance for credit loss		—			(717	)
STX Corporation (*4)	Interest income		—			219
STX Corporation (*4)	Fees income		—			60
	Interest expenses		2			2
	Reversal of allowance for credit loss		(31,210	)		(61,106	)
K BANK Co., Ltd.	Fees income		823			594
K BANK Co., Ltd.	Other income		11			1,051
Well to Sea No.3 Private Equity Fund (*6)	Interest incomes		1,736			—
	Interest expenses		8			—
	Impairment losses due to credit loss		34			85
Others (*7)	Other income		10			—
	Interest expenses		29			10
	Impairment losses due to credit loss (reversal of allowance for credit loss)		(237	)		67

(*1)

As its ownership interest in the Group is lower than 20% as of December 31, 2017, it has been excluded from the ‘corporation that have significant influence over the Group’ category.

(*2)

(*3)

The entity is excluded from the list of associates due to its liquidation for the year ended December 31, 2017.

(*4)

The shares of the entity were sold after it was transferred to assets held for sale during the nine months ended September 30, 2018 and thus was excluded from the list of associates.

(*5)

The shares of the entity were sold after it was transferred to assets held for sale during the year ended December 31, 2017 and thus was excluded from the list of associates.

(*6)

Due to capital contribution for the year ended December 31, 2017, the entity has been included in the list of associates.

(*7)

Others include the amount transacted with Saman Corporation, Kyesan Engineering Co., Ltd., DAEA SNC Co., Ltd., etc., for the nine months ended September 30, 2018 and 2017.

(4)	Major loan transactions with related parties for the nine months ended September 30, 2018 and September 30, 2017 are as follows (Unit: Korean Won in millions):


		For the nine months ended September 30, 2018
Related parties		Beginning balance		Loan		Collection		Others			Ending balance(*1)
Associates	Kumho Tire Co., Inc. (*2)		57,470		—		7,057		(50,413	)		—
	Well to Sea No. 3 Private Equity Fund (*3)		73,810		11,822		15,000		—			70,632
	STX Engine Co., Ltd. (*4)		39,886		—		2,177		(37,709	)		—


		For the nine months ended September 30, 2017
Related parties		Beginning balance		Loan		Collection		Others		Ending balance(*1)
Associates	Kumho Tire Co., Inc. (*2)		50,413		—		—		—		50,413
	Well to Sea No. 3 Private Equity Fund (*3)		—		80,000		—		—		80,000
	STX Engine Co., Ltd. (*4)		44,797		—		7,088		—		37,709

(*1)

Settlement payment from normal operation among the related parties were excluded, and in the case of a limited loan, it was presented as a net increase (decrease).

(*2)

(*3)

Due to capital contribution, the entity was included in the list of associates during the year ended December 31, 2017.

(*4)

The shares of the entity were sold after it was transferred to assets held for sale during the nine months ended September 30, 2018 and thus was excluded from the list of associates.

(5)	There are no major borrowing transactions with related parties for the nine months ended September 30, 2018 and 2017.

(6)	Guarantees provided to the related parties are as follows (Unit: Korean Won in millions):


	September 30, 2018		December 31, 2017		Warranty
Kumho Tire Co., Inc. (*1)		—		4,181	Import credit in foreign currencies and others
		—		636	Loan commitment
Korea Finance Security Co., Ltd.		206		204	Loan commitment
Korea Credit Bureau Co., Ltd.		33		29	Loan commitment
Woori Service Networks Co., Ltd.		169		155	Loan commitment
Chin Hung International Inc.		32,202		31,891	Loan commitment
STX Engine Co., Ltd. (*2)		—		68,858	Import credit in foreign currencies and others
STX corporation (*2)		—		17,557	Import credit in foreign currencies and others
		—		53	Loan commitment
K BANK Co., Ltd.		21		—	Loan commitment
Well to Sea No. 3 Private Equity Fund		239,368		236,190	Loan commitment

(*1)

(*2)

The shares of the entity were sold after it was transferred to assets held for sale during the nine months ended September 30, 2018 and thus was excluded from the list of associates.

For the guarantee provided to the related parties, the amount the Group recognized as provisions for guarantees is nil and 71,459 million Won, as of September 30, 2018 and December 31, 2017, respectively.

(7)	Compensation for key management is as follows (Unit: Korean Won in millions):


	For the nine months ended September 30
	2018		2017
Short term benefits		9,054		9,340
Severance payments		371		372

Total		9,425		9,712

Key management includes registered executives and non-registered executives. Outstanding assets and liabilities from transactions with key management amount to 2,128 million Won and 7,230 million Won, respectively, as of September 30, 2018, and with respect to the assets, the Group has not recognized any allowance nor related impairment loss due to credit losses.

45.

BUSINESS COMBINATION

The business combination occurred during the current period is as follows:

(1)	Acquisition of WB Finance Co., Ltd.

In order to expand Cambodia’s retail business, the Group had acquired 100% ownership of Vision Fund Cambodia on June, 2018 and the Group changed its name to WB Finance Co., Ltd.

(2)	Details of the accounting for the business combination are as follows (Unit: Korean Won in millions):


	Amount
Consideration transferred:
Cash and cash equivalents		87,562
Identifiable assets and liabilities recognized:
Cash and cash equivalents		16,657
Financial assets at FVTOCI		17
Loans and other financial assets at amortized cost		205,451
Premises and equipment		1,630
Intangible assets		763
Current tax assets		173
Deferred tax assets		1,381
Other assets		1,510

Asset total		227,582


	Amount
Deposits due to customers		54,615
Borrowings		120,644
Other financial liabilities		6,149
Current tax liabilities		640
Other liabilities		4,724

Liabilities total		186,772

Identifiable net fair value		40,810
Goodwill (*)		46,752

(*)

Identifying the intangible assets and measuring the fair value of identifiable assets acquired are incomplete as the acquisition date was June 21, 2018. The amount of Goodwill could change due to the result of the measurement of the identifiable assets and liabilities.

46.

ESTABLISHMENT OF A FINANCIAL HODING COMPANY AND PLAN OF STOCK TRANSFER

The Group’s board of directors held a meeting on June 19, 2018, approving the shares transfer plan which was formulated to facilitate the establishment of a financial holding company by means of comprehensive share transfer. In relation to the establishment of the financial holding company, the Group has acquired approval from the Financial Services Committee on November 7, 2018.

The six companies that are subject to the share transfer plan include the Bank, Woori FIS Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Service Co., Ltd., and Woori Private Equity Asset Management Co., Ltd. The Group is planning to establish the financial holding company during January of 2019 after approval from the annual shareholders’ meeting, etc., and the six companies mentioned above will become fully owned subsidiaries of the said financial holding company.

After the financial holding company is established, the shares of the Bank will be delisted from the Korea Stock Exchange and New York Stock Exchange during the first half of the 2019, and the shares of the newly established financial holding company will be listed on both Korea Stock Exchange and New York Stock Exchange.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


				Woori Bank
				(Registrant)

Date: November 16, 2018				By: /s/ Won Duk Lee
				(Signature)

				Name: Won Duk Lee
				Title: Managing Director