6-K

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 March 2020

Commission File Number: 001-31811

Woori Financial Group Inc.

(Translation of registrant’s name into English)

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

(Address of principal executive office)

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.

Submission of Audit Reports of Woori Bank

On March 16, 2020, Woori Financial Group Inc. disclosed audit reports of Woori Bank, its wholly-owned subsidiary, for the fiscal year 2019 based on the International Financial Reporting Standards as adopted by the Republic of Korea.

The financial statements accompanying such reports have not been approved by the shareholders of Woori Bank and remain subject to change.

Please refer to the audit reports and Woori Bank’s consolidated and separate financial statements, which have been furnished as Exhibits 99.1 and 99.2 hereto, respectively.

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 Financial Group Inc. (Registrant)
Date: March 17, 2020	By: /s/ Kyong-Hoon Park
	(Signature)
	Name:	Kyong-Hoon Park
	Title:	Deputy President

EX-99.1

Exhibit 99.1

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED

DECEMBER 31, 2019 AND 2018

ATTACHMENT: INDEPENDENT AUDITORS’ REPORT

WOORI BANK

INDEPENDENT AUDITORS’ REPORT

English Translation of a Report Originally Issued in Korean on March 16, 2020

To the Shareholder and the Board of Directors of Woori Bank

Report on the Audited Consolidated Financial Statements

Audit Opinion

We have audited the accompanying consolidated financial statements of Woori Bank and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position as of December 31, 2019 and December 31, 2018, respectively, and the consolidated statement of comprehensive income, consolidated statement of changes in shareholder’s equity and consolidated statement of cash flows, for the years then ended, and a summary of significant accounting policies and other explanatory information.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2019 and December 31, 2018, respectively, and its financial performance and its cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

Basis for Audit Opinion

We conducted our audits in accordance with the Korean Standards on Auditing (“KSAs”). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements, including those related to independence, that are relevant to our audit of the consolidated financial statements in the Republic of Korea as required by prevailing audit regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and the Audit Committee for the Financial Statements

Management is responsible for the preparation of the accompanying consolidated financial statements in accordance with K-IFRS, and for such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management of the Group is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

The audit committee is responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We are solely responsible for our audit opinion.

We communicate with the audit committee of the Group regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

March 16, 2020

Notice to Readers

This report is effective as of March 16, 2020 the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the consolidated financial statements and may result in modifications to the auditors’ report.

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED

DECEMBER 31, 2019 AND 2018

The accompanying consolidated financial statements including all footnote disclosures were prepared by, and are the responsibility of, the management of Woori Bank.

Tae Seung Sohn

President and Chief Executive Officer

Main Office Address: (Address) 51, Sogong-ro, Jung-gu, Seoul

(Phone Number) 02-2002-3000

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS OF DECEMBER 31, 2019 AND 2018

	December 31, 2019		December 31, 2018
	(Korean Won in millions)
ASSETS
Cash and cash equivalents (Note 6)		6,162,029		6,712,623
Financial assets at fair value through profit or loss (“FVTPL”) (Notes 4, 7, 11, 12 and 26)		6,672,557		6,126,183
Financial assets at financial assets at fair value through other comprehensive income (“FVTOCI”) (Notes 4, 8, 11, 12, and 18)		27,628,707		18,063,423
Securities at amortized cost (Notes 4, 9, 11, 12 and 18)		20,320,539		22,932,559
Loans and other financial assets at amortized cost (Notes 4, 10, 11, 12, 18 and 45)		282,201,102		282,448,315
Investments in joint ventures and associates (Note 13)		786,730		361,427
Investment properties (Note 14)		617,589		378,069
Premises and equipment (Notes 15 and 18)		2,939,276		2,441,141
Intangible assets and goodwill (Note 16)		552,030		587,255
Assets held for distribution (sale) (Note 17)		95		93,502
Current tax assets (Note 42)		46,253		20,488
Deferred tax assets (Note 42)		—		49,863
Derivative assets (designated for hedging) (Notes 4,11,12 and 26)		111,764		35,503
Other assets (Notes 19 and 45)		142,987		196,832
Total assets		348,181,658		340,447,183
LIABILITIES
Financial liabilities at FVTPL (Notes 4, 11, 12, 20 and 26)		2,956,294		2,282,686
Deposits due to customers (Notes 4,11,21 and 45)		263,643,964		248,690,939
Borrowings (Notes 4, 11, 12 and 22)		18,575,566		16,202,986
Debentures (Notes 4, 11 and 22)		22,834,408		28,725,862
Provisions (Notes 23, 44 and 45)		379,197		389,862
Net defined benefit liability (Note 24)		48,278		138,682
Liabilities related to assets held for sale (Note 17)		—		72,660
Current tax liabilities (Note 42)		135,490		156,559
Deferred tax liabilities (Note 42)		179,529		18,156
Derivative liabilities (Designated for hedging) (Notes 4,11,12 and 26)		43		51,408
Other financial liabilities (Notes 4,11,12, 25 and 45)		16,595,398		21,426,064
Other liabilities (Notes 25 and 45)		178,401		338,275
Total liabilities		325,526,568		318,494,139

(Continued)

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS OF DECEMBER 31, 2019 AND 2018 (CONTINUED)

	December 31, 2019			December 31, 2018
	(Korean Won in millions)
EQUITY
Owners’ equity:		22,555,074			21,739,931
Capital stock (Note 28)		3,381,392			3,381,392
Hybrid securities (Note 29)		3,660,814			3,161,963
Capital surplus (Note 28)		287,480			285,889
Other equity (Note 30)		(2,120,597	)		(2,213,970	)
Retained earnings (Notes 31 and 32)
(Regulatory reserve for credit loss as of December 31, 2019 and 2018 is 2,356,246 million Won and 2,578,457 million Won, respectively
Regulatory reserve for credit loss to be reversed (reserved) as of December 31, 2019 and 2018 is 209,898 million Won and 222,211 million Won, respectively
Planned provision reversed (reserved) of regulatory reserve for credit loss as of December 31, 2019 and 2018 is 209,898 million Won and 222,211 million Won, respectively		17,345,985			17,124,657
Non-controlling interests		100,016			213,113
Total equity		22,655,090			21,953,044
Total liabilities and equity		348,181,658			340,447,183

See accompanying notes

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean Won in millions, except for per share data)
Interest income		9,812,538			9,014,660
Financial assets at FVTPL		43,318			52,434
Financial assets at FVTOCI		474,132			280,371
Financial assets at amortized cost		9,295,088			8,681,855
Interest expense		(4,495,842	)		(3,873,594	)
Net interest income (Notes 34 and 45)		5,316,696			5,141,066
Fees and commissions income		1,144,386			1,079,397
Fees and commissions expense		(172,131	)		(168,073	)
Net fees and commissions income (Notes 35 and 45)		972,255			911,324
Dividend income (Notes 36 and 45)		101,091			80,398
Net gain on financial instruments at FVTPL (Notes 11, 37 and 45)		19,255			214,443
Net gain on financial assets at FVTOCI (Notes 11 and 38)		10,901			1,105
Net gain on disposals of financial assets at amortized cost		84,348			44,187
Net gain on disposals of securities at amortized cost		—			431
Net gain on disposals of loans and other financial assets at amortized cost		84,348			43,756
Impairment losses due to credit loss (Notes 39 and 45)		(118,249	)		(84,813	)
General and administrative expenses (Notes 40 and 45)		(3,494,140	)		(3,483,912	)
Other net operating expenses (Notes 40 and 45)		(300,540	)		(401,705	)
Operating income		2,591,617			2,422,093
Share of profits of joint ventures and associates (Note 13)		84,242			3,019
Net other non-operating income (expense)		(32,099	)		44,998
Non-operating income from continuing operations (Note 41)		52,143			48,017
Net income before income tax expense from continuing operations		2,643,760			2,470,110
Income tax expense from continuing operations (Note 42)		645,248			717,001

(Continued)

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR YEARS ENDED DECEMBER 31, 2019 AND 2018 (CONTINUED)

	2019			2018
	(Korean Won in millions, except for per share data)
Net income from continuing operations		1,998,512			1,753,109
Net income from discontinued operations (Note 17)		(471,447	)		298,540
Net income
(Net income after the provision of regulatory reserve for credit loss for the years ended December 31, 2019 and 2018, is 1,736,963 million won and 2,010,774 million won, respectively) (Note 32)		1,527,065			2,051,649
Net loss on valuation of equity securities at FVTOCI		(74,146	)		(30,855	)
Net gain on valuation of financial liabilities designated as at FVTPL due to own credit risk		—			100
Items out of share of other comprehensive gain of joint ventures and associates that will not be reclassified to profit or loss		—			(71,432	)
Remeasurement gain (loss) related to defined benefit plan		(35,049	)		(13,197	)
Items that will not be reclassified to profit or loss		(109,195	)		(115,384	)
Net gain on valuation of debt securities at FVTOCI		44,769			33,360
Changes in equity method capital		373			2,958
Net loss on foreign currency translation of foreign operations		102,085			(4,379	)
Net loss on valuation of cash flow hedge		(1,740	)		(4,646	)
Net gain (loss) on valuation of assets held for sale		—			(4,145	)
Items that may be reclassified to profit or loss		145,487			23,148
Other comprehensive income (loss), net of tax		36,292			(92,236	)
Total comprehensive income		1,563,357			1,959,413
Net income from continuing operations		1,976,994			1,734,642
Net income from discontinued operations		(471,447	)		298,540
Net income attributable to:
Controlling shareholders		1,505,547			2,033,182
Net income from continuing operations		21,518			18,467
Net income from discontinued operations		—			—
Net income attributable to:
Non-controlling interests		21,518			18,467
Total comprehensive income attributable to:
Interests of controlling shareholders		1,531,793			1,943,885
Non-controlling interests		31,564			15,528
Net income per share (Note 43)
Basic and diluted earnings per share from continuing operations and discontinued operations (In Korea Won)		2,028			2,796
Basic and diluted earnings per share from continuing operations (In Korea Won)		2,725			2,353

See accompanying notes

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR YEARS ENDED DECEMBER 31, 2019 AND 2018

	Capital Stock		Hybrid securities			Capital surplus		Other equity			Retained earnings and other reserves			Owners’ equity			Non- controlling interests			Total equity
	(Korean Won in millions)
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			(214,362	)
Adjusted balance, beginning of the year		3,381,392		3,017,888			285,880		(2,331,450	)		15,797,097			20,150,807			199,731			20,350,538
Net income		—		—			—		—			2,033,182			2,033,182			18,467			2,051,649
Dividends to common stocks		—		—			—		—			(336,636	)		(336,636	)		(2,128	)		(338,764	)
Capital changes of subsidiaries		—		—			9		—			—			9			(18	)		(9	)
Net gain on valuation of financial liabilities designated as at FVTPL due to own credit risk		—		—			—		100			—			100			—			100
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		—		—			—		2,733			—			2,733			(228	)		2,505
Changes in other comprehensive income due to disposal of equity securities at FVTOCI		—		—			—		(1,009	)		1,009			—			—			—
Share of other comprehensive gain of joint ventures and associates		—		—			—		2,958			(10,647	)		(7,689	)		—			(7,689	)
Loss on foreign currency translation of foreign operations		—		—			—		(1,929	)		—			(1,929	)		(2,450	)		(4,379	)
Loss on valuation of cash flow hedge		—		—			—		(4,646	)		—			(4,646	)		—			(4,646	)
Remeasurement loss related to defined benefit plan		—		—			—		(71,171	)		—			(71,171	)		(261	)		(71,432	)
Other comprehensive income related to assets held for distribution (sale)		—		—			—		(17,342	)		—			(17,342	)		—			(17,342	)
Dividends to hybrid securities		—		—			—		—			(151,194	)		(151,194	)		—			(151,194	)
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	)		—			—			—
December 31, 2018		3,381,392		3,161,963			285,889		(2,213,970	)		17,124,657			21,739,931			213,113			21,953,044
January 1, 2019		3,381,392		3,161,963			285,889		(2,213,970	)		17,124,657			21,739,931			213,113			21,953,044
Net income		—		—			—		—			1,505,547			1,505,547			21,518			1,527,065
Dividends to common stocks		—		—			—		—			(437,625	)		(437,625	)		(2,013	)		(439,638	)
Interim Dividends		—		—			—		—			(676,000	)		(676,000	)		—			(676,000	)
Net increase (decrease) of treasury stocks		—		—			—		27,016			—			27,016			—			27,016
Net gain (loss) on valuation of financial assets at FVTOCI		—		—			—		(29,553	)		—			(29,553	)		176			(29,377	)
Changes in other comprehensive income due to disposal of equity securities at FVTOCI		—		—			—		46,612			(46,612	)		—			—			—
Share of other comprehensive gain of joint ventures and associates		—		—			1,153		373			—			1,526			—			1,526
Loss on foreign currency translation of foreign operations		—		—			—		92,052			—			92,052			10,033			102,085
Loss on valuation of cash flow hedge		—		—			—		(1,740	)		—			(1,740	)		—			(1,740	)
Remeasurement loss related to defined benefit plan		—		—			—		(34,886	)		—			(34,886	)		(163	)		(35,049	)
Other comprehensive income related to assets held for distribution (sale)		—		—			—		13,197			(13,197	)		—			—			—
Net capital impact due to disposal of investments in subsidiaries		—		—			—		(19,790	)		24,004			4,214			(142,599	)		(138,385	)
Appropriation of retained earnings		—		—			—		368			(368	)		—			—			—
Dividends to hybrid securities		—		—			—		—			(134,421	)		(134,421	)		—			(134,421	)
Issuance of hybrid securities		—		658,470			—		—			—			658,470			—			658,470
Redemption of hybrid securities		—		(159,619	)		—		(276	)		—			(159,895	)		—			(159,895	)
Capital changes of subsidiaries		—		—			438		—			—			438			(49	)		389
December 31, 2019		3,381,392		3,660,814			287,480		(2,120,597	)		17,345,985			22,555,074			100,016			22,655,090

See accompanying notes

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean Won in millions)
Cash flows from operating activities:
Net income		1,527,065			2,051,649
Adjustments to net income:
Income tax expense		672,412			753,223
Interest income		(10,293,261	)		(9,684,499	)
Interest expense		4,612,005			4,033,548
Dividend income		(106,927	)		(90,552	)
		(5,115,771	)		(4,988,280	)
Additions of expenses not involving cash outflows:
Impairment losses due to credit loss		290,801			329,574
Loss on financial assets at FVTOCI		895			1,053
Share of losses of investments in joint ventures and associates		19,474			22,772
Loss on disposal of investments in joint ventures and associates		—			2,931
Loss on transaction and valuation of derivatives (Designated for hedging)		—			36,483
Loss on hedged items (fair value hedge)		86,214			17,299
Provisions for other liabilities		123,248			28,350
Retirement benefits		150,075			142,712
Depreciation and amortization of premises and equipment, intangible assets and investment properties		483,865			272,550
Loss on disposal of premises and equipment, intangible assets and other assets		2,137			1,160
Loss on disposal of assets held for sale		53,483			—
Impairment loss on premises and equipment, intangible assets and other assets		26,915			87
Loss on disposal of assets from discontinued operations		644,361			—
		1,881,468			854,971
Deductions of income not involving cash inflows:
Gain on valuation of financial assets at FVTPL		284,364			215,711
Gain on redemption of debentures		—			1,597
Gain on financial assets at FVTOCI		11,796			3,100
Gain on disposal of securities at amortized cost		—			431
Share of gains of investments in joint ventures and associates		103,716			25,791
Gain on disposal of investments in joint ventures and associates		—			50,511
Gain on transaction and valuation of derivatives (Designated for hedging)		146,913			35,810
Gain on hedged items (fair value hedge)		231			42,797
Reversal of provisions for other liabilities		4,149			2,014
Gain on disposal of premises and equipment, intangible assets and other assets		1,226			30,278
Gain on disposal of assets from discontinued operations		189,154			—
Reversal of impairment loss on premises and equipment, intangible assets and other assets		85			761
		741,634			408,801
Changes in assets and liabilities from operating activities:
Financial assets at FVTPL (K-IFRS 1109)		252,810			670,872
Loans and other financial assets at amortized cost		(11,426,494	)		(15,754,102	)
Other assets		117,911			32,328
Deposits due to customers		16,692,132			13,995,747
Provisions		(57,832	)		(11,920	)
Net defined benefit liability		(258,144	)		(135,313	)
Other financial liabilities		(4,840,788	)		7,411,753
Other liabilities		64,634			89,399
		544,229			6,298,764
Cash received from operating activities:
Interest income received		10,110,448			9,617,307
Interest expense paid		(4,378,059	)		(3,847,411	)
Dividends received		106,923			90,651
Income tax paid		(529,179	)		(544,058	)
Net cash provided by (used in) operating activities		3,405,490			9,124,792

(Continued)

WOORI BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (CONTINUED)

	2019			2018
	(Korean Won in millions)
Cash flows from investing activities:
Cash in-flows from investing activities:
Disposal of financial assets at FVTPL		11,355,894			11,919,335
Disposal of financial assets at FVTOCI		14,968,160			9,146,307
Redemption of securities at amortized cost		8,709,947			9,426,757
Disposal of investments in joint ventures and associates		29,327			51,435
Disposal of investment properties		193			3,512
Disposal of premises and equipment		7,668			5,545
Disposal of intangible assets		998			9,199
Disposal of assets held for distribution (sale)		996,885			80,347
		36,069,072			30,642,437
Cash out-flows from investing activities:
Net cash in-flows of business combination		—			134,967
Acquisition of financial assets at FVTPL		11,823,630			12,322,160
Acquisition of financial assets at FVTOCI		23,927,605			13,275,429
Acquisition of securities at amortized cost		6,092,078			15,622,847
Acquisition of investments in joint ventures and associates		369,640			48,272
Acquisition of investment properties		246,319			15,195
Acquisition of premises and equipment		231,451			118,668
Acquisition of intangible assets		106,732			176,067
Decrease in liabilities held for sale		37,708			—
		42,835,163			41,713,605
Net cash used in investing activities		(6,766,091	)		(11,071,168	)
Cash flows from financing activities:
Cash in-flows from financing activities:
Increase in borrowings		14,156,668			9,606,126
Issuance of debentures		16,448,892			21,505,849
Issuance of hybrid securities		658,470			398,707
		31,264,030			31,510,682
Cash out-flows from financing activities:
Decrease in borrowings		11,313,260			8,349,005
Redemption of debentures		15,686,470			20,903,518
Redemption of lease liabilities		213,329			—
Redemption of hybrid securities		160,000			255,000
Dividends paid on common stocks		1,113,626			336,636
Dividends paid on non-controlling interests		2,013			2,128
Capital reduction of Dividends paid on non-controlling interests with refund		50			—
Dividends paid on hybrid securities		156,691			147,625
		28,645,439			29,993,912
Net cash provided by financing activities		2,618,591			1,516,770
Net decrease in cash and cash equivalents		(742,010	)		(429,606	)
Cash and cash equivalents, beginning of the year		6,712,623			6,908,286
Effects of exchange rate changes on cash and cash equivalents		191,416			233,943
Cash and cash equivalents, end of the year (Note 6)		6,162,029			6,712,623

(*) Profits and losses from discontinued operations have been reflected.

See accompanying notes

WOORI BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

1. GENERAL

(1) Summary of the parent company

Woori Bank (hereinafter referred to the “Bank”), which is a controlling entity in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1110 – Consolidated Financial Statements, was established in 1899 and is engaged in the commercial banking business under the Banking Act, trust business and foreign exchange business under the Financial Investment Services and Capital Market Act.

As of December 31, 2019, the Bank’s shares are wholly owned by Woori Financial Group Inc. (“Woori Financial Group”) which was established in accordance with the Financial Holding Companies Act on January 11, 2019. The Bank has 676 million shares and common stocks amounting to 3,381,392 million Korean Won.

The headquarters of the Bank is located at 51, Sogong-ro, Jung-gu, Seoul, Korea. The Bank has 874 branches and offices in Korea, and 23 branches and offices overseas as of December 31, 2019.

(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 (2019)
Subsidiaries	Main business	December 31, 2019		December 31, 2018
Woori Bank:
Woori FIS Co., Ltd.(*1)	System software development & maintenance		—		100.0		Korea		—
Woori Private Equity Asset Management Co., Ltd. (*1)	Finance		—		100.0		Korea		—
Woori Finance Research Institute Co., Ltd. (*1)	Other service business		—		100.0		Korea		—
Woori Card Co., Ltd. (*1)	Finance		—		100.0		Korea		—
Woori Investment Bank Co., Ltd.(*1)	Other credit finance business		—		59.8		Korea		—
Woori Credit Information Co., Ltd. (*1)	Credit information		—		100.0		Korea		—
Woori America Bank	Finance		100.0		100.0		U.S.A.		December 31
Woori Global Markets Asia Limited	Finance		100.0		100.0		Hong Kong		December 31
Woori Bank China Limited	Finance		100.0		100.0		China		December 31
AO Woori Bank	Finance		100.0		100.0		Russia		December 31
PT Bank Woori Saudara Indonesia 1906 Tbk	Finance		79.9		79.9		Indonesia		December 31
Banco Woori Bank do Brasil S.A.	Finance		100.0		100.0		Brazil		December 31
Korea BTL Infrastructure Fund	Finance		99.9		99.9		Korea		December 31
Woori Fund Service Co., Ltd. (*1)	Finance		—		100.0		Korea		—
Woori Finance Cambodia PLC.	Finance		100.0		100.0		Cambodia		December 31
Woori Finance Myanmar Co., Ltd.	Finance		100.0		100.0		Myanmar		December 31
Wealth Development Bank	Finance		51.0		51.0		Philippines		December 31
Woori Bank Vietnam Limited	Finance		100.0		100.0		Vietnam		December 31
WB Finance Co., Ltd	Finance		100.0		100.0		Cambodia		December 31
Woori Bank Europe	Finance		100.0		100.0		Germany		December 31
Kumho Trust First Co., Ltd. (*2)	Asset securitization		0.0		0.0		Korea		December 31
Asiana Saigon Inc. (*2)	Asset securitization		0.0		0.0		Korea		December 31

Subsidiaries	Main business		Percentage of ownership (%)				Location	Financial statements as of (2019)
			December 31, 2019		December 31, 2018
KAMCO Value Recreation First Securitization Specialty Co., Ltd.(*2)		Asset securitization		15.0		15.0	Korea		December 31
Hermes STX Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
BWL First Co., LLC. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Deogi Dream Fourth Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Jeonju Iwon Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Wonju I one Inc. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Heitz Third Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woorihansoop 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Electric Cable First Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori International First Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori WEBST 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Wibihansoop 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Uri QS 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Uri Display 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Tiger Eyes 2nd Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori Serveone 1st Co., Ltd.(*2)		Asset securitization		0.0		0.0	Korea		December 31
Uri Display 2nd Co.,Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori the Colony Unjung Securitization Specialty Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori Dream 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori Dream 2nd Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori H 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori HS 1st Co., Ltd. (*5)		Asset securitization		—		0.0	Korea		December 31
Woori HS 2nd Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori Sinnonhyeon 1st Inc. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori K 1st Co.,Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Uri S 1st Co.,Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Smart Casting Inc. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori Display 3rd Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
TY 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori HJ 2nd Co., Ltd. (*2) Woori HJ 3rd Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori KJ 2nd Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori KC 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori Lake 1st Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Woori QSell 2nd Co., Ltd. (*2)		Asset securitization		0.0		0.0	Korea		December 31
Quantum Jump the 1st Co., Ltd. (*2)		Asset securitization		0.0		—	Korea		December 31
Quantum Jump the 2nd Co., Ltd. (*2)		Asset securitization		0.0		—	Korea		December 31
Woori BK the 1st Co., Ltd. (*2)		Asset securitization		0.0		—	Korea		December 31
Woori-HC 1st Co., Ltd. (*2)		Asset securitization		0.0		—	Korea		December 31
Wivi Synergy 1st Co., Ltd. (*2)		Asset securitization		0.0		—	Korea		December 31
ATLANTIC TRANSPORTATION 1 S.A. (*2)		Asset securitization		0.0		—	Marshall islands		December 31
Woori Gongdeok First Co., Ltd. (*2)		Asset securitization		0.0		—	Korea		December 31
HD Project Co., Ltd.(*2)		Asset securitization		0.0		—	Korea		December 31
Woori HW 1st Co., Ltd (*2).		Asset securitization		0.0		—	Korea		December 31
Woori HC 2nd Co., Ltd. (*2).		Asset securitization		0.0		—	Korea		December 31
Woori Dream 3rd Co., Ltd. (*2).		Asset securitization		0.0		—	Korea		December 31
Woori SJS 1st Co., Ltd. (*2).		Asset securitization		0.0		—	Korea		December 31

- 3 -

		Percentage of ownership (%)				Location	Financial statements as of (2019)
Subsidiaries	Main business	December 31, 2019		December 31, 2018
G5 Pro Short-term Bond Investment Fund 13 (*3)	Securities investment and others		100.0		100.0	Korea		December 31
Heungkuk Global Private Placement Investment Trust No. 1 (*3)	Securities investment and others		98.5		98.5	Korea		December 31
HeungkukWoori Tech Company Private Placement Investment Trust No. 1 (*3)	Securities investment and others		98.0		98.0	Korea		December 31
AI Partners Water Supply Private Placement Investment Trust No. 2 (*3)	Securities investment and others		97.3		97.3	England		December 31
Consus Sakhalin Real Estate Investment Trust 1st (*3)	Securities investment and others		75.0		75.0	Korea		December 31
Multi Asset Global Real Estate Investment Trust No. 5-2 (*3)	Securities investment and others		99.0		—	Korea		December 31
IGIS Australia Investment Trust No. 209-1 (*3)	Securities investment and others		99.4		—	Korea		December 31
Woori Global Development Infrastructure Synergy Company Private Placement Investment Trust No.1 (*3)	Securities investment and others		99.9		—	Korea		December 31
IGIS Global Private Placement Real Estate Fund No. 316-1 (*3)	Securities investment and others		99.3		—
Principle Guaranteed Trust (*4)	Trust		0.0		0.0	Korea		December 31
Principle and Interest Guaranteed Trust (*4)	Trust		0.0		0.0	Korea		December 31
Multi Asset Global Real Estate Investment Trust No. 5-2
MAGI No.5 LuxCo S.a.r.l. (*2)	Asset securitization		54.6		—	Luxembourg		December 31
MAGI No.5 LuxCo S.a.r.l
ADP 16 Brussels (*2)	Asset securitization		0.0		—	Belgium		December 31
Woori Investment Bank (*1):
Dongwoo First Securitization Specialty Co., Ltd.	Asset securitization		—		5.0	Korea		—
Seari First Securitization Specialty Co., Ltd.	Asset securitization		—		5.0	Korea		—
Seari Second Securitization Specialty Co., Ltd.	Asset securitization		—		5.0	Korea		—
Namjong 1st Securitization Specialty Co., Ltd.	Asset securitization		—		5.0	Korea		—
Bukgeum First Securitization Specialty Co., Ltd.	Asset securitization		—		5.0	Korea		—
Bukgeum Second Securitization Specialty Co., Ltd.	Asset securitization		—		5.0	Korea		—
Woori Card Co., Ltd. (*1)
TUTU Finance-WCI Myanmar Co., Ltd.	Finance		—		100.0	Myanmar		—
Woori Card one of 2017-1 Securitization Specialty Co., Ltd.	Asset securitization		—		0.5	Korea		—
Woori Card one of 2017-2 Securitization Specialty Co., Ltd.	Asset securitization		—		0.5	Korea		—
Woori Card one of 2018-1 Securitization Specialty Co., Ltd.	Asset securitization		—		0.5	Korea		—

(*1) The entity was transferred as a wholly-owned subsidiary of Woori Financial Group, which was established during the period.

(*2) As an asset-backed structured entity, it is determined that the ownership interest rate is controlled by the Group taking into account its power over the activities of the investee, exposure to variable returns, and the ability to use its power to influence the variable returns of the Group, even though its holding interest are less than a majority.

(*3) As a structured entity that aims to invest in securities, it is determined that the ownership interest rate is controlled by the Group taking into account its power over the activities of the investee, exposure to variable returns, and the ability to use its power to influence the variable returns of the Group.

(*4) As money trusts under the Capital Market Act, it is determined that the ownership interest rate is controlled by the Group taking into account its power over the activities of the investee, exposure to variable returns, and the ability to use its power to influence the variable returns of the Group, even though its holding interest are less than a majority.

(*5) They are excluded from consolidated subsidiary as the Group lost power over them during the reporting period.

- 4 -

The Group has not consolidated the following entities as of December 31, 2019 and 2018 despite having more than 50% ownership interest:

	As of December 31, 2019
Subsidiaries	Location		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
IGIS Europe 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		69.0
IGIS Global Private Placement Real Estate Fund No. 148-2 (*)		Korea		Securities Investment		69.0
Mirae Asset Seoul Ring Expressway Private Special Asset Fund No. 1 (*)		Korea		Securities Investment		66.7
Hangkang Sewage Treatment Plant Fund (*)		Korea		Securities Investment		55.6
Korea Investment Pocheon Hwado Expressway Professional Investment Fund(*)		Korea		Securities investment		55.2
Woori Innovative Growth Professional Investment Type Private Investment Trust No.1 (*)		Korea		Securities investment		55.0

(*) Since the investee is a private equity investment fund, the Group does not have the power over the fund’s activities even though it holds more than 50% of ownership interest.

	As of December 31, 2018
Subsidiaries	Location		Main Business		Percentage of ownership (%)
Golden Bridge NHN Online Private Equity Investment (*)		Korea		Securities Investment		60.0
Mirae Asset Seobu Underground Expressway Professional Investment (*)		Korea		Securities Investment		65.8
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		89.6
IGIS Europe 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 Global Private Placement Real Estate Fund No. 148-2 (*)		Korea		Securities Investment		75.0
KB Nongso Sewage Treatment Equipment Private Special Asset (*)		Korea		Securities Investment		50.0
Mirae Asset Seoul Ring Expressway Private Special Asset Fund No. 1 (*)		Korea		Securities Investment		66.2
Hangkang Sewage Treatment Plant Fund (*)		Korea		Securities Investment		55.6
Consus KyungJu Green Private Placement Real Estate Fund No. 1 (*)		Korea		Securities Investment		52.4

(*) Since the investee is a private equity investment fund, the Group does not have the power over the fund’s activities even though it holds more than 50% of ownership interest.

- 5 -

(3) The summarized financial information of the major subsidiaries are as follows. The financial information of each subsidiary was prepared based on consolidated financial statements. (Unit: Korean Won in millions):

	As of and for the year ended December 31, 2019
	Assets		Liabilities		Operating revenue		Net income (loss) attributable to owners			Comprehensive income (loss) attributable to owners
Woori America Bank		2,399,614		2,063,454		109,385		19,822			31,823
Woori Global Markets Asia Limited		623,296		489,462		30,756		7,242			12,422
Woori Bank China Limited		5,926,157		5,393,918		186,668		4,952			15,125
AO Woori Bank		388,406		321,422		24,980		7,231			17,723
PT Bank Woori Saudara Indonesia 1906 Tbk		3,143,279		2,566,204		231,132		42,252			84,710
Banco Woori Bank do Brasil S.A.		145,535		114,546		12,498		996			1,017
Korea BTL Infrastructure Fund		813,736		310		30,768		28,088			28,088
Woori Finance Cambodia PLC.		139,644		111,525		15,931		5,262			6,012
Woori Finance Myanmar Co., Ltd.		29,970		14,813		6,550		1,614			2,703
Wealth Development Bank		337,704		299,899		22,361		872			4,015
Woori Bank Vietnam Limited		1,538,675		1,281,108		61,551		14,000			23,540
WB Finance Co., Ltd.		442,083		348,940		63,923		13,997			16,524
Woori Bank Europe		212,750		156,667		2,318		(2,964	)		(2,005	)
Money trust under the FISCM Act		1,579,545		1,548,932		48,758		443			443
Structured entity for the securitization of financial assets		2,272,644		2,682,315		69,773		(852	)		7,362
Structured entity for the investments in securities		168,362		49,090		18,140		5,876			7,142

	As of and for the year ended December 31, 2018
	Assets		Liabilities		Operating revenue		Net income (loss) attributable to owners			Comprehensive income (loss) attributable to owners
Woori FIS Co., Ltd.		96,260		63,412		271,651		2,840			269
Woori Private Equity Asset Management Co., Ltd.		38,820		1,439		1,713		(2,794	)		(2,843	)
Woori Finance Research Institute Co., Ltd.		3,891		560		4,708		7			(109	)
Woori Card Co., Ltd.		9,987,057		8,305,093		1,371,301		114,767			106,517
Woori Investment Bank Co., Ltd.		2,682,660		2,367,418		205,446		25,552			25,533
Woori Credit Information Co., Ltd.		34,921		6,386		36,883		1,657			1,411
Woori America Bank		2,182,454		1,878,117		90,975		20,510			32,335
Woori Global Markets Asia Limited		517,627		396,216		18,748		5,144			9,647
Woori Bank China Limited		5,470,927		4,953,813		366,973		21,879			19,194
AO Woori Bank		305,521		256,260		19,433		5,163			(3,234	)
PT Bank Woori Saudara Indonesia 1906 Tbk		2,355,975		1,853,768		192,719		40,385			27,109
Banco Woori Bank do Brasil S.A.		179,130		149,146		13,971		1,262			(2,326	)
Korea BTL Infrastructure Fund		777,437		299		29,760		26,057			26,057
Woori Fund Service Co., Ltd.		14,448		1,440		10,052		1,597			1,597
Woori Finance Cambodia PLC.		93,239		71,133		11,038		2,826			3,676
Woori Finance Myanmar Co., Ltd.		19,340		6,886		4,496		640			(1,256	)
Wealth Development Bank		218,134		184,344		13,668		80			(451	)
Woori Bank Vietnam Limited		954,580		720,554		48,716		10,710			13,618
WB Finance Co., Ltd.		268,794		225,655		24,310		2,421			2,329
Woori Bank Europe		58,399		311		5		(5,959	)		(5,974	)
Money trust under the FISCM Act		1,582,765		1,552,594		54,860		259			259
Structured entity for the securitization of financial assets		1,369,745		1,786,869		53,578		4,990			(5,681	)
Structured entity for the investments in securities		63,676		142		1,826		(1,299	)		(3,009	)

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

- 6 -

- Structured entity for asset securitization

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 funds to the structured entity, and it is exposed to the risk that it may not be able to recover its funds depending on the result of investment performance of asset managers of the structured entity.

- Money trust under the Financial Investment Services and Capital Markets Act

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

As of December 31, 2019, the Group provides 2,206,740 million won of credit facilities for the structured entities mentioned above.

(6) The Group has entered into various agreements with structured entities such as asset securitization, structured finance, investment fund, and monetary trust. The characteristics and the nature of risks related to unconsolidated structured entities over which the Group does not have control in accordance with K-IFRS 1110 are as follows:

The ownership interests on unconsolidated structured entities that the Group hold are classified into asset securitization vehicles, structured finance and investment fund, based on the nature and the purpose of the structured entities.

Unconsolidated structured entities classified as ‘asset securitization vehicles’ are entities that issue asset-backed securities, pay the principal and interest or distributes dividends on asset-backed securities through borrowings or profits from the management, operation and sale of securitized assets. The Group transfers related risks from the purchase commitments of asset-backed securities or issuance of asset-backed securities through credit grants, and the structured entities recognize related interest or fee revenue. There are entities that provide additional funds and conditional debt acquisition commitments before the Group’s financial support, but the Group is still exposed to losses arising from the purchase of financial assets issued by the structured entities when it fails to renew the securities.

Unconsolidated structured entities classified as ‘structured financing’ include real estate project financing investment vehicle, social overhead capital companies, and special purpose vehicles for ship (aircraft) financing. Each entity is incorporated as a separate company with a limited purpose in order to efficiently pursue business goals. ‘Structured financing’ is a financing method for large-scale risky business, with investments made based on feasibility of the specific business or project, instead of credit of business owner or physical collaterals. The investors receive profits from the operation of the business. The Group recognizes interest revenue, valuation gain or loss on ownership interest, or dividend income. With regards to uncertainties involving structured financing, there are entities that provide financial support such as additional fund, guarantees and prioritized credit grants prior to the Group’s intervention, but the Group is exposed to possible losses due to loss of principal from reduction in investment value or irrecoverable loans arising from failure to collect scheduled cash flows and cessation of projects.

- 7 -

Unconsolidated structured entities classified as ‘investment funds’ include investment trusts and private equity funds. An investment trust orders the investment and operation of funds to the trust manager in accordance with trust contract with profits distributed to the investors. Private equity funds finances money required to acquire equity securities to enable direction of management and/or improvement of ownership structure, with profit distributed to the investors. The Group recognizes pro rata amounts of valuation gain or loss on investment and dividend income as an investor, and may be exposed to losses due to reduction in investment value.

Total assets of the unconsolidated structured entities, the carrying value of the related items recorded, the maximum exposure to risks, and the loss recognized in conjunction with the unconsolidated structured entities as of December 31, 2019 and 2018 are as follows. The maximum loss exposure includes the amount of investment recognized in the financial statements and the amount that is likely to be confirmed in the future when certain conditions are satisfied by contracts such as purchase arrangements, credit offerings and etc. (Unit: Korean Won in millions):

	December 31, 2019
	Asset securitization vehicle		Structured finance		Investment Funds
Total asset of the unconsolidated structured entities		6,481,401		55,533,559		16,329,990
Assets recognized in the consolidated financial statements related to the unconsolidated structured entities		4,804,202		2,380,297		1,361,579
Financial assets at FVTPL		—		28,834		1,068,082
Financial assets at FVTOCI		2,006,230		42,305		—
Financial assets at amortized cost		2,796,695		2,295,700		120,072
Investments in joint ventures and associates		—		7,475		173,425
Derivative assets		1,277		5,983		—
Liabilities recognized in the consolidated financial statements related to the unconsolidated structured entities		184		847		—
Derivative liabilities		—		15		—
Other liabilities (including provisions)		184		832		—
The maximum exposure to risks		5,184,814		2,826,937		1,407,338
Investments		4,804,202		2,380,297		1,361,579
Credit facilities		380,612		446,640		45,759
Loss recognized on unconsolidated structured entities		—		424		33,143

	December 31, 2018
	Asset securitization vehicle		Structured finance		Investment Funds
Total asset of the unconsolidated structured entities		6,796,235		58,161,494		11,138,822
Assets recognized in the consolidated financial statements related to the unconsolidated structured entities		2,571,835		2,831,842		1,530,767
Financial assets at FVTPL		285,156		70,219		1,197,844
Financial assets at FVTOCI		281,919		48,961		—
Financial assets at amortized cost		2,003,921		2,511,055		71,150
Investments in joint ventures and associates		—		197,393		261,773
Derivative assets		839		4,214		—
Liabilities recognized in the consolidated financial statements related to the unconsolidated structured entities		1,260		905		—
Derivative liabilities		116		248		—
Other liabilities (including provisions)		1,144		657		—
The maximum exposure to risks		3,252,329		3,408,271		1,587,325
Investments		2,571,835		2,831,842		1,530,767
Credit facilities		680,494		576,429		56,558
Loss recognized on unconsolidated structured entities		5,764		11,609		13,868

- 8 -

(7) As of December 31, 2019 and 2018, the share of non-controlling interests on the net income and equity of subsidiaries in which non-controlling interests are significant are as follows: (Unit: Korean Won in millions):

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

	December 31, 2019		December 31, 2018
Woori Investment Bank		—		130,088
PT Bank Woori Saudara Indonesia 1906 Tbk		83,315		68,250
Wealth Development Bank		18,524		16,557

2) Net income or loss attributable to non-controlling interests

	For the year ended December 31, 2019		For the year ended December 31, 2018
Woori Investment Bank		12,547		10,262
PT Bank Woori Saudara Indonesia 1906 Tbk		8,502		8,126
Wealth Development Bank		427		39

3) Dividends to non-controlling interests

	For the year ended December 31, 2019		For the year ended December 31, 2018
PT Bank Woori Saudara Indonesia 1906 Tbk		1,981		2,082

- 9 -

2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

(1) Basis of presentation

Woori Bank and its subsidiaries (the “Group”)’s consolidated financial statements are prepared in accordance with Korean Financial Reporting Standards (“K-IFRS”)

The significant accounting policies applied in the preparation of consolidated financial statements as of and for the year ended December 31, 2019 are stated below, and the accounting policies applied are identical to ones used in the preparation of previous period’s consolidated financial statements, except for the effects of adopting new standards or interpretations as explained below.

The consolidated financial statements are prepared at the end of each reporting period on the historical cost basis, except for certain non-current assets and financial assets that are either revalued or measured in fair value. Historical cost is generally measured at the fair value of consideration given to acquire assets.

The consolidated financial statements of the Group was approved by the Board of Directors on March 3, 2020, and is planned for an approval in the annual shareholder’s meeting on March 24, 2020.

1) The standards and interpretations that are newly adopted by the Group during the current period, and the changes in accounting policies thereof are as follows:

① K-IFRS 1109 ‘Financial Instruments,’ K-IFRS 1107 ‘Financial Instruments: Disclosure’ amendments

The Group has adopted the amendments of K-IFRS 1109 and 1107 for the first time in the current year. The amendments mainly deal with the addition of temporary exceptions from applying specific hedge accounting requirements while the uncertainty arises from interest rate benchmark reform. The amendment requires that for the purpose of determining whether a forecast transaction (or a component thereof) is highly probable, an entity shall assume that the interest rate benchmark on which the hedged cash flows (contractually or non-contractually specified) are based is not altered as a result of interest rate benchmark reform. When applying the prospective assessment, the amendment further requires that an entity shall assume that the hedged risk or the interest rate benchmark on which the hedged item or the hedging instrument is based is not altered as a result of the reform. Additionally, for a hedge of a non-contractually specified benchmark component of interest rate risk, an entity shall apply the requirement that the risk component shall be separately identifiable only at the inception of the hedging relationship. Meanwhile, an entity shall prospectively cease applying the temporary exceptions to a hedged item at the earlier of:

(a) when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the hedged item; and (b) when the hedging relationship that the hedged item is part of is discontinued. Note 26 sets out details of the hedge accounting applied by the Group. These amendments will be effective from January 1, 2020 but the Group has applied such amendments in current year as the early adoption is permitted.

- 10 -

② Leases

The Group initially applied K-IFRS 1116 on January 1, 2019. Other accounting standards enacted from January 1, 2019 are not expected to have material impacts on the Group’s consolidated financial statements.

K-IFRS 1116 introduces an accounting model for the single lessee and as a result, the Group, as a lessee, recognizes right-of-use assets which represent a lessee’s right to use an underlying asset and lease liabilities which represent an obligation to make lease payments. An accounting model for the lessor is similar to the previous accounting policy.

The Group recognized the cumulative effects due to the initial application of K-IFRS 1116 on January 1, 2019, which is the date of initial application. Therefore, the comparative financial information applies K-IFRS 1017 and the related interpretations as reported previously and was not restated. The details of the changes to the accounting policy are described below.

i) Definition of lease

Previously, the Group determined whether an arrangement is, or contains, a lease on the arrangement date by applying K-IFRS 2104 ‘Determining whether an arrangement contains a lease’. The Group currently determines whether the contract is, or contains, a lease, based on the new definition of a lease. According to K-IFRS 1116, a contract is, or contains a lease if the right to control the use of an identified asset is transferred in exchange for the consideration received for a period of time.

On the date of initial application for K-IFRS 1116, the Group elected to apply a practical expedient which does not require the Group to reassess whether the contract is a lease. The Group applied K-IFRS 1116 only to the contracts that were previously identified as a lease and did not reassess the contracts that were not identified as a lease in line with K-IFRS 1017 and K-IFRS 2104. Therefore, the definition of lease under K-IFRS 1116 is only applicable to contracts that are entered into or modified after January 1, 2019.

For a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease and non-lease components.

The Group elected not to recognize right-to-use assets and lease liabilities for certain leases of low-value assets (e.g. IT facilities) and short-term leases (less than one year). The Group will recognize the related lease payments as expenses equally over the lease period.

IFRS Interpretations Committee published its interpretation of ‘Lease Period and Lease Improvement Useful Life’ as of December 16, 2019. The Interpretation Committee discussed the calculation method of renewable lease and cancellable lease etc., and according to the interpretation, the consolidating company shall identify factors to consider a wide range of economic disadvantages and calculate the lease period based on them. However, as the Group is holding a large number of contracts and the conditions of the contract vary, sufficient time is required for analysis of the contract and accounting policy establishment. Therefore, the Group is planning to reflect the effects in the consolidated financial statements after the analysis of the effects changes in accounting policies over the lease term is completed.

- 11 -

ii) Lessee

The Group leases various assets, including buildings, vehicles and IT equipment.

Previously, the Group classified its leases either as operating leases or as finance leases based on whether the lease substantially transfers the risk and reward of owning the underlying assets. According to K-IFRS 1116, the Group recognizes right-of-use assets and lease liabilities for most of its leases, which means most of its leases are presented in the statement of financial position.

For the right-of-use assets that do not satisfy the definition of an investment property, the Group presents those assets as the same item as the item that the corresponding underlying asset would have been presented for. Right-of-use assets that meet the definition of investment properties would be presented as investment properties.

The Group presents lease liability as other financial liabilities in the consolidated statement of financial position.

A lease classified as operating lease in accordance with K-IFRS 1017

The Group has classified its property lease as operating lease in accordance with K-IFRS 1017. For leases previously classified as operating leases applying K-IFRS 1017, the Group measures lease liabilities at the present value of the remaining lease payments using the Group’s incremental borrowing rates as of January 1, 2019. However, the Group elected not to apply recognition, measurement and presentation requirements for leases of low-value underlying assets. A right-of-use asset is measured using the following methods.

- The same amount as the lease liability (adjusted for any advanced payments or payables). The Group adopts this method for all its leases.

For leases previously classified as operating leases applying K-IFRS 1017, the Group applies the following practical expedient when applying K-IFRS 1116.

- Any initial direct cost is excluded from the measurement of right-of-use assets on the date of initial application.

- As an alternative to impairment review, K-IFRS 1037 ‘Provisions, contingent liabilities and contingent assets’ is applied immediately prior to the date of initial application to determine whether the leases are onerous.

- Right-of-use assets and lease liabilities are not recognized for a short-term lease (remaining lease term of 12 months or less).

- Hindsight is used when determining a lease term for contracts that contain extension option or termination option.

iii) Impacts to the financial statements

a) Impacts at the point of transition

As of the date of transition to K-IFRS 1116, the Group additionally recognized the right-of-use assets and lease liabilities, and the impacts are as follows (Unit: Korean won in millions):

	January 1, 2019
Right-of-use assets presented as premises and equipment (*)		441,170
Lease liability (*)		382,439

(*) The differences have occurred due to prepaid, unpaid lease payment, transfer, etc. and there is no effect on retained earnings.

When measuring lease liabilities for leases that were previously classified as operating lease, the Group used its incremental borrowing rate as of January 1, 2019 as the discount rate. The applied weighted-average incremental borrowing rate is 2.14%.

- 12 -

	January 1, 2019
Operating leases as of December 31, 2018		403,045
Amount discounted by incremental borrowing rate on January 1, 2019		382,709
- Recognition exemption for leases of low-value assets		(253	)
- Recognition exemption for leases with remaining lease period of 12 months or less at the transition date		(17	)
Lease liabilities recognized on January 1, 2019		382,439

b) Impacts during the transition

The Group recognized depreciation expenses and interest expenses instead of the operating lease expenses for the leases in line with K-IFRS 1116. For the year ended December 31, 2019, the Group recognized depreciation expenses of 221,534 million Won and interest expenses of 8,309 million Won.

③ Share-based payment

For cash-settled share-based payment transactions that provide cash in return for the goods or services received, the Group measures the goods or services received, and the corresponding liability at the fair value and recognizes as employee benefit expenses and liabilities during the vesting period. The fair value of the liability is remeasured at the end of each reporting period and the settlement date until the liability is settled, and changes in fair value are recognized as employee benefits.

④ It is believed that the following issued, revised standards will not have a significant impact on the Group:

- K-IFRS 2123 Uncertainty over Income Tax Treatments (Issued)

- K-IFRS 1109 Financial Instruments (Revised)

- K-IFRS 1028 Investment in Associates and Joint Ventures (Revised)

- K-IFRS 1019 Employee Benefits (Revised)

- K-IFRS 1115 Revenue from Contracts with Customers (Revised)

- Annual Improvements to IFRSs 2015-2017 Cycle

These annual improvements include partial amendments of K-IFRS 1012 ‘Income Tax,’ K-IFRS 1023 ‘Borrowing Cost,’ K-IFRS 1103 ‘Business Combination’ and K-IFRS 1111 ‘Joint Arrangements’.

2) The details of K-IFRSs that have been issued and published as of the date of issue approval of financial statements but have not yet reached the effective date, and which the Group has not applied at an earlier date are as follows:

- Revised Conceptual Framework for Financial Reporting

- Revised K-IFRS 1103 ‘Business Combinations’

- Revised K-IFRS 1001 ‘Financial Statements Presentation’ and K-IFRS 1008 ‘Change and Error of Accounting Policy and Accounting Estimates’

It is believed that revised standards listed above, will not have a significant impact on the company.

- 13 -

(2) Basis of consolidated financial statement presentation

The consolidated financial statements incorporate the financial statements of the Bank and the entities (including structured entities) controlled by the Bank (and its subsidiaries, which is the “Group”). Control is achieved where the Group 1) has the power over the investee, 2) is exposed, or has rights, to variable returns from its involvement with the investee, and 3) has the ability to use its power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’s voting rights in an investee are sufficient to give it power, including:

• The relative size of the Group’s holding of voting rights and dispersion of holdings of the other vote holders;

• Potential voting rights held by the Group, other vote holders or other parties;

• Rights arising from other contractual arrangements;

• Any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owner of the Group and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owner of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intra-group transactions and, related assets and liabilities, income and expenses are eliminated in full on consolidation.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owner of the parent company.

When the Group loses control of a subsidiary, a gain or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is recognized as the fair value on initial recognition for subsequent accounting under K-IFRS 1109 Financial Instruments or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

- 14 -

(3) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured as the sum of the acquisition-date fair values of the assets transferred by the Group in exchange for control of the acquiree, liabilities assumed by the Group for the former owners of the acquiree and the equity interests issued by the Group. Acquisition-related costs are generally recognized in profit or loss as incurred.

At the acquisition date, the acquiree’s identifiable assets, liabilities and contingent liabilities that meet the condition for recognition under K-IFRS 1103 are recognized at their fair value, except that:

• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with K-IFRS 1012 Income Taxes and K-IFRS 1019 Employee Benefits, respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with K-IFRS 1102 Share-based Payment at the acquisition date; and

• non-current assets (or disposal groups) that are classified as held for sale in accordance with K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations are measured at the lower of their previous carrying amounts and fair value less costs to sell.

Any excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest (if any) in the acquiree over the net of identifiable assets and liabilities assumed of the acquiree at the acquisition date is recognized as goodwill which is included in intangible assets.

- 15 -

If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognized immediately in net income as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration other than the above is remeasured at subsequent reporting dates as appropriate, with the corresponding gain or loss being recognized in profit or loss.

When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured at fair value at the acquisition date (i.e., the date when the Group obtains control) and the resulting gain or loss, if any, is recognized in net income (or other comprehensive income, if applicable). Amounts arising from changes in value of interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are recognized, identical to the treatment assuming interests are sold directly.

- 16 -

(4) Investments in joint ventures and associates

An associate is an entity over which the Group has significant influence, and that is not a subsidiary or a joint venture. Significant influence is the power to participate in making decision on the financial and operating policy of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to net assets relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The net income of the current period and the assets and liabilities of the joint ventures and associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, an investment in the joint ventures and associates is initially recognized in the consolidated statements of financial position at cost and adjusted thereafter to recognize the Group’s share of the net assets of the joint ventures and associates and any impairment. When the Group’s share of losses of the joint ventures and associates exceeds the Group’s interest in the associate, the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint ventures and associates.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the joint ventures and associates recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognized immediately in net income.

Upon a loss of significant influence over the joint ventures and associates, the Group discontinues the use of the equity method and measures at fair value of any investment that the Group retains in the former joint ventures and associates from the date when the Group loses significant influence. The fair value of the investment is regarded as its fair value on initial recognition as a financial asset in accordance with K-IFRS 1039 Financial Instruments; Recognition and Measurement. The Group recognized differences between the carrying amount and fair value in net income and it is included in determination of the gain or loss on disposal of joint ventures and associates. The Group accounts for all amounts recognized in other comprehensive income in relation to that joint ventures and associates on the same basis as would be required if the joint ventures and associates had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by an associate would be reclassified to net income on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to net income as a reclassification adjustment.

- 17 -

When the Group’s ownership of interest in an associate or a joint venture decreases but the Group continues to maintain significant influence over an associate or a joint venture, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that decrease in ownership interest if the gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. Meanwhile, if interest on associate or joint venture meets the definition of non-current asset held for sale, it is accounted for in accordance with K-IFRS 1105.

The requirements of K-IFRS 1028 - Investments in Associates and Joint Ventures to determine whether there has been a loss event are applied to identify whether it is necessary to recognize any impairment loss with respect to the Group’s investment in the joint ventures and associates. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with K-IFRS 1036 - Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized is not allocated to any asset (including goodwill), which forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with K-IFRS 1036 to the extent that the recoverable amount of the investment subsequently increases.

The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.

When a subsidiary transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognized in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group.

(5) Investment in Joint operation

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

When the Group operates as a joint operator, it recognizes in relation to its interest in a joint operation:

- its assets, including its share of any assets held jointly;

- its liabilities, including its share of any liabilities incurred jointly;

- its revenue from the sale of its share of the output arising from the joint operation;

- its share of the revenue from the sale of the output by the joint operation; and

- its expenses, including its share of any expenses incurred jointly.

The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the K-IFRSs applicable to the particular assets, liabilities, revenues and expenses.

When the Group enters into a transaction with a joint operation in which it is a joint operator, such as a sale or contribution of assets, it is conducting the transaction with the other parties to the joint operation and, as such, the Group recognizes gains and losses resulting from such a transaction only to the extent of the other parties’ interests in the joint operation.

When the Group enters into a transaction with a joint operation in which it is a joint operator, such as a purchase of assets, it does not recognize proportional share of profit or loss until the asset is sold to a third party.

- 18 -

(6) Revenue recognition

K-IFRS 1115 requires the recognition of revenues based on transaction price allocated to the performance obligation when or as the Group performs that obligation to the customer. Revenues other than those from contracts with customers, such as interest revenue and loan origination fee (cost), are measured through effective interest rate method.

1) Revenues from contracts with customers

The Group recognizes revenue when the Group satisfies a performance obligation by transferring a promised good or service to a customer. When a performance obligation is satisfied, the Group shall recognize as a revenue the amount of the transaction price that is allocated to that performance obligation. The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

The Group is recognizing revenue by major sources as shown below:

① Fees and commission received for brokerage

The fees and commission received for agency are the amount of consideration or fee expected to be entitled to receive in return for providing goods or services to the other parties with the Group acting as an agency, such as in the case of sales of bancassurance and beneficiary certificates. The majority of these fees and commission received for brokerage are from the business activities relevant to Consumer banking segment.

② Fees and commission received related to credit

The fees and commission received related to credit mainly include the lending fees received from the loan activity and the fees received in the L/C transactions. Except for the fees and commission accounted for in calculating the effective interest rate, it is generally recognized when the performance obligation has been performed. The majority of these fees and commission received related to credit are from the business activities relevant to Consumer banking and Corporate banking segment.

③ Fees and commission received for electronic finance

The fees and commission received for electronic finance include fees received in return for providing various kinds of electronic financial services through firm-banking and CMS. These fees are recognized as revenue immediately upon the completion of services. The majority of these fees and commission received for electronic finance are from the business activities relevant to Consumer banking and Corporate banking segment.

④ Fees and commission received on foreign exchange handling

The fees and commission received on foreign exchange handling consist of various fees incurred when transferring foreign currency. The point of processing the customer’s request is the time when performance obligation is satisfied, and revenue is immediately recognized when fees and commission are received after requests are processed. The business activities relevant to these fees and commission received on foreign exchange handling are substantially attributable to Corporate banking segment.

⑤ Fees and commission received on foreign exchange

The fees and commission received on foreign exchange consist of fees related to the issuance of various certificates, such as exchange, import and export performance certificates, purchase certificates, etc. The point of processing the customer’s request is the time when performance obligation is satisfied, and revenue is immediately recognized when fees and commission are received after requests are processed. The business activities relevant to these fees and commission received on foreign exchange are substantially attributable to Corporate banking segment.

⑥ Fees and commission received for guarantee

The fees and commission received for guarantee include the fees received for the various warranties. The activities related to the warranty consist mainly of performance obligations satisfied over time and fees and commission are recognized over the guarantee period. The business activities relevant to these fees and commission received for guarantee are substantially attributable to Corporate banking segment.

- 19 -

⑦ Fees and commission received on securities business

The fees and commission received on securities business consist mainly of fees and commission for the sale of beneficiary certificates, and these fees are recognized when the beneficiary certificates are sold to customers. The business activities relevant to these fees and commission received on securities business are substantially attributable to Consumer banking segment.

⑧ Fees and commission from trust management

The fees and commission from trust management consist of fees and commission received in return for the operation and management services for entrusted assets. These operation and management services are performance obligations satisfied over time, and revenue is recognized over the service period. Among the fees and commission from trust management, variable considerations such as profit commission that are affected by the value of entrusted assets and base return of the future periods are recognized as revenue when limitations to the estimates are lifted. The majority of these fees and commission received for brokerage are from the business activities relevant to Consumer banking segment.

⑨ Other fees

Other fees are usually fees related to remittances, but include fees related to various other services provided to customers by the Group. These fees are recognized when transactions occur at the customers’ request and services are provided, at the same time when commission are received. These other fees occur across all operating segments and no single operating segment represents majority of other fees.

2) Revenues from sources other than contracts with customers

① Interest income

Interest income on financial assets measured at FVTOCI and financial assets at amortized costs is measured using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating the interest income over the expected life of the asset. The effective interest rate is the rate that exactly discounts estimated future cash flows to the instrument’s initial unamortized cost over the expected period, or shorter if appropriate. Future cash flows include commissions and cost of reward points (limited to the primary component of effective interest rate) and other premiums or discounts that are paid or received between the contractual parties when calculating the effective interest rate, but does not include expected credit losses. All contractual terms of a financial instrument are considered when estimating future cash flows.

For purchased or originated credit-impaired financial assets, interest revenue is recognized by applying the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition. Even if the financial asset is no longer impaired in the subsequent periods due to credit improvement, the basis of interest revenue calculation is not changed from amortized cost to unamortized cost of the financial assets.

② Loan origination fees and costs

The commission fees earned on loans, which is part of the effective interest of loans, is accounted for as deferred origination fees. Incremental costs related to the origination of loans are accounted for as deferred origination fees and is being added or deducted to/from interest income on loans using effective interest rate method.

- 20 -

(7) Accounting for foreign currencies

The Group’s consolidated financial statements are presented in Korean Won, which is the functional currency of the Group. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at its prevailing exchange rates at the date. The effective portion of the changes in fair value of a derivative that qualifies as a cash flow hedge and the foreign exchange differences on monetary items that form part of net investment in foreign operations are recognized in equity.

Assets and liabilities of the foreign operations subject to consolidation are translated into Korean Won at foreign exchange rates at the end of the reporting period. Except for situations in which it is required to use exchange rates at the date of transaction due to significant changes in exchange rates during the period, items that belong to profit or loss shall be measured by average exchange rate, with foreign exchange differences recognized as other comprehensive income and added to equity (allocated to non-controlling interests, if appropriate). When foreign operations are disposed, the controlling interest’s share of accumulated foreign exchange differences related to such foreign operations will be reclassified to profit or loss, while non-controlling interest’s corresponding share will not be reclassified.

Adjustments to fair value of identifiable assets and liabilities, and goodwill arising from the acquisition of foreign operations will be treated as assets and liabilities of the corresponding foreign operation and is translated using foreign exchange rates at the end of the period. The foreign exchange differences are recognized in equity.

(8) Cash and cash equivalents

The Group is classifying cash on hand, demand deposits, interest-earning deposits with original maturities of up to three months on acquisition date, and highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value as cash and cash equivalents.

- 21 -

(9) Financial assets and financial liabilities

1) Financial assets

A regular way purchase or sale of financial assets is recognized or derecognized on the trade date. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose term requires delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

On initial recognition, financial assets are classified into financial assets at FVTPL, financial assets at FVTOCI, and financial assets at amortized cost.

a) Business model

The Group evaluates the way business is being managed, and the purpose of the business model for managing a financial asset best reflects the way information is provided to the management at its portfolio level. Such information considers the following:

- The accounting policies and purpose specified for the portfolio, the actual operation of such policies. This includes strategy of the management focusing on the receipt of contractual interest revenue, maintaining a certain level of interest income, matching the duration of financial assets and the duration of corresponding liabilities to obtain the asset, and outflow or realization of expected cash flows from disposal of assets

- The way the performance of a financial asset held under the business model is evaluated, and the way such evaluation is being reported to the management

- The risk affecting the performance of the business model (and financial assets held under the business model), and the way such risk is being managed

- The compensation plan for the management (e.g. whether the management is being compensated based on the fair value of assets or based on contractual cash flows received)

- Frequency, amount, timing and reason for sale of financial assets in the past and forecast of future sale activities.

- 22 -

b) Contractual cash flows

The principal is defined to be the fair value of a financial assets at initial recognition. Interest is not only composed of consideration for the time value of money, consideration for the credit risk related to remaining principal at a certain period of time, and consideration for other cost (e.g. liquidity risk and cost of operation) and fundamental risk associated with lending, but also profit.

When evaluating whether contractual cash flows are solely payments of principal and interests, the Group considers the contractual terms of the financial instrument. When a financial asset contains contractual conditions that modify the timing and amount of contractual cash flows, it is required to determine whether contractual cash flows that arise during the remaining life of the financial instrument due to such contractual condition are solely payments of principal and interest. The Group considers the following elements when evaluating the above:

- Conditions that lead to modification of timing or amount of cash flows

- Contractual terms that adjust contractual nominal interest, including floating rate features

- Early payment features and maturity extension features

- Contractual terms that limit the Group’s claim on cash flows arising from certain assets (e.g. non-recourse feature)

- 23 -

① Financial assets at FVTPL

The Group is classifying those financial assets that are not classified as either financial assets at amortized cost or financial assets at FVTOCI, and those designated to be measured at FVTPL, as financial assets at FVTPL. Financial assets at FVTPL are measured at fair value, and related profit or loss is recognized in net income. Transaction costs related to acquisition at initial recognition is recognized in net income immediately upon its occurrence.

It is possible to designate a financial asset as financial asset at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial asset at FVTPL; (b) the financial asset forms part of the Group’s financial instrument group (a group composed of a combination of financial asset or liability), is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial asset is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial asset at FVTPL is allowed under K-IFRS 1109 ‘Financial Instruments’. However, the designation is irrevocable.

② Financial assets at FVTOCI

When financial assets are held under a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at FVTOCI. Also, for investments in equity instruments that are not held for short-term trade, an irrevocable election is available at initial recognition to present subsequent changes in fair value as other comprehensive income.

At initial recognition, financial assets at FVTOCI is measured at its fair value plus any direct transaction cost and is subsequently measured in fair value. However, for equity instruments that do not have a quotation in an active market and in which fair value cannot be measured reliably, they are measured at cost. The changes in fair value except for profit or loss items such as impairment losses (reversals), interest revenue calculated by using effective interest method, and foreign exchange gain or loss, and related income tax effects are recognized as other comprehensive income until the asset’s disposal. Upon derecognition, the accumulated other comprehensive income is reclassified from equity to net income for FVTOCI (debt instrument) and reclassified within the equity for FVTOCI (equity instruments).

③ Financial assets at amortized cost

When financial assets are held under a business model whose objective is to hold financial assets in order to collect contractual cash flows, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at amortized cost. At initial recognition, financial assets at amortized cost are recognized at fair value plus any direct transaction cost. Financial assets at amortized cost is presented at amortized cost using effective interest method, less any loss allowance.

- 24 -

2) Financial liabilities

At initial recognition, financial liabilities are classified into either financial liabilities at FVTPL or financial liabilities at amortized cost.

Financial liabilities are usually classified as financial liabilities at FVTPL when they are acquired with a purpose to repurchase them within a short period of time, when they are part of a certain financial instrument portfolio that is actually and recently being managed with a purpose of short-term profit and joint management by the Group at initial recognition, and when they are derivatives that do not qualify as hedging instruments. Financial liabilities at FVTPL are measured at fair value plus direct transaction cost at initial recognition and are subsequently measured at fair value. Profit or loss arising from financial liabilities at FVTPL is recognized in net income when occurred.

It is possible to designate a financial liability as financial liability at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial liability at FVTPL; (b) the financial asset forms part of the Group’s financial instrument group (a group composed of a combination of financial asset or liability) according to the Group’s documented risk management or investment strategy, is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial liability is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial liability at FVTPL is allowed under K-IFRS 1109 ‘Financial Instruments’.

Financial liabilities designated as at FVTPL are initially recognized at fair value, with any direct transaction cost recognized in profit or loss and are subsequently measured at fair value. Any profit or loss from financial liabilities at FVTPL are recognized in profit or loss.

Financial liabilities not classified as financial liabilities at FVTPL are measured at amortized cost. The Group is classifying liabilities such as deposits due to customers, borrowings and debentures as financial liabilities at amortized cost.

3) Reclassification

Financial assets are not reclassified after initial recognition unless the Group modifies the business model used to manage financial assets. When the Group modifies the business model used to manage financial assets, all affected financial assets are reclassified on the first day of the first reporting period after the modification.

- 25 -

4) Derecognition

Financial assets are derecognized when contractual rights to cash flows from the financial assets are expired, or when substantially all of risk and reward for holding financial assets is transferred to another entity as a result of a sale of financial assets. If the Group does not have and does not transfer substantially all of the risk and reward of holding financial assets with control of the transferred financial assets retained, the Group recognizes financial assets to the extent of its continuing involvement. If the Group holds substantially all the risk and reward of holding a financial asset, it continues to recognize that asset and proceeds are accounted for as collateralized borrowings.

When a financial asset is fully derecognized, the difference between the book value and the sum of proceeds and accumulated other comprehensive income is recognized as profit or loss in case of FVTOCI (debt instruments), and as retained earnings for FVTOCI (equity instruments).

In case when a financial asset is not fully derecognized, the Group allocates the book value into amounts retained in the books and removed from the books, based on the relative fair value of each portion at the date of sale, and based on the degree of continuing involvement. For the derecognized portion of the financial assets, the difference between its book value and the sum of proceeds and the portion of accumulated other comprehensive income attributable to that portion will be recognized in profit or loss in case of debt instruments and recognized in retained earnings in case of equity instruments. The accumulated other comprehensive income is distributed to the portion of book value retained in the books, and to the portion of book value removed from the books.

The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

When the Group exchanges with the existing lender one debt instrument into another one with substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability

- 26 -

5) Fair value of financial instruments

Financial assets at FVTPL and financial assets at FVTOCI are measured and presented in consolidated financial statements at their fair values, and all derivatives are also subject to fair value measurement.

Fair value is defined as the price that would be received to exchange an asset or paid to transfer a liability in a recent transaction between independent parties that are reasonable and willing. Fair value is the transaction price of identical financial assets or financial liabilities generated in an active market. An active market is a market where trade volume is sufficient and objective price information is available due to the fact that bid and ask price differences are small.

When trade volume of a financial instrument is low, when transaction prices within the market show large differences among them, or when it cannot be concluded that a financial instrument is being traded within an active market due to disclosures being extremely shallow, fair value is measured using valuation techniques based on alternative market information or using internal valuation techniques based on general and observable information obtained from objective sources. Market information includes maturity and characteristics, duration, similar yield curve, and variability measurement of financial instruments of similar nature. Fair value amount contains unique assumptions on each entity (the Group concluded that it is using assumptions applied in valuing financial instruments in the market, or risk-adjusted assumptions in case marketability does not exist).

The market approach and income approach, which are valuation techniques used to estimate the fair value of financial instruments, both require significant judgment. Market approach measures fair value using either a recent transaction price that includes the financial instrument, or observable information on comparable firm or assets. Income approach measures fair value through discounting future cash flows with a discount rate reflecting market expectations, and revenue, operating income, depreciation, capital expenditures, income tax, working capital and estimated residual value of financial investments are being considered when deriving future cash flows. Valuation techniques such as the above include estimates based on the financial instruments’ complexity and usefulness of observable information in the market.

The valuation techniques used in the evaluation of financial instruments are explained below.

- 27 -

a) Financial assets at FVTPL and Financial assets at FVTOCI

The fair value of equity securities included in financial assets at FVTPL and financial assets at FVTOCI category is recognized in the statement of financial position at its available market price. Debt securities traded in the over-the-counter market are generally recognized at an amount computed by an independent appraiser. When the Group uses the fair value determined by independent appraisers, the Group usually obtains three values from three different appraisers for each financial instrument and selects the minimum amount without making additional adjustments. For equity securities without marketability, the Group uses the amount determined by the independent appraiser. The Group verifies the prices obtained from appraisers in various ways, including the evaluation of independent appraisers’ competency, indirect verification through comparison between appraisers’ price and other available market information, and reperformed by employees who have knowledge of valuation models and assumptions that appraisers used.

b) Derivatives

The Group’s transactions involving derivatives such as futures and exchange traded options are measured at market value. For exchange traded derivatives classified as level 2 in the fair value hierarchy, the fair value is estimated using internal valuation techniques. If there are no publicly available market prices because they are traded over-the-counter, fair value is measured through internal valuation techniques. When using internal valuation techniques to derive fair value, the types of derivatives, base interest rate or characteristics of prices, or stock market indices are considered. When variables used in the internal valuation techniques are not observable information in the market, such variables may contain significant estimates.

c) Adjustment of valuation amount

The Group is exposed to credit risk when a counterparty to a derivative contract does not perform its contractual obligation, and the exposure amount is equal to the amount of derivative asset recognized in the statement of financial position. When the Group earns income through valuation of derivatives, such income is recognized as derivative asset in the statement of financial position. Some of the derivatives are traded in the market, but most of the derivatives are measured at estimated fair value derived from internal valuation models that use observable information in the market. As such, in order to estimate the fair value there should be an adjustment made to incorporate counterparty’s credit risk, and credit risk adjustment is being considered when valuing derivative assets such as over-the counter derivatives. The amount of financial liabilities is also adjusted by the Group’s own credit risk when valuing them.

The amount of adjustment is derived from counterparty’s probability of default and loss given default. This adjustment considers contractual matters that are designed to reduce the Group’s exposure to each counterparty’s credit risk. When derivatives are under master netting arrangement, the exposure used in the computation of credit risk adjustment is a net amount after adding/deducting cash collateral received (or paid) from loss (or gain) position derivatives with the same counterparty.

- 28 -

6) Expected credit losses on financial assets

The Group recognizes loss allowance on expected credit losses for the following assets:

- Financial assets at amortized cost

- Debt instruments measured at FVTOCI

- Contract assets as defined by K-IFRS 1115

Expected credit losses are weighted-average value of a range of possible results, considering the time value of money, and are measured by incorporating information on current conditions and forecasts of future economic conditions that are available without undue cost or effort.

The methods to measure expected credit losses are classified into following three categories in accordance with K-IFRS:

- General approach: Financial assets that do not belong to below two models and unused loan commitments

- Simplified approach: When financial assets are either trade receivables, contract assets or lease receivables

- Credit impairment model: Purchased or originated credit-impaired financial assets

The measurement of loss allowance under general approach is differentiated depending on whether the credit risk has increased significantly after initial recognition. That is, loss allowance is measured based on 12-month expected credit loss when the credit risk has not increased significantly after initial recognition, while loss allowance is measured at lifetime expected credit loss when credit risk has increased significantly. Lifetime is the expected remaining life of the financial instrument up to the maturity date of the contract.

The measurement of loss allowance under simplified approach is always based on lifetime expected credit loss, and loss allowance under credit impairment model is measured as the cumulative change in lifetime expected credit loss since initial recognition.

a) Measurement of expected credit losses on financial asset at amortized cost

The expected credit losses on financial assets at amortized cost is measured by the difference between the contractual cash flows during the period and the present value of expected cash flows. Expected cash inflows are computed for individually significant financial assets in order to calculate expected credit losses.

Financial assets that are not individually significant, they are included in a group of financial assets with similar credit risk characteristics and expected credit losses of the group are calculated collectively.

Expected credit losses are deducted through loss allowance account, and when the financial asset is determined to be uncollectible, the loss allowance is written off from the books along with the related financial asset. When loan receivable previously written off is subsequently collected, the related loss allowance is increased and changes in loss allowance are recognized in profit or loss.

b) Measurement of expected credit losses on financial asset at FVTOCI

The measurement method of expected credit loss is identical to financial asset at amortized cost, but changes in the loss allowance is recognized in other comprehensive income. When financial assets at FVTOCI is disposed or repaid, the related loss allowance is reclassified from other comprehensive income to net income.

- 29 -

(10) Offsetting financial instruments

Financial assets and liabilities are presented as a net amount in the statements of financial position when the Group has an enforceable legal right and an intention to settle on a net basis or to realize an asset and settle the liability simultaneously.

(11) Investment properties

The Group classifies a property held to earn rentals and/or for capital appreciation as an investment property. Investment properties are measured initially at cost, including transaction costs, less subsequent depreciation and impairment.

Subsequent costs are included in the carrying amount of the asset or recognized as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Group and the cost of an asset can be measured reliably, and the book value of a portion of an asset that are replaced by a subsequent expenditure is removed from the books. Routine maintenance and repairs are expensed as incurred.

While land is not depreciated, all other investment properties are depreciated based on the depreciation method and useful lives of premises and equipment. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, and when it is deemed appropriate to change them, the effect of any change is accounted for as a change in accounting estimates.

An investment property is derecognized from the consolidated financial statements on disposal or when it is permanently withdrawn from use and no future economic benefits are expected even from its disposal. The gain or loss on derecognition of an investment property is calculated as the difference between the net disposal proceeds and the carrying amount of the property and is recognized in profit or loss in the period of derecognition.

(12) Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of premises and equipment is expenditure directly attributable to their purchase or construction, which includes any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. It also includes the initial estimate of costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent costs are recognized in the carrying amount of an asset or as a separate asset (if appropriate) if it is probable that future economic benefit associated with the assets will flow into the Group and the cost of an asset can be measured reliably. Routine maintenance and repairs are expensed as incurred.

While land is not depreciated, for all other premises and equipment, depreciation is charged to net income on a straight-line basis by applying the following estimated economic useful lives on the amount of cost or revalued amount less residual value.

	Useful life
Buildings used for business purpose	35 to 57 years
Structures in leased office	4 to 5 years
Properties for business purpose	4 to 5 years
Leased assets	Useful lives of the same kind or similar other premises and equipment

The Group reassesses the depreciation method, the estimated useful lives and residual values of premises and equipment at the end of each reporting period. If changes in the estimates are deemed appropriate, the changes are accounted for as a change in an accounting estimate. When there is an indicator of impairment and the carrying amount of a premises and equipment item exceeds the estimated recoverable amount, the carrying amount of such asset is reduced to the recoverable amount.

- 30 -

(13) Intangible assets and goodwill

The Group is recognizing intangible assets measured at the manufacturing cost or acquisition cost plus additional incidental expenses less accumulated amortization and accumulated impairment losses. The Group’s intangible asset are amortized over the following economic lives using the straight-line method. The estimated useful life and amortization method are reviewed at the end of each reporting period. If changes in the estimates are deemed appropriate, the changes are accounted for as a change in an accounting estimate.

	Useful life
Industrial property rights	10 years
Development costs	5 years
Software and others	4 to 5 years

In addition, when an indicator that intangible assets are impaired is noted, and the carrying amount of the asset exceeds the estimated recoverable amount of the asset, the carrying amount of the asset is reduced to its recoverable amount.

Goodwill acquired in a business combination is included in intangible assets. Goodwill is not amortized, but is subject to an impairment test at the cash-generating unit level every year, and whenever there is an indicator that goodwill is impaired.

Goodwill is allocated to each of the Group’s cash-generating unit (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

(14) Impairment of non-monetary assets

Intangible assets with indefinite useful lives or intangible assets that are not yet available for use are tested for impairment annually, regardless of whether or not there is any indication of impairment. All other assets are tested for impairment by estimating the recoverable amount when there is an objective indication that the carrying amount may not be recoverable. Recoverable amount is the higher of value in use or net fair value, less costs to sell. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and such impairment loss is recognized immediately in net income.

- 31 -

(15) Leases

As the Group applied K-IFRS 1116 using the revised retrospective method, the comparative financial information has not been prepared. The Group also applied K-IFRS 1017 and 2104. The accounting policies in accordance with K-IFRS 1017 and 2104 are separately disclosed.

Accounting policy applied since January 1, 2019.

The Group determines whether the agreement is a lease or includes a lease at the time of the agreement. In exchange for consideration in the contract, if the control over the use of the identified asset is transferred for a period of time, the contract is a lease or includes a lease. In determining whether a contract transfers control of the use of the identified asset, the Group uses the definition of a lease in K-IFRS 1116.

This accounting policy applies to contracts entered into since January 1, 2019.

1) The Group as a lessor

The Group recognizes the right-of-use asset and the lease liability at the commencement date of the lease. The right-of-use asset is measured at cost, which comprises the amount of the initial measurement of the lease liability, lease payments made at or before the commencement date (less any lease incentives received), initial direct costs, and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located.

The right-of-use asset is subsequently depreciated on a straight-line basis from the commencement of the lease to the end of the lease term. However, if the lease transfers ownership of the underlying asset to the lessee by the end of the lease term or if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, the lessee depreciates the right-of-use asset same as a fixed asset from the commencement date to the end of the useful life of the underlying asset. The right-of-use asset may be reduced by an impairment of the underlying asset or adjusted by remeasurement of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that cannot be readily determined, the Group uses its incremental borrowing rate. The Group generally uses the incremental borrowing rate.

- 32 -

The lease payments included in the measurement of the lease liability comprise the following:

- Fixed payments (including in-substance fixed payments)

- Variable lease payments that depend on an index (or a rate), initially measured using the index or rate as at the commencement date

- Amounts expected to be payable by the lessee under residual value guarantees

- The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, lease payments of the extended period if the lessee is reasonably certain to exercise extension option, and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease

The lease liability is subsequently increased by the interest expense recognized for the lease liability and decreased by reflecting the payment of the lease payments. The lease liability is remeasured if the future lease payments change depending on changes in the index (or a rate), changes in the expected amount to be paid under the residual value guarantee, and changes in the assessment of whether the purchase or extension option is reasonably certain to be exercised or not to exercise the terminate option.

When remeasuring a lease liability, the related right-of-use asset is adjusted and if the carrying amount of the right-of-use asset decreases to zero, the remeasurement amount is recognized in profit or loss.

The Group applies its judgment when determining the lease term for some lease contracts that include the extension option. The assessment of whether the Group is reasonably certain to exercise the option significantly affects the lease term and therefore has a significant impact on the amount of lease liabilities and the right-of-use asset.

In the statement of financial position, the Group classified the right-of-use assets that do not meet the definition of investment property as ‘premises and equipment’ and the lease liabilities as ‘other financial liabilities.’

The Group has chosen a practical expedient that does not recognize the right-of-use asset and lease liabilities for short-term leases with a lease term less than 12 months and leases for which the underlying asset is of low value. The Group recognizes the lease payments associated with those leases as an expense on a straight-line basis over the lease term.

2) The Group as a lessor

At the date of the agreement or the effective date of the modification containing the lease element, the Group allocates the consideration of the contract to each lease element on the basis of its relative stand-alone price.

As a lessor, the Group classifies its leases as either an operating lease or a finance lease at the commencement date.

The Group subsequently judges whether the lease transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset, otherwise a lease is classified as an operating lease.

If the agreement contains both lease and non-lease elements, the Group applies K-IFRS 1115 to allocate the consideration of the contract.

The Group applies derecognition and impairment provisions of K-IFRS 9 to its net investment in the lease. The Group also carries out regular review of the unguaranteed residual value used to calculate total lease investment.

The Group recognizes lease payments from operating lease as income on a straight-line basis.

The accounting policy that the Group has applied as a lessor is not different from K-IFRS 1116.

- 33 -

3) Accounting policy applied until January 1, 2019

The Group classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, and all lease contracts other than finance leases are classified as operating leases.

① The Group as a lessee

In case of finance leases, the lesser amount of the present value of the minimum lease payments at the commencement date of the lease term or the fair value of the leased asset are recognized as financial lease assets and liabilities in the statement of financial position. Lease payments are allocated as interest expense and repayment of the lease liability so that the same period interest rate is calculated for the balance of the liability. Adjustment to the lease payments are accounted for as expenses during the period.

The operating lease payments are recognized as an expense on a straight-line basis if there is no other systematic basis that is more representative of the pattern in which benefit from the use of underlying asset. Adjustment lease payments from the operating leases are accounted for as expenses during the period in which they are incurred.

② The Group as a lessor

The Group recognizes a finance lease receivable equal to the present value of the minimum lease and the non-guaranteed residual value, which is the net investment of the finance lease. The accounting for recognizing interest income by reporting period is carried out on a financial lease receivable after the commencement date of the lease term by applying a method in which a certain interest rate of the Group’s net investment in the lease is calculated.

The Group recognizes income from lease payments of operating lease on a straight-line basis over the lease term, and the direct costs of the lease incurred during the negotiation and contract phase of the operating lease is added to the carrying value of the lease asset and recognized as an expense over the lease term on a straight-line basis. Operating lease assets are included in other assets and are depreciated over their economic useful life.

- 34 -

(16) Derivative instruments

Derivative instruments are classified as forwards, futures, options and swaps, depending on the types of transactions and are classified at the point of transaction as either trading or hedging based on its purpose.

Derivatives are initially recognized at fair value at the date of contract and are subsequently measured at fair value at the end of each reporting period. The resulting gain or loss is recognized in net income immediately unless the derivative is designated and effective as a hedging instrument. If derivatives have been designated as hedging instruments and if it is effective, the point of recognition of gain or loss depends on the characteristics of hedging relationship.

1) Embedded derivatives

Embedded derivatives are components of a hybrid financial instrument that includes a non-derivative host contract. It has an effect of modifying part of cash flows of the hybrid financial instrument similar to an independent derivative.

Embedded derivatives that are part of a hybrid contract of which the host contract is a financial asset within the scope of K-IFRS 1109 is not separated. The classification is done by considering the hybrid contract as a whole, and subsequent measurement is either at amortized cost or fair value.

If embedded derivatives are part of a hybrid contract of which the host contract is not a financial asset within the scope of K-IFRS 1109 (e.g. financial liability), then these are treated as separate derivatives if embedded derivatives meet the definition of a derivative, characteristics & risk of the embedded derivatives are not closely related to that of host contract, and if the host contract is not measured at FVTPL.

In the previous year, all embedded derivatives which were part of a hybrid contract were treated as separate derivatives if embedded derivatives meet the definition of a derivative, characteristics & risk of the embedded derivatives are not closely related to that of host contract, and if the host contract is not measured at FVTPL

2) Hedge accounting

The Group is applying K-IFRS 1109 in regards to hedge accounting. The Group is designating certain derivatives as hedging instrument against fair value changes in relation to the interest rate risk, foreign currency translation and interest rate risk, and foreign currency translation risk.

The Group is documenting the relationship between hedging instruments and hedged items at the commencement of hedging in accordance with their purpose and strategy. Also, the Group documents at the commencement and subsequent dates whether the hedging instrument effectively counters the changes in fair value of hedged items. A hedging instrument is effective only when it meets all the following criteria:

- When there is an economic relationship between the hedged items and hedging instruments.

- When the effect of credit risk is not stronger than the change in value due to the economic relationship between the hedged items and hedging instruments.

- When the hedge ratio of hedging relationship is equal to the proportion of the number of items that the group actually hedges and the number of hedging instruments that the Group actually uses to hedge the number of hedged items

When a hedging relationship no longer meets the hedging effectiveness requirements related to hedge ratio, but when the purpose of risk management on designated hedging relationship is still maintained, the hedge ratio of the hedging relationship is adjusted so that hedging relationship may meet the requirements again (Hedge ratio readjustment).

The Group has designated derivatives as hedging instrument except for the portion on foreign currency basis spread. The fair value change due to foreign currency basis spread is recognized in other comprehensive income and is accumulated in equity. If the hedged item is related to transactions, the accumulated other comprehensive income is reclassified to profit or loss when the hedged item affects the profit or loss. However, when non-monetary items are subsequently recognized due to hedged items, the accumulated equity is removed from the equity directly, and is included in the initial book value of the recognized non-monetary items. Such transfers does not affect other comprehensive income. But if part or all of accumulated equity is not expected to be recovered in the future periods, the amount not expected to be recovered is immediately reclassified to profit or loss. If the hedged item is time-related, then the foreign currency basis spread on the day the derivative is designated as a hedging instrument that is related to the hedged item is reclassified to profit or loss over the term of the hedge.

- 35 -

3) Fair value hedge

Gain or loss arising from valid hedging instrument is recognized in profit or loss. However, when the hedging instrument mitigates risks on equity instruments designated as financial assets at FVTOCI, related gain or loss is recognized in other comprehensive income.

The book value of hedged items that are not measured in fair value is adjusted by the changes in fair value arising from the hedged risk, with resulting gain or loss reflected in net income. In case of debt instruments measured at FVTOCI, book value is an amount that is already adjusted to fair value and thus gain or loss arising from the hedged risk is recognized in profit or loss instead of other comprehensive income without adjustments in book value. When the hedged item is equity instruments measured at FVTOCI, the gain or loss arising from hedged risk is retained at other comprehensive income in order to match the gain or loss with hedging instruments.

Hedge accounting ceases to apply only when hedging relationship (or part of it) does not meet the requirements of hedge accounting (even after hedging relationship readjustment, if applicable). This treatment holds in case of lapse, disposal, expiry and exercise of hedging instruments, and this cease of treatment applies prospectively. The fair value adjustments made to book value of hedged item due to hedged risk is amortized from the date of discontinuance of hedge accounting and is recognized in profit or loss.

4) Cash flow hedge

The Group recognizes the effective portion of changes in the fair value of derivatives and other valid hedging instruments that are designated and qualified as cash flow hedges in other comprehensive income, to the extent of cumulative fair value changes of the hedged item from the date of hedge accounting. The gain or loss relating to the ineffective portion is recognized immediately in net income.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to net income when the hedged item affects net income. However, when non-monetary assets or liabilities are subsequently recognized due to expected transactions involving hedged items, the valuation gain or loss accumulated in the equity as other comprehensive income is removed from the equity and included in the initial book value of the recognized non-monetary assets or liabilities. Such transfers do not affect other comprehensive income. Also, if accumulated other comprehensive income is a loss and part or all of the losses are not expected to be recovered in the future periods, the said amount is immediately reclassified to profit or loss.

Hedge accounting ceases to apply only when hedging relationship (or part of it) does not meet the requirements of hedge accounting (even after hedging relationship readjustment, if applicable). This treatment holds in case of lapse, disposal, expiry and exercise of hedging instruments, and this cease of treatment applies prospectively. At the point of cessation of cash flow hedge, the valuation gain or loss recognized as accumulated other comprehensive income continues to be recognized as equity, and is reclassified to profit or loss when the expected transaction is ultimately recognized as profit or loss. However, when transactions are no longer expected to occur, the valuation gain or loss of hedging instrument recognized as accumulated other comprehensive income is immediately reclassified to profit or loss.

- 36 -

(17) Assets (or disposal group) held for sale

The Group classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

(18) Provisions

Provisions are recognized if it has present or contractual obligations as a result of the past event, it is probable that an outflow of resources will be required to settle the obligation and the amount of the obligation is reliably estimated. Provisions are not recognized for the future operating losses.

The Group recognizes provision related to the payment guarantees, loan commitment and litigations. Under the terms of lease agreement, the cost incurred by the Group to recover the leased asset to its original state are recognized as provisions at the commencement of the lease or during a specific period in which the obligation is incurred as a result of the using the asset. The provisions are measured as the best estimate of the expenditure required to recover the asset, which is regularly reviewed and sated to the new situation.

Where there are a number of similar obligations, the probability that an outflow will be required in settlement is determined by considering the obligations as a whole. Although the likelihood of outflow for any one item may be small, if it is probable that some outflow of resources will be needed to settle the obligations as a whole, a provision is recognized.

(19) Capital and compound financial instruments

The Group classifies a financial instrument that it issues as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. A financial liability is a contractual obligation to deliver cash or another financial asset to another entity. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The compound financial instruments are financial instruments where it is neither a financial liability nor an equity instrument because it was designed to contain both equity and debt elements.

If the Group reacquires its own equity instruments, the consideration paid including the direct transaction costs (net of tax expense) are presented as a deduction from total equity until such instruments are retired or reissued. When these instruments are reissued, the consideration received (net of direct transaction costs) is included in the shareholder’s equity.

(20) Financial guarantee contracts

A financial guarantee contract is a contract where the issuer must pay a certain amount of money in order to compensate losses suffered by the creditor when debtor defaults on a debt instrument in accordance with original or modified contractual terms.

A financial guarantee is initially measured at fair value and is subsequently measured at the higher of the amounts below unless it is designated to be measured at FVTPL or when it arises from disposal of an asset.

- Loss allowance in accordance with K-IFRS 1109

- Initial book value less accumulated profit measured in accordance with K-IFRS 1115

- 37 -

(21) Employee benefits and pensions

The Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by the employees. Also, the Group recognizes expenses and liabilities in the case of accumulating compensated absences when the employees render services that entitle their right to future compensated absences. Similarly, the Group recognizes expenses and liabilities for customary profit distribution or bonuses when the employees render services, even though the Group does not have legal obligation to do so because it can be construed as constructive obligation.

The Group is operating defined contribution plans and defined benefit plans. Contributions to defined contribution plans are recognized as an expense when employees have rendered services entitling them to receive the benefits. For defined benefit plans, the defined benefit liability is calculated through an actuarial assessment using the projected unit credit method every end of the reporting period, conducted by professional actuaries. Remeasurement, comprising actuarial gains and losses, the return on plan assets (excluding interest), and the effect of the changes to the asset ceiling (if applicable) is reflected immediately in the separate statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur.

Remeasurement recognized in the consolidated statement of comprehensive income is not reclassified to profit or loss in the subsequent periods. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are composed of service cost (including current service cost and past service cost, as well as gains and losses on curtailments and settlements), net interest expense (income) and remeasurement.

The Group presents the service cost and net interest expense (income) components in profit or loss, and the remeasurement component in other comprehensive income. Curtailment gains and losses are accounted for as past service costs.

The retirement benefit obligation recognized in the consolidated statement of financial position represents the actual deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from this calculation is recognized as an asset limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.

Liabilities for termination benefits are recognized at the earlier of either the date when the Group is no longer able to cancel its proposal for termination benefits or the date when the Group has recognized the cost of restructuring that accompanies the payment of termination benefits.

- 38 -

(22) Income taxes

Income tax expense is composed of current tax and deferred tax. That is, income tax expense is composed of taxes payable or refundable during the period and deferred taxes calculated by applying asset-liability method to taxable and deductible temporary differences arising from operating loss and tax credit carryforwards. Temporary differences are the differences between the carrying values of assets and liabilities for financial reporting purposes and their tax bases. Deferred income tax benefit or expense is recognized for the change in deferred tax assets or liabilities. Deferred tax assets and liabilities are measured as of the reporting date using the enacted or substantively enacted tax rates expected to apply in the period in which the liability is settled or asset realized. Deferred tax assets, including the carryforwards of unused tax losses, are recognized to the extent it is probable that the deferred tax assets will be realized.

Deferred income tax assets and liabilities are offset if, and only if, the Group has a legally enforceable right to offset current tax assets against current tax liabilities, and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority or when the entity intends to settle current tax liabilities and assets on a net basis with different taxable entities.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill. Deferred tax assets or liabilities are not recognized if they arise from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity or when it arises from business combination.

The tax uncertainty arises from the compensation claim filed by the Group, and the refund litigation for the amount of tax levied by the tax authority due to differences in tax law analysis

In response, the Group paid taxes in accordance with K-IFRS 2123 due to the tax authority’s claim but recognized as a corporate tax asset if it is highly probable of a refund in the future.

(23) Criteria of calculating earnings per share (“EPS”)

Basic EPS is a calculation of net income per each common stock. It is calculated by dividing net income attributable to ordinary shareholders by the weighted-average number of common shares outstanding. Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of all dilutive potential common shares.

- 39 -

3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS

The significant accounting estimates and assumptions are continuously being evaluated based on numerous factors including historical experiences and expectations of future events considered to be reasonably possible. Actual results can differ from those estimates based on such definitions. The accounting estimates and assumptions that contain significant risk of materially changing current book values of assets and liabilities in the next accounting periods are as follows:

(1) Income taxes

The Group has recognized current and deferred taxes based on best estimates of expected future income tax effect arising from the Group’s operations until the end of the current reporting period. However, actual tax payment may not be identical to the related assets and/or liabilities already recognized, and these differences may affect current taxes and deferred tax assets/liabilities at the time when income tax effects are finalized. Deferred tax assets relating to tax losses carried forward and deductible temporary differences are recognized only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the deductible temporary differences can be utilized. In this case the Group’s evaluation considers various factors such as estimated future taxable profit based on forecasted operating results, which are based on historical financial performance. The Group is reviewing the book value of deferred tax assets every end of the reporting period and in the event that the possibility of earning future taxable income changes, the deferred tax assets are adjusted up to taxable income sufficient to use deductible temporary differences.

(2) Valuation of financial instruments

Financial assets at FVTPL and FVTOCI are recognized in the consolidated financial statements at fair value. All derivatives are measured at fair value. Valuation techniques are required in order to determine fair values of financial instruments where observable market prices do not exist. Financial instruments that are not actively traded and have low price transparency will have less objective fair value and require broad judgment in liquidity, concentration, uncertainty in market factors and assumption in price determination and other risks.

As described in Note 2-(9)-5), ‘Fair value of financial assets and liabilities’, when valuation techniques are used to determine the fair value of a financial instrument, various general and internally developed techniques are used, and various types of assumptions and variables are incorporated during the process.

(3) Impairment of financial instruments

K-IFRS 1109 requires entities to measure loss allowance equal to 12-month expected credit losses or lifetime expected credit losses after classifying financial assets into one of the three stages, which depends on the degree of increase in credit risk after their initial recognition.

	Stage 1	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 credit losses due to possible defaults on financial instruments within a 12-month period from the year-end.	Expected lifetime credit losses: Expected credit losses from all possible defaults during the expected lifetime of the financial instruments.

(*) Credit risk may be considered to not have been significantly increased when credit risk is low at year-end.

The Group has estimated the allowance for credit losses based on reasonable and supportable information that was available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

- 40 -

Probability of default (PD) and Loss given default (LGD) for each category of financial asset is being calculated by considering factors such as debtor type, credit rating and portfolio. The estimates are regularly reviewed in order to reduce discrepancies with actual losses.

In measuring the expected credit losses, the Group is also using reasonable and supportable macroeconomic indicators such as economic growth rates, interest rates, market index rates, etc., in order to forecast future economic conditions.

The Group is conducting the following procedures to estimate and apply future economic forecast information.

- Development of prediction models by analyzing the correlation between default rates of corporate and retail exposures per year and macroeconomic indicators

- Calculation of predicted default rate incorporating future economic forecasts by applying estimated macroeconomic indicators provided by verified institutions such as Bank of Korea and National Assembly Budget Office to the prediction model developed.

At the end of every reporting period, the Group evaluates whether credit risk reflected forward-looking information has significantly been increased since the date of initial recognition. When evaluating whether credit risk has significantly been increased, the changes in the probability of default over the financial instrument’s remaining life is used instead of changes in the amount of expected credit losses. The Group performs the above evaluation with distinctions made to corporate and retail exposures, and indicators of significant increase in credit risk are as follows:

Corporate Exposures	Retail Exposures
Asset quality level ‘Precautionary’ or lower	Asset quality level ‘Precautionary’ or lower
More than 30 days past due	More than 30 days past due
‘Warning’ level in early warning system	Significant decrease in credit rating (*)
Debtor experiencing financial difficulties (Capital impairment, Adverse opinion or Disclaimer of opinion by external auditors)
Significant decrease in credit rating (*)

(*) Determining whether there has been a significant decrease in the credit rating of corporate and retail exposures applies only to credit ratings that are measured through 12-month expected credit loss. The Bank has applied the above indicators of significant decrease in credit rating since initial recognition as follows, and the estimation method is regularly being monitored.

	Credit rating	Significant increased indicator of the credit rating
Corporate	AAA ~ A+	More than 4 steps
	A- ~ BBB	More than 3 steps
	BBB- ~ BB+	More than 2 steps
	BB ~ BB-	More than 1 step
Retail	1 ~ 3	More than 3 steps
	4 ~ 5	More than 2 steps
	6 ~ 10	More than 1 step

The Group sees no significant increase in credit risk after initial recognition for debt securities, etc. with a credit rating of A + or higher, which are deemed to have low credit risk at the end of the reporting period

- 41 -

The Group concludes that credit is impaired when financial assets are under conditions stated below:

- When principal of loan is overdue for 90 days or longer due to significant deterioration in credit

- For loans overdue for less than 90 days, when it is determined that not even a portion of the loan will be recovered unless claim actions such as disposal of collaterals are taken

- When other objective indicators of impairment have been noted for the financial asset.

The Group determines which loan is subject to write-off in accordance with internal guidelines and writes off loan receivables when it is determined that the loans are practically irrecoverable. For example, loans are practically irrecoverable when application is made for rehabilitation under the Debtor Rehabilitation and Bankruptcy Act and loans are confirmed as irrecoverable by the court’s decision to waive debtor’s obligation, or when it is impossible to recover the loan amount through legal means such as auctioning of debtor’s assets or through any other means of recovery available. Notwithstanding the write-off, the Group may still exercise its right of collection after the asset has been written off in accordance with its collection policies.

(4) Defined benefit plan

The Group operates a defined benefit pension plan. Defined benefit obligation is calculated at every end of the reporting period by performing actuarial valuation, and estimation of assumptions such as discount rate, expected wage growth rate and mortality rate is required to perform such actuarial valuation. The defined benefit plan, due to its long-term nature, contains significant uncertainties in its estimates.

- 42 -

4. RISK MANAGEMENT

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

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

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

(1) Credit risk

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

1) Credit risk management

The Group considers the probability of failure in performing the obligation of its counterparties, credit exposure to the counterparty, the related default risk and the rate of default loss. The Group uses the credit rating model to assess the possibility of counterparty’s default risk; and when assessing the obligor’s credit grade, the Group utilizes credit grades derived using statistical methods.

In order to manage credit risk limit, the Group establishes the appropriate credit line per obligor, company or industry. It monitors obligor’s credit line, total exposures and loan portfolios when approving the loan.

The Group mitigates credit risk resulting from the obligor’s credit condition by using financial and physical collateral, guarantees, netting agreements and credit derivatives. The Group has adopted the entrapment method to mitigate its credit risk. Credit risk mitigation is reflected in qualifying financial collateral, trade receivables, guarantees, residential and commercial real estate and other collaterals. The Group regularly performs a revaluation of collateral reflecting such credit risk mitigation.

- 43 -

2) Maximum exposure to credit risk

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

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

		December 31, 2019		December 31, 2018
Loans and other financial assets at amortized cost	Korean treasury and government agencies		14,776,596		13,547,154
	Banks		17,147,119		22,282,857
	Corporates		99,503,081		96,619,393
	Consumers		150,774,306		149,998,911
	Sub-total		282,201,102		282,448,315
Financial assets at FVTPL (*)	Deposit		27,901		26,935
	Debt securities		1,298,105		1,824,155
	Loans		9,037		385,450
	Derivative assets		2,921,221		2,026,079
	Sub-total		4,256,264		4,262,619
Financial assets at FVTOCI	Debt securities		26,779,977		17,112,249
Securities at amortized cost	Debt securities		20,320,539		22,932,559
Derivative assets	Derivative assets (Designated for hedging)		111,764		35,503
Off-balance accounts	Guarantees		12,618,918		12,666,417
	Unused loan commitments		70,303,900		97,796,704
	Sub-total		82,922,818		110,463,121
	Total		416,592,464		437,254,366

(*) Puttable financial instruments are not included.

- 44 -

a) Credit risk exposure by geographical areas

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

	December 31, 2019
	Korea		China		USA		UK		Japan		Others (*)		Total
Loans and other financial assets at amortized cost		256,824,697		5,107,935		5,077,666		1,844,374		1,172,209		12,174,221		282,201,102
Securities at amortized cost		20,104,604		—		66,747		—		—		149,188		20,320,539
Financial assets at FVTPL		4,255,159		381		—		—		724		—		4,256,264
Financial assets at FVTOCI		24,543,608		332,319		144,601		102,311		2		1,657,136		26,779,977
Derivative assets (Designated for hedging)		111,764		—		—		—		—		—		111,764
Off-balance accounts		79,254,829		1,211,857		387,795		78,850		46,662		1,942,825		82,922,818
Total		385,094,661		6,652,492		5,676,809		2,025,535		1,219,597		15,923,370		416,592,464

	December 31, 2018
	Korea		China		USA		UK		Japan		Others (*)		Total
Loans and other financial assets at amortized cost		261,538,144		4,592,153		4,597,119		1,526,532		893,354		9,301,013		282,448,315
Securities at amortized cost		22,757,048		—		70,578		—		—		104,933		22,932,559
Financial assets at FVTPL		4,261,110		1,243		—		—		266		—		4,262,619
Financial assets at FVTOCI		15,697,518		261,085		103,755		24,960		2,247		1,022,684		17,112,249
Derivative assets (Designated for hedging)		35,503		—		—		—		—		—		35,503
Off-balance accounts		107,632,858		801,978		343,323		136,727		35,000		1,513,235		110,463,121
Total		411,922,181		5,656,459		5,114,775		1,688,219		930,867		11,941,865		437,254,366

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

- 45 -

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):

	December 31, 2019
	Service		Manufacturing		Finance and insurance		Construction		Individuals		Others		Total
Loans and other financial assets at amortized cost		50,039,309		32,446,042		35,252,933		2,999,644		146,868,586		14,594,588		282,201,102
Securities at amortized cost		8,545,838		—		10,979,001		364,591		—		431,109		20,320,539
Financial assets at FVTPL		122,809		120,181		3,065,124		9,057		15,430		923,663		4,256,264
Financial assets at FVTOCI		85,609		139,098		18,968,457		—		9,241		7,577,572		26,779,977
Derivative assets (Designated for hedging)		—		—		111,764		—		—		—		111,764
Off-balance accounts		15,679,156		22,883,535		10,105,862		3,678,937		23,774,589		6,800,739		82,922,818
Total		74,472,721		55,588,856		78,483,141		7,052,229		170,667,846		30,327,671		416,592,464

	December 31, 2018
	Service		Manufacturing		Finance and insurance		Construction		Individuals		Others		Total
Loans and other financial assets at amortized cost		48,316,081		34,967,700		40,337,838		3,295,967		145,715,074		9,815,655		282,448,315
Securities at amortized cost		1,157,512		—		13,414,743		527,847		—		7,832,457		22,932,559
Financial assets at FVTPL		120,659		153,159		3,117,845		16,118		7,614		847,224		4,262,619
Financial assets at FVTOCI		382,409		109,749		13,017,646		224,665		5,535		3,372,245		17,112,249
Derivative assets (Designated for hedging)		—		—		35,503		—		—		—		35,503
Off-balance accounts		17,645,104		22,300,388		9,654,685		4,146,708		49,948,865		6,767,371		110,463,121
Total		67,621,765		57,530,996		79,578,260		8,211,305		195,677,088		28,634,952		437,254,366

- 46 -

3) Credit risk exposure

a) Financial assets

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

	December 31, 2019
	Stage 1				Stage 2				Stage 3		Total		Loss allowance			Total, net
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Loans and other financial assets at amortized cost		245,680,458		19,326,404		8,133,469		9,134,828		1,249,380		283,524,539		(1,323,437	)		282,201,102
Korean treasury and government agencies		14,769,487		10,390		—		—		1		14,779,878		(3,282	)		14,776,596
Banks		16,885,709		109,667		150,318		—		21,907		17,167,601		(20,482	)		17,147,119
Corporates		81,111,077		15,049,095		446,679		3,068,152		771,893		100,446,896		(943,815	)		99,503,081
General business		45,740,212		6,039,033		402,467		1,421,602		533,016		54,136,330		(643,530	)		53,492,800
Small- and medium-sized enterprise		31,378,069		8,507,800		44,212		1,586,865		225,544		41,742,490		(276,815	)		41,465,675
Project financing and others		3,992,796		502,262		—		59,685		13,333		4,568,076		(23,470	)		4,544,606
Consumers		132,914,185		4,157,252		7,536,472		6,066,676		455,579		151,130,164		(355,858	)		150,774,306
Securities at amortized cost		20,326,050		—		—		—		—		20,326,050		(5,511	)		20,320,539
Financial assets at FVTOCI (*4)		26,669,417		110,560		—		—		—		26,779,977		(8,558	)		26,779,977
Total		292,675,925		19,436,964		8,133,469		9,134,828		1,249,380		330,630,566		(1,337,506	)		329,301,618

	December 31, 2019
	Collateral value
	Stage 1		Stage 2		Stage 3		Total
Loans and other financial assets at amortized cost		169,438,540		14,451,806		681,699		184,572,045
Korean treasury and government agencies		—		—		—		—
Banks		612,200		2,028		—		614,228
Corporates		55,602,819		2,335,496		384,420		58,322,735
General business		22,291,349		1,023,766		240,771		23,555,886
Small- and medium-sized enterprise		31,517,538		1,311,730		143,649		32,972,917
Project financing and others		1,793,932		—		—		1,793,932
Consumers		113,223,521		12,114,282		297,279		125,635,082
Securities at amortized cost		—		—		—		—
Financial assets at FVTOCI (*4)		—		—		—		—
Total		169,438,540		14,451,806		681,699		184,572,045

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

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

(*3) Credit grade of corporates are BBB- ~ C, and consumers are grades 7 ~ 10.

(*4) Financial assets at FVTOCI has been disclosed as the amount before deducting loss allowance because loss allowance does not reduce the carrying amount

- 47 -

	December 31, 2018
	Stage 1				Stage 2				Stage 3		Total		Loss allowance			Total, net
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Loans and other financial assets at amortized cost		252,911,704		17,624,416		6,330,382		5,739,850		1,693,148		284,299,500		(1,851,185	)		282,448,315
Korean treasury and government agencies		13,549,305		1,009		1		—		—		13,550,315		(3,161	)		13,547,154
Banks		22,162,966		105,583		27,777		—		14,307		22,310,633		(27,776	)		22,282,857
Corporates		77,152,005		15,550,301		655,907		3,424,215		1,034,030		97,816,458		(1,197,065	)		96,619,393
General business		43,165,455		6,474,057		526,303		1,723,704		716,722		52,606,241		(816,783	)		51,789,458
Small- and medium-sized enterprise		29,510,917		8,527,542		107,998		1,547,761		277,825		39,972,043		(335,469	)		39,636,574
Project financing and others		4,475,633		548,702		21,606		152,750		39,483		5,238,174		(44,813	)		5,193,361
Consumers		140,047,428		1,967,523		5,646,697		2,315,635		644,811		150,622,094		(623,183	)		149,998,911
Securities at amortized cost		22,939,039		—		195		—		250		22,939,484		(6,925	)		22,932,559
Financial assets at FVTOCI (*4)		16,940,654		146,443		25,153		—		—		17,112,250		(6,177	)		17,112,250
Total		292,791,397		17,770,859		6,355,730		5,739,850		1,693,398		324,351,234		(1,864,287	)		322,493,124

	December 31, 2018
	Collateral value
	Stage 1		Stage 2		Stage 3		Total
Loans and other financial assets at amortized cost		163,329,105		8,836,440		698,593		172,864,138
Korean treasury and government agencies		11,600		—		—		11,600
Banks		361,024		3,334		—		364,358
Corporates		51,595,949		2,509,620		426,325		54,531,894
General business		19,907,948		1,167,993		241,651		21,317,592
Small- and medium-sized enterprise		29,780,716		1,291,222		184,674		31,256,612
Project financing and others		1,907,285		50,405		—		1,957,690
Consumers		111,360,532		6,323,486		272,268		117,956,286
Securities at amortized cost		—		—		—		—
Financial assets at FVTOCI (*4)		—		—		—		—
Total		163,329,105		8,836,440		698,593		172,864,138

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

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

(*3) Credit grade of corporates are BBB- ~ C, and consumers are grades 7 ~ 10.

(*4) Financial assets at FVTOCI has been disclosed as the amount before deducting loss allowance because loss allowance does not reduce the carrying amount

- 48 -

b) Guarantees and loan commitments

The credit quality of the guarantees and loan commitments as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019
Financial assets	Stage 1				Stage 2				Stage 3		Total
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Off-balance accounts
Guarantees		10,952,919		1,333,561		355		223,657		108,426		12,618,918
Loan Commitments		65,582,464		2,865,739		1,270,212		566,983		18,502		70,303,900
Total		76,535,383		4,199,300		1,270,567		790,640		126,928		82,922,818

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

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

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

	December 31, 2018
Financial assets	Stage 1				Stage 2				Stage 3		Total
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Off-balance accounts
Guarantees		11,212,772		1,063,551		7,147		261,599		121,348		12,666,417
Loan commitments		91,734,567		3,632,586		1,529,330		880,518		19,703		97,796,704
Total		102,947,339		4,696,137		1,536,477		1,142,117		141,051		110,463,121

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

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

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

4) Collateral and other credit enhancements

There have been no significant decreases in the value of collateral or other credit enhancements held by the Group during the current year or significant changes in collateral or other credit enhancements due to changes in the collateral policy of the Group. As of December 31, 2019, there are no financial assets that do not recognize the allowance for losses due to collateral.

5) For the financial assets that record loss allowance as total expected credit loss, the amortized cost before the change in contractual cash flows is 18,735 million won, and the net loss due to the change is 82 million won.

6) As the Group manages receivables that have not lost the right of claim to the debtor for the grounds of incomplete statute limitation and uncollected receivables under the related laws as receivable charge-offs, the balance as of December 31, 2019 and 2018 are 8,362,692 million won and 9,578,796 million won, respectively.

- 49 -

(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.

For trading activities and non-trading activities, the Group avoids, bears or mitigates risks by identifying the underlying source of risks, measuring parameters and evaluating their appropriateness. The process is called market risk management.

1) Market risk management for trading activities

The Group uses both a standard-based and an internal model-based approach to measure market risk. The standard-based approach is used to calculate individual market risk of owned capital while the internal model-based approach is used to calculate general capital market risk and it is used to measure internal risk management measure.

The Group measures Value at Risk (“VaR,” maximum losses) with Historical Simulation Method based on 99% confidence level and 10-day holding period of positions, and calculates the required market risk capital using the internal model, which has been approved by Financial Supervisory Service in Korea. For the internal management purpose, VaR is measured based on 99% confidence level and one-day holding period of positions and the limit management is performed on a daily basis. The validation of the model is assessed through the performance of back testing, which is to compare the actual gain or loss to the VaR measurements on a daily basis.

In addition, for crisis management, the Group performs stress testing on a monthly basis, which is to measure the expected loss amount in case of extreme situation, such as IMF bailout in 1997 or global financial crisis in 2008.

Each year, the Risk Management Committee establishes the VaR limit, loss limit and risk capital limit discriminated by managerial unit (group, department, team, risk element, etc.), and as for minor operating units, the limits are decided by position operating department up to given limit. Limit compliance is independently monitored by risk general department and periodically reported to risk management committee and risk management council.

2) Market risk management for non-trading activities

For non-trading sectors of the Group, the risk is managed and measured by DNII (change in Net Interest Income) and DEVE (change in Economic Value of Equity) through NII (Net Interest Income) and NPV (Net Present Value) simulation, and for the remaining subsidiaries, the risk is managed and measured with interest rate EaR (Earning at Risk, maximum of the expected change for profit or loss) and interest rate VaR that are in accordance with BIS Framework.

NII is a profit-based indicator for displaying the profit changes in the 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 an 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. Meanwhile, DNII means possible variation of net interest income induced by changes of interest rate during the certain future period of time (e.g. 1year), and DEVE is possible variation of present value of assets, liabilities, off-balance accounts and ultimately, economic value of shareholder’s equity which is incurred by the same reason as DNII.

- 50 -

a) Trading activities

The minimum, maximum and average VaR for the year ended December 31, 2019 and 2018, respectively, and the VaR as of December 31, 2019 and 2018, respectively, are as follows (Unit: Korean Won in millions):

	December 31, 2019			For the year ended December 31, 2019									December 31, 2018			For the year ended December 31, 2018
Risk factor				Average			Maximum			Minimum						Average			Maximum			Minimum
Interest rate		5,052			3,406			5,725			1,176			3,107			3,702			5,528			1,730
Stock price		3,730			3,203			5,935			1,146			2,353			2,669			5,081			1,138
Foreign currencies		5,028			5,033			6,469			4,395			4,972			4,678			6,136			3,439
Commodity price		—			1			32			—			—			3			24			—
Diversification		(6,233	)		(5,127	)		(9,229	)		(2,339	)		(4,445	)		(4,869	)		(8,155	)		(1,815	)
Total VaR(*)		7,577			6,516			8,932			4,378			5,987			6,183			8,614			4,492

(*) VaR (Value at Risk): Maximum expected daily losses at 99% confidence level

b) Non-trading activities

For assets and liabilities as of December 31, 2019 that include Bank and consolidated trusts and subsidiaries of the Bank, details of DEVE and DNII calculated based on interest rate risk in banking book (IRRBB) are as follows (Unit: Korean Won in millions):

December 31, 2019
DEVE(*1)	DNII(*2)
490,981	162,023

(*1) DEVE: change in Economic Value of Equity

(*2) DNII: change in Net Interest Income

- 51 -

NII and NPV according to interest rate change scenario for assets and liabilities held by the Bank and connected trusts as of December 31, 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2018
	NII(*1)		NPV(*2)
Base case		4,895,332		24,636,678
Base case (Prepay)		4,887,799		24,225,946
IR 100bp up		5,575,470		24,415,761
IR 100bp down		4,329,543		24,907,344
IR 200bp up		6,603,132		24,232,738
IR 200bp down		3,508,859		25,245,667
IR 300bp up		7,560,155		24,079,415
IR 300bp down		3,352,267		25,680,084

(*1) NII: Net Interest Income

(*2) NPV: Net Portfolio Value

Interest 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.

As of December 31, 2018, the interest EaR and VaR calculated based on the BIS Framework of subsidiaries other than the Bank, consolidated trusts are as follows (Unit: Korean Won in millions):

December 31, 2018
EaR (*1)	VaR (*2)
248,364	141,484

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

(*2) VaR (Value at Risk): Maximum expected losses

- 52 -

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):

	December 31, 2019
	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		146,193,133		48,300,144		11,816,952		9,862,931		55,239,556		4,920,615		276,333,331
Financial assets at FVTPL		23,808		1,352		37		36		1,161		13,347		39,741
Financial assets at FVTOCI		5,404,435		5,486,008		3,450,669		3,174,789		9,366,714		309,364		27,191,979
Securities at amortized cost		1,844,868		1,696,004		738,383		1,409,549		14,869,227		858,142		21,416,173
Total		153,466,244		55,483,508		16,006,041		14,447,305		79,476,658		6,101,468		324,981,224
Liability:
Deposits due to customers		115,999,212		46,176,835		32,506,154		26,207,212		42,787,093		59,305		263,735,811
Borrowings		11,716,603		1,910,759		1,048,991		706,952		3,230,108		509,359		19,122,772
Debentures		1,775,711		2,326,926		2,770,855		2,002,444		13,872,930		1,487,529		24,236,395
Total		129,491,526		50,414,520		36,326,000		28,916,608		59,890,131		2,056,193		307,094,978

	December 31, 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		159,893,080		45,387,214		8,878,060		9,903,959		46,459,450		4,201,379		274,723,142
Financial assets at FVTPL		371,984		32,278		24,951		64,838		145,121		27,536		666,708
Financial assets at FVTOCI		2,579,442		1,775,435		1,486,953		2,223,494		9,289,742		185,320		17,540,386
Securities at amortized cost		2,449,416		2,251,180		1,735,698		1,946,948		15,177,608		402,671		23,963,521
Total		165,293,922		49,446,107		12,125,662		14,139,239		71,071,921		4,816,906		316,893,757
Liability:
Deposits due to customers		100,232,916		44,207,416		29,419,951		35,427,657		40,130,055		72,276		249,490,271
Borrowings		9,971,680		1,924,390		670,404		518,167		2,723,156		626,364		16,434,161
Debentures		2,143,916		2,416,483		2,201,070		2,584,230		18,955,400		2,403,077		30,704,176
Total		112,348,512		48,548,289		32,291,425		38,530,054		61,808,611		3,101,717		296,628,608

- 53 -

3) Currency risk

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

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

		December 31, 2019
		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		22,869		26,477,960		150,462		1,600,140		31,392		5,202,952		2,258		2,929,311		5,243,487		41,453,850
	Financial assets at FVTPL		157		181,600		5,322		56,602		—		—		105		135,827		62,813		436,842
	Financial assets at FVTOCI		2,675		3,097,614		—		—		2,005		332,319		25		33,017		406,753		3,869,703
	Securities at amortized cost		319		369,677		—		—		—		—		40		52,139		97,092		518,908
	Total		26,020		30,126,851		155,784		1,656,742		33,397		5,535,271		2,428		3,150,294		5,810,145		46,279,303
Liability	Financial liabilities at FVTPL		251		291,102		4,415		46,957		—		—		68		87,776		83,790		509,625
	Deposits due to customers		13,208		15,291,671		166,108		1,766,526		27,739		4,597,467		1,727		2,240,884		3,245,229		27,141,777
	Borrowings		6,588		7,627,665		11,061		117,634		17		2,743		515		668,060		499,046		8,915,148
	Debentures		3,519		4,074,200		—		—		—		—		105		136,230		96,646		4,307,076
	Other financial liabilities		2,966		3,434,559		11,240		119,529		3,079		510,281		359		466,240		6,473		4,537,082
	Total		26,532		30,719,197		192,824		2,050,646		30,835		5,110,491		2,774		3,599,190		3,931,184		45,410,708
Off-balance accounts			6,550		7,583,651		34,316		364,946		4,525		749,973		560		726,323		459,726		9,884,619

		December 31, 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		20,406		22,816,027		167,419		1,696,255		29,880		4,863,230		1,994		2,550,147		4,742,340		36,667,999
	Financial assets at FVTPL		74		82,197		1,425		14,434		—		—		59		75,169		79,584		251,384
	Financial assets at FVTOCI		1,472		1,645,595		—		—		1,604		261,085		—		—		729,581		2,636,261
	Securities at amortized cost		52		58,489		—		—		—		—		—		—		175,552		234,041
	Total		22,004		24,602,308		168,844		1,710,689		31,484		5,124,315		2,053		2,625,316		5,727,057		39,789,685
Liability	Financial liabilities at FVTPL		118		131,927		1,956		19,815		—		—		55		70,250		121,658		343,650
	Deposits due to customers		11,159		12,477,154		169,770		1,720,072		23,967		3,900,923		887		1,135,149		4,392,936		23,626,234
	Borrowings		6,606		7,386,616		3,834		38,847		381		61,947		286		365,585		505,541		8,358,536
	Debentures		3,645		4,075,084		—		—		—		—		—		—		285,339		4,360,423
	Other financial liabilities		2,522		2,820,290		28,955		293,362		1,818		295,919		193		246,584		18,527		3,674,682
	Total		24,050		26,891,071		204,515		2,072,096		26,166		4,258,789		1,421		1,817,568		5,324,001		40,363,525
Off-balance accounts			7,453		8,333,153		33,347		337,868		1,557		253,366		474		606,714		823,655		10,354,756

- 54 -

(3) Liquidity risk

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

1) Liquidity risk management

Liquidity risk management is to prevent potential cash shortages as a result of mismatching the use of funds (assets) and sources of funds (liabilities) or unexpected cash outflows. The financial liabilities that are relevant to liquidity risk are incorporated within the scope of risk management. Derivatives instruments are excluded from those financial liabilities as they reflect expected cash flows for a pre-determined period.

Assets and liabilities are grouped by account under Asset Liability Management (“ALM”) in accordance with the characteristics of the account. The Group manages liquidity risk by identifying the maturity gap and such gap ratio through various cash flows analysis (i.e. based on remaining maturity and contract period, etc.), while maintaining the gap ratio at or below the target limit.

2) Maturity analysis of non-derivative financial liabilities

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

	December 31, 2019
	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		115,156		—		—		—		—		—		115,156
Deposits due to customers		165,400,761		37,167,838		24,506,399		30,749,525		6,590,119		1,877,594		266,292,236
Borrowings		8,207,571		2,948,384		2,162,846		1,880,424		3,647,461		520,937		19,367,623
Debentures		1,775,711		2,326,926		2,770,855		2,002,444		13,872,930		1,487,529		24,236,395
Lease liabilities		43,226		40,097		34,940		31,939		212,858		40,698		403,758
Other financial liabilities		10,237,132		50,758		116,798		8,198		7,288		2,660,368		13,080,542
Total		185,779,557		42,534,003		29,591,838		34,672,530		24,330,656		6,587,126		323,495,710

	December 31, 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		191,825		—		—		—		—		—		191,825
Deposits due to customers		145,187,689		33,825,662		22,186,833		42,046,740		7,098,907		1,870,334		252,216,165
Borrowings		6,373,835		2,846,294		1,874,069		1,607,985		3,156,128		642,017		16,500,328
Debentures		2,143,916		2,416,483		2,201,070		2,584,230		18,955,400		2,403,077		30,704,176
Other financial liabilities		14,240,022		44,572		169,996		1,201		90,615		2,288,560		16,834,966
Total		168,137,287		39,133,011		26,431,968		46,240,156		29,301,050		7,203,988		316,447,460

- 55 -

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

	December 31, 2019
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		115,156		—		—		—		—		—		115,156
Deposits due to customers		174,235,496		38,690,463		23,520,964		23,618,431		5,547,232		150,234		265,762,820
Borrowings		8,207,571		2,948,384		2,162,846		1,880,424		3,647,461		520,937		19,367,623
Debentures		1,775,711		2,326,926		2,770,855		2,002,444		13,872,930		1,487,529		24,236,395
Lease liabilities		43,226		40,097		34,940		31,939		212,858		40,698		403,758
Other financial liabilities		10,237,132		50,758		116,798		8,198		7,288		2,660,368		13,080,542
Total		194,614,292		44,056,628		28,606,403		27,541,436		23,287,769		4,859,766		322,966,294

	December 31, 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		191,825		—		—		—		—		—		191,825
Deposits due to customers		163,787,990		38,126,886		20,993,436		23,262,092		5,230,533		17,649		251,418,586
Borrowings		6,373,835		2,846,294		1,874,069		1,607,985		3,156,128		642,017		16,500,328
Debentures		2,143,916		2,416,483		2,201,070		2,584,230		18,955,400		2,403,077		30,704,176
Other financial liabilities		14,240,022		44,572		169,996		1,201		90,615		2,288,560		16,834,966
Total		186,737,588		43,434,235		25,238,571		27,455,508		27,432,676		5,351,303		315,649,881

3) Maturity analysis of derivative financial liabilities

Derivatives held for trading purpose are not managed in accordance with their contractual maturity, since the Group holds such financial instruments with the purpose of disposing or redemption before their maturity. As such, those derivatives are incorporated as “within 3 months” in the table below. Derivatives designated for hedging purpose are estimated by offsetting cash inflows and cash outflows.

The cash flow by the maturity of derivative financial liabilities as of December 31, 2018 and 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
December 31, 2019	Cash flow hedge		3			3			3			3		31		—		43
	Trading		2,841,138			—			—			—		—		—		2,841,138
December 31, 2018	Cash flow hedge		(1,880	)		(683	)		8,080			14,133		14,104		—		33,754
	Fair value hedge		(3,835	)		9,448			(3,541	)		9,133		6,991		—		18,196
	Trading		2,090,861			—			—			—		—		—		2,090,861

- 56 -

4) Maturity analysis of off-balance accounts (Guarantees and loan commitments)

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

	December 31, 2019		December 31, 2018
Guarantees		12,618,918		12,666,417
Loan commitments		70,303,900		97,796,704

(4) Operational risk

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

1) Operational risk management

The Group has been running the operational risk management system under Basel II. The Group developed Advanced Measurement Approaches (“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.

2) Operational risk measurement

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

- 57 -

(5) Capital management

The Group complies with the standard of capital adequacy provided by financial regulatory authorities. The capital adequacy standard is based on Basel published by Basel III Committee on Banking Supervision in Bank for International Settlement in 2010 and was implemented in Korea in December 2013. The capital adequacy ratio is calculated by dividing own capital by asset (weighted with a risk premium – risk weighted assets) based on the consolidated financial statements of the Group.

According to the above regulations, the Group is required to meet the following new minimum requirements: Common Equity Tier 1 capital ratio of 8.00% and 7.13%, a Tier 1 capital ratio of 9.50% and 8.63% and a minimum total capital ratio of 11.5% and 10.63% as of December 31, 2019 and December 31, 2018, respectively.

Details of the Group’s capital adequacy ratio as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Tier 1 capital		17,321,301			17,275,539
Other Tier 1 capital		3,466,009			3,147,680
Tier 2 capital		3,526,902			3,827,573
Total risk-adjusted capital		24,314,212			24,250,792
Risk-weighted assets for credit risk		139,043,544			142,626,069
Risk-weighted assets for market risk		2,706,955			2,372,451
Risk-weighted assets for operational risk		9,197,928			9,972,430
Additional capital under capital floor		6,941,108			—
Total risk-weighted assets		157,889,535			154,970,950
Common Equity Tier 1 ratio		10.97	%		11.15	%
Tier 1 capital ratio		13.17	%		13.18	%
Total capital ratio		15.40	%		15.65	%

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

- 58 -

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

	For the year ended December 31, 2019
	Consumer banking			Corporate banking			Investment banking			Capital market			Credit cards			Headquarters and others
Net Interest income (expense)
Interest income		3,782,031			3,648,980			152,368			6,635			481,074			1,845,680
Interest expense		(1,158,128	)		(2,549,507	)		—			—			(116,555	)		(1,094,078	)
Inter-segment		(868,580	)		885,816			(174,188	)		63,738			—			93,214
		1,755,323			1,985,289			(21,820	)		70,373			364,519			844,816
Net non-interest Income (expense)
Non-interest income		541,013			662,186			283,304			9,963,528			470,233			(23,976	)
Non-interest expense		(34,268	)		(119,374	)		(80,681	)		(9,877,111	)		(443,950	)		224,877
Inter-segment		126,756			72,052			—			—			—			(198,808	)
		633,501			614,864			202,623			86,417			26,283			2,093
Other income (expense)
General and administrative expense		(1,872,196	)		(913,239	)		(20,586	)		(22,902	)		(120,774	)		(626,447	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(80,181	)		(12,617	)		9,343			(178	)		(172,552	)		51,728
		(1,952,377	)		(925,856	)		(11,243	)		(23,080	)		(293,326	)		(574,719	)
Operating income (expenses)		436,447			1,674,297			169,560			133,710			97,476			272,190
Non-operating income (expenses)		(99,015	)		(23,843	)		41,754			(9,453	)		15,725			(14,826	)
Net income (expense) before income tax expense		337,432			1,650,454			211,314			124,257			113,201			257,364
Income tax expense		(92,794	)		(447,731	)		(58,111	)		(34,171	)		(27,164	)		16,555
Net income (expense)		244,638			1,202,723			153,203			90,086			86,037			273,919
	For the year ended December 31, 2019
	Sub-total			Adjustments(*)			Dis-continued operations			Continuing operations
Net Interest income (expense)
Interest income		9,916,768			376,493			480,723			9,812,538
Interest expense		(4,918,268	)		306,264			(116,162	)		(4,495,842	)
Inter-segment		—			—			—			—
		4,998,500			682,757			364,561			5,316,696
Net non-interest Income (expense)
Non-interest income		11,896,288			(10,138,668	)		397,639			1,359,981
Non-interest expense		(10,330,507	)		9,573,064			(284,772	)		(472,671	)
Inter-segment		—			—			—			—
		1,565,781			(565,604	)		112,867			887,310
Other income (expense)
General and administrative expense		(3,576,144	)		(38,520	)		(120,524	)		(3,494,140	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(204,457	)		(86,344	)		(172,552	)		(118,249	)
		(3,780,601	)		(124,864	)		(293,076	)		(3,612,389	)
Operating income (expenses)		2,783,680			(7,711	)		184,352			2,591,617
Non-operating income (expenses)		(89,658	)		(486,834	)		(628,635	)		52,143
Net income (expense) before income tax expense		2,694,022			(494,545	)		(444,283	)		2,643,760
Income tax expense		(643,416	)		(28,996	)		(27,164	)		(645,248	)
Net income (expense)		2,050,606			(523,541	)		(471,447	)		1,998,512

- 59 -

	For the year ended December 31, 2018
	Consumer banking			Corporate banking			Investment banking			Capital market			Credit cards			Headquarters and others
Net Interest income (expense)
Interest income		3,529,645			3,409,835			152,273			8,945			670,240			1,605,696
Interest expense		(1,021,639	)		(2,168,000	)		(150	)		—			(160,642	)		(983,547	)
Inter-segment		(634,110	)		833,224			(163,962	)		25,963			—			(61,115	)
		1,873,896			2,075,059			(11,839	)		34,908			509,598			561,034
Net non-interest Income (expense)
Non-interest income		678,360			721,096			230,357			7,020,740			665,534			1,214,380
Non-interest expense		(143,704	)		(290,347	)		(53,671	)		(6,964,671	)		(620,687	)		(550,919	)
Inter-segment		132,690			70,016			—			—			—			(202,706	)
		667,346			500,765			176,686			56,069			44,847			460,755
Other income (expense)
General and administrative expense		(1,865,933	)		(868,608	)		(14,318	)		(18,452	)		(170,765	)		(967,923	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(127,220	)		(61,064	)		62,454			(16,861	)		(227,144	)		102,574
		(1,993,153	)		(929,672	)		48,136			(35,313	)		(397,909	)		(865,349	)
Operating income (expenses)		548,089			1,646,152			212,983			55,664			156,536			156,440
Non-operating income (expenses)		(20,208	)		899			32,738			—			(5,547	)		56,829
Net income (expense) before income tax expense		527,881			1,647,051			245,721			55,664			150,989			213,269
Income tax expense		(145,167	)		(445,619	)		(67,573	)		(15,308	)		(36,222	)		(41,088	)
Net income (expense)		382,714			1,201,432			178,148			40,356			114,767			172,181
	For the year ended December 31, 2018
	Sub-total			Adjustments(*)			Dis-continued operations			Continuing operations
Net Interest income (expense)
Interest income		9,376,634			307,865			669,839			9,014,660
Interest expense		(4,333,978	)		300,431			(159,953	)		(3,873,594	)
Inter-segment		—			—			—			—
		5,042,656			608,296			509,886			5,141,066
Net non-interest Income (expense)
Non-interest income		10,530,467			(8,456,014	)		654,923			1,419,530
Non-interest expense		(8,623,999	)		7,611,504			(442,717	)		(569,778	)
Inter-segment		—			—			—			—
		1,906,468			(844,510	)		212,206			849,752
Other income (expense)
General and administrative expense		(3,905,999	)		281,966			(140,121	)		(3,483,912	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(267,261	)		(62,314	)		(244,762	)		(84,813	)
		(4,173,260	)		219,652			(384,883	)		(3,568,725	)
Operating income (expenses)		2,775,864			(16,562	)		337,209			2,422,093
Non-operating income (expenses)		64,711			(19,141	)		(2,447	)		48,017
Net income (expense) before income tax expense		2,840,575			(35,703	)		334,762			2,470,110
Income tax expense		(750,977	)		(2,246	)		(36,222	)		(717,001	)
Net income (expense)		2,089,598			(37,949	)		298,540			1,753,109

(*) These adjustments are performed in order to present intersegment profit or loss adjustments based on managerial accounting as profit or loss in accordance with K-IFRS.

- 60 -

(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 years ended December 31, 2019 and 2018 amounted to 10,702,487 million Won and 10,447,783 million Won, respectively, and revenue from the foreign customers amounted to 1,348,394 million Won and 1,311,169 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 December 31, 2019 and 2018 are 4,509,131 million Won and 3,531,842 million Won, respectively, and foreign subsidiaries are 386,495 million Won and 236,050 million Won, respectively.

(4) Information about major customers

The Group does not have any single customer that generates 10% or more of the Group’s total revenue.

- 61 -

6. CASH AND CASH EQUIVALENTS

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

	December 31, 2019		December 31, 2018
Cash		1,957,984		2,107,850
Foreign currencies		625,986		725,083
Demand deposits		3,518,505		3,512,216
Fixed deposits		59,554		367,474
Total		6,162,029		6,712,623

(2) Significant transactions of investing activities and financing activities not involving cash inflows and outflows are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Changes in other comprehensive income related to valuation of financial assets at FVTOCI		(29,376	)		2,505
Changes in other comprehensive income related to valuation of equity method investments		373			2,958
Changes in other comprehensive income related to valuation gain or loss on cash flow hedge		(1,740	)		(4,646	)
Changes in financial assets at FVTOCI as a result of debt-equity swap		96,527			14,378
Changes in investments in associates due to accounts transfer		—			(89,151	)
Changes in unpaid dividends on hybrid equity securities		(22,269	)		3,569
Changes in equity related to assets held for distribution (sale)		—			(17,342	)
Classified to assets held for distribution (sale) from premises and equipment		95			15,594
Classified to assets held for distribution (sale) from deferred tax assets		—			9,778
Increase in right-of-use assets and lease liabilities		624,306			—

- 62 -

(3) Adjustments of liabilities from financing activities in current year are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
						Not involving cash inflows and outflows
	January 1, 2019		Cash flow			Foreign Exchange			Variation of gains on valuation of hedged items		Others			December 31, 2019
Borrowings		16,202,986		2,843,408			(281,312	)		—		(189,516	)		18,575,566
Debentures		28,725,862		762,422			124,472			85,983		(6,864,331	)		22,834,408
Lease liabilities (*)		382,439		(213,329	)		375			—		219,124			388,609
Total		45,311,287		3,392,501			(156,465	)		85,983		(6,834,723	)		41,798,583

(*) The amount of lease liability at the beginning of the current in applying K-IFRS 1116 is reflected.

	For the year ended December 31, 2018
					Not involving cash inflows and outflows
	January 1, 2018		Cash flow		Foreign Exchange		Variation of gains on valuation of hedged items			Others		December 31, 2018
Borrowings		14,784,706		1,257,121		161,078		—			81		16,202,986
Debentures		27,869,651		602,331		267,339		(25,498	)		12,039		28,725,862
Total		42,654,357		1,859,452		428,417		(25,498	)		12,120		44,928,848

- 63 -

7. FINANCIAL ASSETS AT FVTPL

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

	December 31, 2019		December 31, 2018
Financial assets at fair value through profit or loss mandatorily measured at fair value		6,672,557		6,126,183
Total		6,672,557		6,126,183

(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):

	December 31, 2019		December 31, 2018
Deposits:
Gold banking asset		27,901		26,935
Securities:
Debt securities
Korean treasury and government agencies		521,600		516,173
Financial institutions		390,340		533,393
Corporates		306,165		774,589
Others		80,000		—
Equity securities		634,052		455,666
Capital contributions		483,199		422,481
Beneficiary certificates		1,299,042		985,417
Sub-total		3,714,398		3,687,719
Loans		9,037		385,450
Derivatives assets		2,921,221		2,026,079
Total		6,672,557		6,126,183

(3) Financial assets at fair value through profit or loss designated as upon initial recognition is nil as of December 31, 2018 and 2019

- 64 -

8. FINANCIAL ASSETS AT FVTOCI AND AFS FINANCIAL ASSETS

(1) Details of financial assets at FVTOCI as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Debt securities:
Korean treasury and government agencies		1,152,711		1,358,378
Financial institutions		17,769,924		11,252,790
Corporates		3,906,957		1,824,843
Bond denominated in foreign currencies		3,869,648		2,636,209
Sub-total		26,699,240		17,072,220
Equity securities		848,730		951,174
Securities loaned		80,737		40,029
Total		27,628,707		18,063,423

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

Purpose of acquisition	December 31, 2019		December 31, 2018		Remarks
Investment for strategic business partnership purpose		593,242		662,934
Debt-equity swap		255,444		287,990
Others		44		250		Cooperative insurance, etc.
Total		848,730		951,174

- 65 -

(3) Changes in the loss allowance and gross carrying amount of financial assets at FVTOCI are as follows (Unit: Korean Won in millions):

1) Allowance for credit losses

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3		Total
Beginning balance		(5,939	)		(238	)		—		(6,177	)
Transfer to 12-month expected credit losses		—			—			—		—
Transfer to lifetime expected credit losses		62			(62	)		—		—
Transfer to credit-impaired financial assets		—			—			—		—
Net reversal of (allowance for) credit losses (*1)		(3,276	)		235			—		(3,041	)
Disposal		476			—			—		476
Changes in consolidated scope		157			65			—		222
Others (*2)		(38	)		—			—		(38	)
Ending balance		(8,558	)		—			—		(8,558	)

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3		Total
Beginning balance		(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 allowance for credit losses (*1)		(1,918	)		(109	)		—		(2,027	)
Others (*2)		86			—			—		86
Ending balance		(5,939	)		(238	)		—		(6,177	)

(*1) Profit or loss from discontinued operations are included.

(*2) Others consists of foreign currencies translation, etc.

2) Gross carrying amount

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3		Total
Beginning balance		17,087,096			25,153			—		17,112,249
Transfer to 12-month expected credit losses		10,043			(10,043	)		—		—
Transfer to lifetime expected credit losses		(5,116	)		5,116			—		—
Transfer to credit-impaired financial assets		—			—			—		—
Acquisition		23,722,665			—			—		23,722,665
Disposal / Redemption		(14,132,724	)		(10,088	)		—		(14,142,812	)
Gain (loss) on valuation		49,440			(113	)		—		49,327
Amortization based on effective interest method		14,641			—			—		14,641
Changes in consolidated scope		(35,636	)		(10,025	)		—		(45,661	)
Others (*)		69,568			—			—		69,568
Ending balance		26,779,977			—			—		26,779,977

	For the year ended December 31, 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		13,275,429			10,000			—		13,285,429
Disposal / Redemption		(9,146,307	)		(15,047	)		—		(9,161,354	)
Gain (loss) on valuation		70,017			(59	)		—		69,958
Amortization based on effective interest method		10,195			47			—		10,242
Others (*)		33,765			—			—		33,765
Ending balance		17,087,096			25,153			—		17,112,249

(*) Others consists of foreign currencies translation, etc.

- 66 -

(4) During the term, the Group sold its equity securities of Woori Finance Holdings Co., designated as financial assets at FVTOCI in order to comply with the requirement to limit the acquisition of parent company shares by its subsidiaries under the business law. The fair value at disposal is 767,727 million Won and the cumulative loss at disposal is 23,782 million Won. In addition, the equity securities designated as FVTOCI were sold in accordance with the sale settlements of the creditors, and the fair value at disposal is 34,841 million Won and the cumulative loss at disposal is 38,995 million Won.

9. SECURITIES AT AMORTIZED COST AND HTM FINANCIAL ASSETS

(1) Details of securities at amortized cost as of December 31, 2019 and December 31, 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Korean treasury and government agencies		8,044,040			7,523,458
Financial institutions		6,694,614			9,474,922
Corporates		5,068,489			5,707,063
Foreign currency-denominated bonds		518,907			234,041
Allowance for credit losses		(5,511	)		(6,925	)
Total		20,320,539			22,932,559

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

1) Loss allowance

	For the years ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(6,924	)		—		—		(6,924	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net reversal of credit losses		1,415			—		—		1,415
Others (*)		(2	)		—		—		(2	)
Ending balance		(5,511	)		—		—		(5,511	)

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(5,078	)		—		—		(5,078	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses		(1,922	)		—		—		(1,922	)
Disposal		22			—		—		22
Others (*)		54			—		—		54
Ending balance		(6,924	)		—		—		(6,924	)

(*) Others consists of foreign currencies translation, etc.

- 67 -

2) Gross carrying amount

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		22,939,484			—		—		22,939,484
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Acquisition		6,092,078			—		—		6,092,078
Disposal/Redemption		(8,709,947	)		—		—		(8,709,947	)
Amortization based on effective interest method		(3,286	)		—		—		(3,286	)
Others (*)		7,721			—		—		7,721
Ending balance		20,326,050			—		—		20,326,050
	For the year ended December 31, 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		15,622,847			—		—		15,622,847
Disposal/Redemption		(9,426,757	)		—		—		(9,426,757	)
Amortization based on effective interest method		(7,970	)		—		—		(7,970	)
Others (*)		2,068			—		—		2,068
Ending balance		22,939,484			—		—		22,939,484

(*) Others consist of foreign currencies translation, etc.

- 68 -

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

(1) Details of loans and other financial assets at amortized cost as of December 31, 2019 and loans and receivables as of December 31, 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Due from banks		14,395,746		14,150,027
Loans		260,175,673		260,819,917
Other financial assets (other receivables)		7,629,683		7,478,371
Total		282,201,102		282,448,315

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

	December 31, 2019			December 31, 2018
Due from banks in local currency:
Due from The Bank of Korea (“BOK”)		11,028,850			11,034,602
Due from depository banks		40,000			90,003
Due from non-depository institutions		378			76
Due from the Korea Exchange		—			30,000
Others		39,139			85,915
Loss allowance		(2,591	)		(3,069	)
Sub-total		11,105,776			11,237,527
Due from banks in foreign currencies:
Due from banks on demand		1,122,521			828,022
Due from banks on time		1,296,842			1,288,303
Others		872,603			798,493
Loss allowance		(1,996	)		(2,318	)
Sub-total		3,289,970			2,912,500
Total		14,395,746			14,150,027

- 69 -

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

	Counterparty	December 31, 2019		Reason of restriction
Due from banks in local currency:
Due from BOK	The BOK		11,028,850	Reserve deposits under the BOK Act
Others	The Korea Exchange and others		39,136	Central counterparty KRW margin and others
Sub-total			11,067,986
Due from banks in foreign currencies:
Due from banks on demand	The BOK and others		1,103,917	Reserve deposits under the BOK Act and others
Due from banks on time	National bank Cambodia		58	Reserve deposits and others
Others	Korea Investment & Securities and others		872,603	Overseas futures and options trade deposits and others
Sub-total			1,976,578
Total			13,044,564

	Counterparty	December 31, 2018		Reason of restriction
Due from banks in local currency:
Due from BOK	The BOK		11,034,602	Reserve deposits under the BOK Act
Others	The Korea Exchange and others		81,889	Central counterparty KRW margin and others
Sub-total			11,116,491
Due from banks in foreign currencies:
Due from banks on demand	The BOK and others		780,576	Reserve deposits under the BOK Act and others
Others	Korea Investment & Securities and others		798,493	Reserve deposits and others
Sub-total			1,579,069
Total			12,695,560

- 70 -

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

1) Allowance for credit losses

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(5,387	)		—		—		(5,387	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net reversal of credit losses (*1)		714			—		—		714
Others (*2)		(18	)		—		—		(18	)
Changes in consolidated scope		104			—		—		104
Ending balance		(4,587	)		—		—		(4,587	)

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(3,092	)		—		—		(3,092	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses (*1)		(2,219	)		—		—		(2,219	)
Others (*2)		(76	)		—		—		(76	)
Ending balance		(5,387	)		—		—		(5,387	)

(*1) Profit or loss from discontinued operations are included.

(*2) Others consists of foreign currencies translation, etc.

- 71 -

2) Gross carrying amount

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		14,155,414			—		—		14,155,414
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net increase (decrease)		279,225			—		—		279,225
Others(*)		(9,217	)		—		—		(9,217	)
Changes in consolidated scope		(25,089	)		—		—		(25,089	)
Ending balance		14,400,333			—		—		14,400,333

(*) Others consist of foreign currencies translation, etc.

	For the year ended December 31, 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 (decrease)		5,301,259			—		—		5,301,259
Others(*)		(16,680	)						(16,680	)
Ending balance		14,155,414			—		—		14,155,414

(*) Others consist of foreign currencies translation, etc.

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

	December 31, 2019			December 31, 2018
Loans in local currency		219,910,121			210,701,421
Loans in foreign currencies		18,514,913			15,239,032
Domestic banker’s letter of credit		2,899,651			2,934,366
Credit card accounts		7,275			8,051,384
Bills bought in foreign currencies		4,772,093			7,874,457
Bills bought in local currency		16,012			22,885
Factoring receivables		20,737			45,851
Advances for customers on guarantees		12,616			13,810
Private placement bonds		152,489			365,531
Securitized loans		2,250,042			1,377,072
Call loans		3,290,167			2,669,080
Bonds purchased under resale agreements		8,981,752			11,701,951
Others		471			1,037,283
Loan origination costs and fees		600,560			574,178
Discounted present value		(886	)		(10,308	)
Allowance for credit losses		(1,252,340	)		(1,778,076	)
Total		260,175,673			260,819,917

- 72 -

(6) Changes in the loss allowance of loans are as follows (Unit: Korean won in millions):

	For the year ended December 31, 2019
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		(114,509	)		(48,368	)		(129,906	)		(348,311	)		(349,619	)		(527,673	)
Transfer to 12-month expected credit losses		(14,677	)		13,904			773			(58,236	)		49,585			8,651
Transfer to lifetime expected credit losses		14,057			(15,359	)		1,302			12,019			(28,871	)		16,852
Transfer to credit-impaired financial assets		1,946			7,957			(9,903	)		3,128			17,760			(20,888	)
Net reversal of (allowance for) credit losses (*1)		26,884			(37,570	)		(146,733	)		82,630			13,800			(77,389	)
Recovery		—			—			(59,967	)		—			—			(63,944	)
Charge-off		—			—			206,004			—			—			222,113
Disposal of financial assets		—			—			2,763			—			1			42,095
Unwinding effect		—			—			9,647			—			—			17,903
Others (*2)		1,351			1,461			(3,604	)		(16,572	)		560			(322	)
Changes in consolidated scope		9,286			5,688			12,231			11,840			4,683			1,389
Ending balance		(75,662	)		(72,287	)		(117,393	)		(313,502	)		(292,101	)		(381,213	)
	For the year ended December 31, 2019
	Credit card accounts									Total
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		(64,787	)		(78,131	)		(116,772	)		(527,607	)		(476,118	)		(774,351	)
Transfer to 12-month expected credit losses		(15,295	)		15,262			33			(88,208	)		78,751			9,457
Transfer to lifetime expected credit losses		7,269			(7,557	)		288			33,345			(51,787	)		18,442
Transfer to credit-impaired financial assets		15,055			59,063			(74,118	)		20,129			84,780			(104,909	)
Net reversal of (allowance for) credit losses (*1)		(33,967	)		(92,562	)		(31,436	)		75,547			(116,332	)		(255,558	)
Recovery		—			—			(29,035	)		—			—			(152,946	)
Charge-off		—			—			138,944			—			—			567,061
Disposal of financial assets		—			—			—			—			1			44,858
Unwinding effect		—			—			—			—			—			27,550
Others (*2)		22,730			30,379			(49,707	)		7,509			32,400			(53,633	)
Changes in consolidated scope		68,813			73,546			161,803			89,939			83,917			175,423
Ending balance		(182	)		—			—			(389,346	)		(364,388	)		(498,606	)

	For the year ended December 31, 2018
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		(101,479	)		(41,358	)		(117,168	)		(365,251	)		(255,922	)		(905,243	)
Transfer to 12-month expected credit losses		(9,848	)		8,966			882			(24,324	)		22,658			1,666
Transfer to lifetime expected credit losses		5,905			(7,183	)		1,278			15,074			(407,780	)		392,706
Transfer to credit-impaired financial assets		79,078			47,343			(126,421	)		62,731			97,750			(160,481	)
Net reversal of (allowance for) credit losses (*1)		(86,224	)		(56,164	)		(49,637	)		(68,381	)		193,392			(94,004	)
Recovery		—			—			(51,855	)		—			—			(127,630	)
Charge-off		—			—			204,552			—			—			290,109
Disposal of loans		—			33			1,633			—			237			49,902
Unwinding effect		—			—			7,945			—			—			23,381
Others (*2)		(1,941	)		(5	)		(1,115	)		31,840			46			1,921
Ending balance		(114,509	)		(48,368	)		(129,906	)		(348,311	)		(349,619	)		(527,673	)
	For the year ended December 31, 2018
	Credit card accounts									Total
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		(57,134	)		(71,463	)		(102,858	)		(523,864	)		(368,743	)		(1,125,269	)
Transfer to 12-month expected credit losses		(13,846	)		13,738			108			(48,018	)		45,362			2,656
Transfer to lifetime expected credit losses		5,871			(6,194	)		323			26,850			(421,157	)		394,307
Transfer to credit-impaired financial assets		82,406			84,048			(166,454	)		224,215			229,141			(453,356	)
Net reversal of (allowance for) credit losses (*1)		(82,083	)		(98,260	)		(33,205	)		(236,688	)		38,968			(176,846	)
Recovery		—			—			(57,565	)		—			—			(237,050	)
Charge-off		—			—			242,879			—			—			737,540
Disposal of loans		—			—			—			—			270			51,535
Unwinding effect		—			—			—			—			—			31,326
Others (*2)		(1	)		—			—			29,898			41			806
Ending balance		(64,787	)		(78,131	)		(116,772	)		(527,607	)		(476,118	)		(774,351	)

(*1) Profit or loss from discontinued operations are included.

(*2) Others consists of debt-equity swap, foreign currencies translation, etc.

- 73 -

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

	For the year ended December 31, 2019
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		110,619,242			6,028,009			391,494			131,453,727			5,031,258			1,020,658
Transfer to 12-month expected credit losses		2,629,127			(2,616,892	)		(12,235	)		1,558,518			(1,547,948	)		(10,570	)
Transfer to lifetime expected credit losses		(8,234,138	)		8,252,223			(18,085	)		(2,291,629	)		2,327,324			(35,695	)
Transfer to credit-impaired financial assets		(147,287	)		(103,303	)		250,590			(252,066	)		(142,763	)		394,829
Charge-off		—			—			(206,004	)		—			—			(222,113	)
Disposal		—			(55	)		(67,924	)		—			(70	)		(161,318	)
Net increase (decrease)		6,309,192			889,302			84,361			3,995,547			(777,088	)		(270,008	)
Changes in consolidated scope		(946,904	)		(28,132	)		(14,523	)		(1,604,250	)		(96,864	)		(6,799	)
Ending balance		110,229,232			12,421,152			407,674			132,859,847			4,793,849			708,984

	For the year ended December 31, 2019
	Credit card accounts									Total
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		6,861,844			982,772			208,989			248,934,813			12,042,039			1,621,141
Transfer to 12-month expected credit losses		286,975			(286,924	)		(51	)		4,474,620			(4,451,764	)		(22,856	)
Transfer to lifetime expected credit losses		(336,040	)		336,410			(370	)		(10,861,807	)		10,915,957			(54,150	)
Transfer to credit-impaired financial assets		(48,082	)		(80,178	)		128,260			(447,435	)		(326,244	)		773,679
Charge-off		—			—			(138,944	)		—			—			(567,061	)
Disposal		—			—			—			—			(125	)		(229,242	)
Net increase (decrease)		247,532			(19,692	)		62,345			10,552,271			92,522			(123,302	)
Changes in consolidated scope		(7,004,954	)		(932,388	)		(260,229	)		(9,556,108	)		(1,057,384	)		(281,551	)
Ending balance		7,275			—			—			243,096,354			17,215,001			1,116,658
	For the year ended December 31, 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			131,096,396			4,466,354			1,622,409
Transfer to 12-month expected credit losses		1,921,485			(1,912,046	)		(9,439	)		1,081,702			(1,077,895	)		(3,807	)
Transfer to lifetime expected credit losses		(3,186,506	)		3,199,993			(13,487	)		(2,275,984	)		2,733,860			(457,876	)
Transfer to credit-impaired financial assets		(218,943	)		(127,447	)		346,390			(348,503	)		(275,189	)		623,692
Charge-off		—			—			(204,552	)		—			—			(290,109	)
Disposal		—			(478	)		(31,910	)		—			(2,781	)		(166,347	)
Net increase (decrease)		8,600,859			(619,771	)		(22,247	)		1,900,116			(813,091	)		(307,304	)
Ending balance		110,619,242			6,028,009			391,494			131,453,727			5,031,258			1,020,658
	For the year ended December 31, 2018
	Credit card accounts									Total
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		5,721,743			935,266			177,983			240,320,486			10,889,378			2,127,131
Transfer to 12-month expected credit losses		221,984			(221,841	)		(143	)		3,225,171			(3,211,782	)		(13,389	)
Transfer to lifetime expected credit losses		(287,623	)		288,027			(404	)		(5,750,113	)		6,221,880			(471,767	)
Transfer to credit-impaired financial assets		(104,459	)		(95,758	)		200,217			(671,905	)		(498,394	)		1,170,299
Charge-off		—			—			(242,879	)		—			—			(737,540	)
Disposal		—			—			—			—			(3,259	)		(198,257	)
Net increase (decrease)		1,310,199			77,078			74,215			11,811,174			(1,355,784	)		(255,336	)
Ending balance		6,861,844			982,772			208,989			248,934,813			12,042,039			1,621,141

- 74 -

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

	December 31, 2019			December 31, 2018
CMA accounts		—			185,999
Receivables		5,382,069			4,864,403
Accrued income		944,427			1,000,427
Telex and telephone subscription rights and refundable deposits		969,046			982,925
Other receivables		400,651			512,339
Allowance for credit losses		(66,510	)		(67,722	)
Total		7,629,683			7,478,371

(9) Changes in the allowances for credit losses on other financial assets are as follows (Unit: Korean won in millions):

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		(3,250	)		(1,971	)		(62,501	)		(67,722	)
Transfer to 12-month expected credit losses		(216	)		207			9			—
Transfer to lifetime expected credit losses		123			(157	)		34			—
Transfer to credit-impaired financial assets		22			178			(200	)		—
Net reversal of (allowance for) credit losses (*)		619			12			(6,446	)		(5,815	)
Charge-off		—			—			2,457			2,457
Disposal		—			—			1,685			1,685
Others		(50	)		(45	)		(17	)		(112	)
Changes in consolidated scope		1,609			1,048			340			2,997
Ending balance		(1,143	)		(728	)		(64,639	)		(66,510	)

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		(2,955	)		(1,832	)		(54,211	)		(58,998	)
Transfer to 12-month expected credit losses		(150	)		139			11			—
Transfer to lifetime expected credit losses		105			(416	)		311			—
Transfer to credit-impaired financial assets		6,509			304			(6,813	)		—
Net allowance for credit losses (*)		(6,583	)		(166	)		(31,550	)		(38,299	)
Charge-off		—			—			28,200			28,200
Disposal		—			1			1,264			1,265
Others		(176	)		(1	)		287			110
Ending balance		(3,250	)		(1,971	)		(62,501	)		(67,722	)

(*) Profit or loss from discontinued operations are included.

- 75 -

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

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		7,445,893			28,193			72,007			7,546,093
Transfer to 12-month expected credit losses		8,333			(8,317	)		(16	)		—
Transfer to lifetime expected credit losses		(18,019	)		18,082			(63	)		—
Transfer to credit-impaired financial assets		(1,031	)		(1,046	)		2,077			—
Charge-off		—			—			(2,457	)		(2,457	)
Disposal		—			—			(2,212	)		(2,212	)
Net increase (decrease)		597,769			24,355			63,804			685,928
Changes in consolidated scope		(522,770	)		(7,971	)		(418	)		(531,159	)
Ending balance		7,510,175			53,296			132,722			7,696,193

	For the year ended December 31, 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		7,573			(7,556	)		(17	)		—
Transfer to lifetime expected credit losses		(11,418	)		11,734			(316	)		—
Transfer to credit-impaired financial assets		(7,580	)		(1,110	)		8,690			—
Charge-off		—			—			(28,201	)		(28,201	)
Disposal		—			(5	)		(1,640	)		(1,645	)
Net increase (decrease)		794,983			(3,994	)		13,579			804,568
Ending balance		7,445,893			28,193			72,007			7,546,093

(*) Others consist of foreign currencies translation, etc.

- 76 -

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.

- 77 -

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

	December 31, 2019
	Level 1 (*)		Level 2 (*)		Level 3		Total
Financial assets:
Financial assets at fair value through profit or loss
Due from banks		27,901		—		—		27,901
Debt securities		400,611		897,494		—		1,298,105
Equity securities		157,246		—		476,806		634,052
Capital contributions		—		—		483,199		483,199
Beneficiary certificates		1		31,841		1,267,200		1,299,042
Loans		—		—		9,037		9,037
Derivative assets		3,057		2,893,116		25,048		2,921,221
Sub-total		588,816		3,822,451		2,261,290		6,672,557
Financial assets at FVTOCI
Debt securities		2,146,163		24,553,077		—		26,699,240
Equity securities		441,672		—		407,058		848,730
Securities loaned		—		80,737		—		80,737
Sub-total		2,587,835		24,633,814		407,058		27,628,707
Derivative assets				111,764				111,764
Total		3,176,651		28,568,029		2,668,348		34,413,028
Financial liabilities:
Financial liabilities at fair value through profit or loss
Deposits due to customers		27,530		—		—		27,530
Derivative liabilities		4,336		2,764,763		72,039		2,841,138
Sub-total		31,866		2,764,763		72,039		2,868,668
Financial liabilities at fair value through profit or loss designated as upon initial recognition
Equity-linked securities		—		—		87,626		87,626
Derivative liabilities		—		43		—		43
Total		31,866		2,764,806		159,665		2,956,337

- 78 -

	December 31, 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
Due from banks		26,935		—		—		26,935
Debt securities		239,794		1,575,972		8,389		1,824,155
Equity securities		53,806		—		401,860		455,666
Capital contributions		—		—		422,481		422,481
Beneficiary certificates		2,130		128,988		854,299		985,417
Loans		—		205,000		180,450		385,450
Derivative assets		13,216		1,964,065		48,798		2,026,079
Sub-total		335,881		3,874,025		1,916,277		6,126,183
Financial assets at FVTOCI
Debt securities		1,838,409		15,233,811		—		17,072,220
Equity securities		482,327		—		468,847		951,174
Securities loaned		—		40,029		—		40,029
Sub-total		2,320,736		15,273,840		468,847		18,063,423
Derivative assets (Designated for hedging)		—		35,503		—		35,503
Total		2,656,617		19,183,368		2,385,124		24,225,109
Financial liabilities:
Financial liabilities at fair value through profit or loss mandatorily measured at fair value
Deposits due to customers		27,058		—		—		27,058
Derivative liabilities		2,245		2,071,925		16,691		2,090,861
Sub-total		29,303		2,071,925		16,691		2,117,919
Financial liabilities at fair value through profit or loss designated as upon initial recognition
Equity-linked securities		—		—		164,767		164,767
Derivative liabilities (Designated for hedging)		—		51,408		—		51,408
Total		29,303		2,123,333		181,458		2,334,094

(*) There were no transfers between Level 1 and Level 2 of financial assets and liabilities measured at fair value. The Group recognizes transfers among levels at the end of reporting period in which events have occurred or conditions have changed.

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

- 79 -

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

① Valuation methods and input variables for each type of financial instrument classified into level 2 in December 31, 2019 and 2018 are as follows:

	Valuation methods	Input variables
Debt securities	Fair value is measured by discounting the future cash flows of debt securities applying the risk-free market rate.	Risk-free market rate
Beneficiary certificates	The beneficiary certificates classified as Level 2 are MMF and are measured at base price.	Base price
Derivatives	The fair value is measured through option model (Closed Form), DCF Model, FDM, Monte Carlo Simulation and etc.	Discount rate, foreign exchange rate, stock prices and price of underlying assets, volatility, and etc.

② Valuation methods and input variables for each type of financial instrument classified into level 3 in December 31, 2019 and 2018 are as follows:

	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, corporate Beta, etc.
Derivatives	Fair value is measured by models such as option model (Closed form), DCF model, FDM and Monte Carlo Simulation.	Discount rate, values of underlying assets such as foreign exchange rate and stock prices, volatility, etc.
Equity-linked securities	Fair value is measured by models such as option model (Closed form), DCF model, FDM and Monte Carlo Simulation.	Values of underlying assets, market rate, dividend, volatility, correlation coefficient and foreign exchange rate, etc.

- 80 -

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	Type	Significant but unobservable input variable	Range	Impact of changes in significant unobservable inputs on fair value measurement
Loans	Binomial tree		Stock price, Volatility of underlying asset	14.51%~46.06%	Fair value increases as volatility of underlying asset increases.
Derivative assets	Option valuation model and others	Interest rate related	Correlation coefficient	0.90~0.98	Variation of fair value increases as correlation coefficient increases.
			Volatility of underlying asset	16.3%~41.2%	Variation of fair value increases as volatility increases.
	Option valuation model and others	Equity related	Correlation coefficient	0.237~0.675	Variation of fair value increases as correlation coefficient increases.
	DCF model	Currency related	Credit risk adjustment ratio	7.7%~100.0%	Variation of fair value decreases as credit risk adjustment ratio increases.
Derivative liabilities	Option valuation model and others	Interest rate related	Correlation coefficient	0.90~0.98	Variation of fair value increases as correlation coefficient increases.
			Volatility of underlying asset	16.3%~41.2%	Variation of fair value increases as volatility increases.
		Equity related	Correlation coefficient	0.237~0.675	Variation of fair value increases as correlation coefficient increases.
			Volatility of underlying asset	21.4%~22.4%	Variation of fair value increases as volatility increases.
Equity-linked securities	Monte Carlo Simulation and others		Correlation coefficient         Volatility of underlying asset	0.294~0.675 19.1%~25.3%	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.
Equity securities, capital contributions and Beneficiary certificates	External appraisal value and others		Terminal growth rate	0	Fair value increases as terminal growth rate increases.
			Discount rate	0.35%~19.21%	Fair value increases as discount rate decreases.
			Volatility of real estate sale price	0	Fair value increases as volatility of real estate sale price increases.
			Volatility of underlying assets	13.21%~34.72%	Change of fair value increases as volatility of underlying assets increases

Fair value of financial assets and liabilities classified into Level 3 is measured by the Group using its own valuation methods or using external specialists. Unobservable inputs used in the fair value measurements are produced by the internal system of the Group and the appropriateness of inputs is reviewed regularly.

- 81 -

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

	For the year ended December 31, 2019
	January 1, 2019		Net Income (loss) (*1)			Other comprehensive income		Purchases/ issuances			Disposals/ settlements			Transfer to or out of Level 3 (*2)			Changes in consolidated scope			December 31, 2019
Financial assets:
Financial assets at fair value through profit or loss
Debt securities		8,389		8			—		2,000			(302	)		—			(10,095	)		—
Equity securities		401,860		58,309			—		73,851			(28,253	)		—			(28,961	)		476,806
Capital contributions		422,481		(13,364	)		—		163,364			(65,947	)		—			(23,335	)		483,199
Beneficiary certificates		854,299		15,805			—		568,026			(140,966	)		8,441			(38,405	)		1,267,200
Loans		180,450		(696	)		—		500			(46,269	)		—			(124,948	)		9,037
Derivative assets		48,798		16,935			—		1,115			(40,343	)		(1,457	)		—			25,048
Sub-total		1,916,277		76,997			—		808,856			(322,080	)		6,984			(225,744	)		2,261,290
Financial assets at FVTOCI
Equity securities		468,847		—			24,741		494			(307	)		—			(86,717	)		407,058
Total		2,385,124		76,997			24,741		809,350			(322,387	)		6,984			(312,461	)		2,668,348
Financial liabilities:
Financial liabilities at fair value through profit or loss
Derivative liabilities		16,691		84,033			—		(11,140	)		(14,817	)		(2,728	)		—			72,039
Financial liabilities at fair value through profit or loss designated as upon initial recognition
Equity-linked securities		164,767		33,237			—		1,810			(112,188	)		—			—			87,626
Total		181,458		117,270			—		(9,330	)		(127,005	)		(2,728	)		—			159,665

(*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 28,749 million Won for the years ended December 31, 2019, which is from financial assets and liabilities that the Group holds as at the end of the periods, has been recognized in net gain (loss) on financial assets at FVTPL and net gain (loss) on financial assets at FVTOCI in the consolidated statement of comprehensive income.

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

- 82 -

	For the year ended December 31, 2018
	January 1, 2018		Net Income (loss) (*1)			Other comprehensive income		Purchases/ issuances		Disposals/ settlements			Transfer to or out of Level 3 (*2)			December 31, 2018
Financial assets:
Financial assets at fair value through profit or loss
Debt securities		9,694		(28	)		—		3,000		(4,277	)		—			8,389
Equity securities		280,171		56,271			—		67,953		(2,535	)		—			401,860
Capital contributions		294,121		16,119			—		144,207		(31,966	)		—			422,481
Beneficiary certificates		654,066		16,391			—		5,151,535		(4,971,003	)		3,310			854,299
Loans		165,001		3,378			—		150,103		(138,032	)		—			180,450
Derivative assets		19,346		75,696			—		4,722		(50,966	)		—			48,798
Sub-total		1,422,399		167,827			—		5,521,520		(5,198,779	)		3,310			1,916,277
Financial assets at FVTOCI
Equity securities		451,287		—			19,688		432		(2,560	)		—			468,847
Total		1,873,686		167,827			19,688		5,521,952		(5,201,339	)		3,310			2,385,124
Financial liabilities:
Financial liabilities at fair value through profit or loss
Derivative liabilities		20,951		46,409			—		255		(50,921	)		(3	)		16,691
Financial liabilities at fair value through profit or loss designated as upon initial recognition
Equity-linked securities		160,057		(16,243	)		—		183,039		(162,086	)		—			164,767
Total		181,008		30,166			—		183,294		(213,007	)		(3	)		181,458

(*1) The losses that increase financial liabilities are presented as positive amounts, and the gains that decrease financial liabilities are presented as negative amounts. The gain amounting to 137,777 million Won for the years ended December 31, 2019, which is from financial assets and liabilities that the Group holds as at the end of the periods, has been recognized in net gain (loss) on financial assets at FVTPL and net gain (loss) on financial assets at FVTOCI in the consolidated statement of comprehensive income.

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

- 83 -

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

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

Among the financial instruments that are classified as Level 3 amounting to 2,828,015 million Won and 2,566,582 million Won as of December 31, 2019 and 2018 respectively, equity investments of 2,040,780 million Won and 1,641,875 million Won that are considered to provide the best estimate of fair value are excluded from the sensitivity analysis.

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

	December 31, 2019
	Net income (loss)					Other comprehensive income (loss)
	Favorable		Unfavorable			Favorable		Unfavorable
Financial assets:
Financial assets at FVTPL
Derivative assets (*1)		640		(935	)		—		—
Loans		152		(128	)		—		—
Debt securities		15,317		(10,361	)		—		—
Equity securities (*2) (*3)		1,125		(1,125	)		—		—
Beneficiary certificates (*3)
Financial assets at FVTOCI
Equity securities (*2) (*3)		—		—			19,547		(9,399	)
Total		17,234		(12,549	)		19,547		(9,399	)
Financial liabilities:
Financial liabilities at fair value through profit or loss
Derivative liabilities (*1)		1,054		(816	)		—		—
Financial liabilities at fair value through profit or loss designated as upon initial recognition
Equity-linked securities (*1)		136		(142	)		—		—
Total		1,190		(958	)		—		—

- 84 -

	December 31, 2018
	Net income (loss)					Other comprehensive income (loss)
	Favorable		Unfavorable			Favorable		Unfavorable
Financial assets:
Financial assets at FVTPL
Derivative assets (*1)		4,578		(4,352	)		—		—
Loans (*2)		146		(127	)		—		—
Debt securities		68		(35	)		—		—
Equity securities (*3)(*4)		12,700		(9,165	)		—		—
Beneficiary certificates (*4)		1,582		(1,582	)		—		—
Financial assets at FVTOCI
Equity securities (*3)(*4)		—		—			23,798		(10,078	)
Total		19,074		(15,261	)		23,798		(10,078	)
Financial liabilities:
Financial liabilities at fair value through profit or loss
Derivative liabilities (*1)		2,433		(2,751	)		—		—
Financial liabilities at fair value through profit or loss designated as upon initial recognition
Equity-linked securities (*1)		1,561		(1,669	)		—		—
Total		3,994		(4,420	)		—		—

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

(*2) Fair value changes of equity securities are calculated by increasing or decreasing stock price (-10~10%) and fluctuation rate (-10~10%) and discount rate. The growth rate, discount rate, and liquidation value are major unobservable variables.

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

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

- 85 -

(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):

	December 31, 2019
	Fair value								Book value
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities at amortized cost		3,123,898		17,378,920		—		20,502,818		20,320,539
Loans and other financial assets at amortized cost		—		—		271,309,351		271,309,351		282,201,102
Financial liabilities:
Deposits due to customers		—		263,876,489		—		263,876,489		263,643,964
Borrowings		—		18,495,665		—		18,495,665		18,575,566
Debentures		—		23,062,891		—		23,062,891		22,834,408
Other financial liabilities		—		16,594,482		—		16,594,482		16,595,398

	December 31, 2018
	Fair value								Book value
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities at amortized cost		3,618,213		19,417,130		—		23,035,343		22,932,559
Loans and other financial assets at amortized cost		—		—		282,333,497		282,333,497		282,448,315
Financial liabilities:
Deposits due to customers		—		248,763,952		—		248,763,952		248,690,939
Borrowings		—		16,203,070		—		16,203,070		16,202,986
Debentures		—		28,755,251		—		28,755,251		28,725,862
Other financial liabilities		—		21,444,937		—		21,444,937		21,426,064

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	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 financial assets at amortized cost	The fair value is measured by discounting the projected cash flows of loan products by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the debtor.	Risk-free market rate, credit spread and prepayment-rate
Deposits due to customers, borrowings, debentures and other financial liabilities	The fair value is measured by discounting the projected cash flows of debt products by applying the market discount rate that is reflecting credit rating of the Group.	Risk-free market rate and forward rate

- 86 -

(6) Financial instruments by category

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

	December 31, 2019
Financial assets	Financial asset at FVTPL		Financial assets at FVTOCI		Financial assets at amortized cost		Derivatives assets (Designated for hedging)		Total
Due from banks		27,901		—		14,395,746		—		14,423,647
Securities		3,714,398		27,628,707		20,320,539		—		51,663,644
Loans		9,037		—		260,175,673		—		260,184,710
Derivative assets		2,921,221		—		—		111,764		3,032,985
Other financial assets		—		—		7,629,683		—		7,629,683
Total		6,672,557		27,628,707		302,521,641		111,764		336,934,669

	December 31, 2019
Financial liabilities	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivatives liabilities (Designated for hedging)		Total
Deposits due to customers		27,530		263,643,964		—		263,671,494
Borrowings		87,626		18,575,566		—		18,663,192
Debentures		—		22,834,408		—		22,834,408
Derivative liabilities		2,841,138		—		43		2,841,181
Other financial liabilities(*)		—		16,658,162		—		16,658,162
Total		2,956,294		321,712,100		43		324,668,437

(*) Other financial liabilities include 62,764 million Won of financial guarantee liabilities measured at amortized cost included in provisions.

	December 31, 2018
Financial assets	Financial asset at FVTPL		Financial assets at FVTOCI		Financial assets at amortized cost		Derivatives assets (Designated for hedging)		Total
Deposits		26,935		—		14,150,027		—		14,176,962
Securities		3,687,719		18,063,423		22,932,559		—		44,683,701
Loans		385,450		—		260,819,917		—		261,205,367
Derivative assets		2,026,079		—		—		35,503		2,061,582
Other financial assets		—		—		7,478,371		—		7,478,371
Total		6,126,183		18,063,423		305,380,874		35,503		329,605,983

	December 31, 2018
Financial liabilities	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivatives liabilities (Designated for hedging)		Total
Deposits due to customers		27,058		248,690,939		—		248,717,997
Borrowings		164,767		16,202,986		—		16,367,753
Debentures		—		28,725,862		—		28,725,862
Derivative liabilities		2,090,861		—		51,408		2,142,269
Other financial liabilities (*)		—		21,473,881		—		21,473,881
Total		2,282,686		315,093,668		51,408		317,427,762

(*) Other financial liabilities include 47,817 million Won of financial guarantee liabilities measured at amortized cost included in provisions.

- 87 -

(7) Income or expense from financial instruments by category

Income or expense from financial assets and liabilities by each category during the years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Interest Income (expense)			Fees and Commissions Income (expense)		Provision (reversal) of credit loss			Others		Total
Financial assets at FVTPL		43,318			89,777		—			105,067		238,162
Financial assets at FVTOCI		474,132			—		(3,297	)		26,045		496,880
Securities at amortized cost		436,340			—		1,415			—		437,755
Loans and other financial assets at amortized cost		8,858,748			160,743		(131,942	)		84,348		8,971,897
Financial liabilities at FVTPL		(719	)		—		—			135		(584	)
Financial liabilities at amortized cost		(4,495,123	)		—		—			—		(4,495,123	)
Derivatives assets (liabilities) (Designated for hedging)		—			—		—			4,261		4,261
Off-balance provisions		—			39,975		15,575			—		55,550
Total		5,316,696			290,495		(118,249	)		219,856		5,708,798

	December 31, 2018
	Interest Income (expense)			Fees and Commissions Income (expense)		Provision (reversal) of credit loss			Others			Total
Financial assets at FVTPL		54,243			86,845		—			264,850			405,938
Financial assets at FVTOCI		280,371			66		(2,027	)		24,707			303,117
Securities at amortized cost		376,788			—		(1,922	)		431			375,297
Loans and other financial assets at amortized cost		8,973,097			317,316		(415,084	)		79,101			8,954,430
Financial liabilities at FVTPL		(3,164	)		—		—			17,485			14,321
Financial liabilities at amortized cost		(4,030,384	)		27,742		—			25,498			(3,977,144	)
Derivatives assets (liabilities) (Designated for hedging)		—			—		—			(672	)		(672	)
Off-balance provisions		—			—		89,459			—			89,459
Total		5,650,951			431,969		(329,574	)		411,400			6,164,746

- 88 -

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.

a) Bonds sold under repurchase agreements

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

		December 31, 2019		December 31, 2018
Assets transferred	Financial assets at FVTOCI		56,975		33,588
	Securities at amortized cost		42,841		5,552
	Loans at amortized cost		82,594		—
	Total		182,410		39,140
Related liabilities	Bonds sold under repurchase agreements		180,402		42,907

b) Securities loaned

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

		December 31, 2019		December 31, 2018		Loaned to
Financial assets at FVTOCI	Korean financial institution’s debt securities and others		80,737		40,029		Korea Securities Finance Corporation
	Total		80,737		40,029

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. The group does not possess financial assets that the group involves continuously.

(2) The offset of financial assets and liabilities

The Group possesses both the uncollected domestic exchange receivables and the unpaid domestic exchange payable, which satisfy offsetting criteria of K-IFRS 1032. Therefore, the total number of uncollected domestic exchange receivables or unpaid domestic exchange payable has been offset with part of unpaid domestic exchange payable or uncollected domestic exchange receivables and has been disclosed in loans at amortized cost and other financial assets (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 K-IFRS 1032, 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 K-IFRS 1032, but in accordance with the collateral arrangements and under the circumstances of the trading party’s default, insolvency or bankruptcy, the net amount of derivative assets and derivative liabilities, receivable spot exchange and payable spot exchange can be offset.

- 89 -

The Group has entered into a resale and repurchase agreement and accounted it as a collateralized borrowing. The Group has also entered into a resale and purchase agreement and accounted it as a secured loans. The 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 K-IFRS 1032. 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 K-IFRS 1032. 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 December 31, 2019 and 2018, the financial instruments to be offset and covered by master netting agreements and similar agreements are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Gross amounts of recognized financial assets		Gross amounts of recognized financial assets setoff		Net amounts of financial assets presented		Related amounts not setoff in the consolidated statement of financial position				Net amounts
							Netting agreements and others		Cash collateral received
Financial assets:
Derivative assets (*1)		3,032,730		—		3,032,730		6,973,061		111,122		946,141
Receivable spot exchange (*2)		4,997,594		—		4,997,594
Bonds purchased under resale agreements (*2)		8,981,752		—		8,981,752		8,981,752		—		—
Domestic exchange settlement credits (*2)(*6)		31,639,302		31,269,258		370,044		—		—		370,044
Total		48,651,378		31,269,258		17,382,120		15,954,813		111,122		1,316,185

	December 31, 2019
	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
							Netting agreements and others		Cash collateral pledged
Financial liabilities:
Derivative liabilities (*1)		2,822,403		—		2,822,403		6,985,725		172,488		748,551
Equity-linked securities index in short position (*3)		87,626		—		87,626
Payable spot exchange (*4)		4,996,735		—		4,996,735
Bonds sold under repurchase agreements (*5)		180,402		—		180,402		180,402		—		—
Domestic exchange settlement debits (*4)(*6)		32,526,538		31,269,258		1,257,280		1,257,280		—		—
Total		40,613,704		31,269,258		9,344,446		8,423,407		172,488		748,551

(*1) The items include derivatives held for trading, derivatives designated for hedging.

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

(*3) The items are equity linked securities related to derivatives and are included in financial liabilities at FVTPL.

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

(*5) The items are included in borrowings.

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

- 90 -

	December 31, 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
							Netting agreements and others		Cash collateral received
Financial assets:
Derivative assets (*1)		1,908,542		—		1,908,542		5,527,117		66,857		515,100
Receivable spot exchange (*2)		4,200,532		—		4,200,532
Bonds purchased under resale agreements (*2)		11,701,951		—		11,701,951		11,701,951		—		—
Domestic exchange settlement credits (*2)(*6)		30,090,598		29,699,412		391,186		—		—		391,186
Total		47,901,623		29,699,412		18,202,211		17,229,068		66,857		906,286

	December 31, 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
							Netting agreements and others		Cash collateral pledged
Financial liabilities:
Derivative liabilities (*1)		1,862,681		—		1,862,681		5,540,147		115,615		577,713
Equity-linked securities index in short position (*3)		164,767		—		164,767
Payable spot exchange (*4)		4,206,027		—		4,206,027
Bonds sold under repurchase agreements (*5)		42,907		—		42,907		42,907		—		—
Domestic exchange settlement debits (*4)(*6)		36,832,774		29,699,412		7,133,362		6,231,538		—		901,824
Total		43,109,156		29,699,412		13,409,744		11,814,592		115,615		1,479,537

(*1) The items include derivatives held for trading, derivatives designated for hedging.

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

(*3) The items are equity linked securities related to derivatives and are included in financial liabilities at FVTPL.

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

(*5) The items are included in borrowings.

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

- 91 -

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 (%)
Joint ventures and Associates	Main business	December 31, 2019		December 31, 2018		Location		Financial statements as of
Woori Bank:
Woori Service Networks Co., Ltd. (*1)	Freight & staffing services		4.9		4.9		Korea		November 30, 2019 (*5)
Korea Credit Bureau Co., Ltd. (*2)	Credit information		9.9		9.9		Korea		December 31, 2019
Korea Finance Security Co., Ltd. (*1)	Security service		15.0		15.0		Korea		November 30, 2019(*5)
Chin Hung International Inc. (*3)	Construction		25.3		25.3		Korea		November 30, 2019(*5)
Saman Corporation (*2)	General construction Technology service		9.2		9.2		Korea		September 30, 2019 (*3)
Dongwoo C & C Co., Ltd. (*4)(*10)	Construction		23.2		24.5		Korea		—
SJCO Co., Ltd. (*4)	Aggregate transportation and wholesale		26.5		26.5		Korea		—
G2 Collection Co., Ltd. (*4)	Wholesale and retail sales		28.9		28.9		Korea		—
The Base Enterprise Co., Ltd. (*4)	Manufacturing		48.4		48.4		Korea		—
Kyesan Engineering Co., Ltd. (*4) (*10)	Construction		23.2		23.3		Korea		—
Good Software Lap Co., Ltd. (*4) (*10)	Service		28.9		29.4		Korea		—
Wongwang Co., Ltd. (*4)	Wholesale and real estate		29.0		29.0		Korea		—
Sejin Construction Co., Ltd. (*4)	Construction		29.6		29.6		Korea		—
QTS Shipping Co., Ltd. (*4)	Complex transportation brokerage		49.4		49.4		Korea		—
DAEA SNC Co., Ltd. (*4)	Wholesale and retail sales		24.0		24.0		Korea		—
ARES-TECH Co., Ltd. (*4)	Electronic component manufacturing		23.4		23.4		Korea		—
Force TEC Co., Ltd. (*4)	Manufacturing		25.8		25.8		Korea		—
Sinseong Trading Co., Ltd. (*4)	Manufacturing		27.2		27.2		Korea		—
Reading Doctors Co., Ltd. (*4)	Other services		35.4		35.4		Korea		—
PREXCO Co., Ltd. (*4)	Manufacturing		28.1		28.1		Korea		—
Jiwon Plating Co., Ltd. (*4)(*10)	Plating		20.5		20.8		Korea		—
Cultizm Korea LTD Co., Ltd. (*4)	Wholesale and retail sales		31.3		31.3		Korea		—
Gil Co., Ltd. (*6)	Manufacturing		—		26.1		Korea		—
NK Eng Co., Ltd. (*4)	Manufacturing		23.1		23.1		Korea		—
Youngdong Sea Food Co., Ltd. (*4)	Processed sea food manufacturing		24.0		24.0		Korea		—
Woori Growth Partnerships New Technology Private Equity Fund	Other financial services		23.1		23.1		Korea		December 31,2019

- 92 -

		Percentage of ownership (%)
Joint ventures and Associates	Main business	December 31, 2019		December 31, 2018		Location		Financial statements as of
2016KIF-IMM Woori Bank Technology Venture Fund	Other financial services		20.0		20.0		Korea		December 31, 2019
K BANK Co., Ltd. (*2)	Finance		14.5		14.1		Korea		November 30(*5)
Smart Private Equity Fund No.2	Other financial services		20.0		20.0		Korea		December 31, 2019
Woori Bank-Company K Korea Movie Asset Fund	Other financial services		25.0		25.0		Korea		December 31, 2019
Well to Sea No. 3 Private Equity Fund (*7)	Finance		50.0		50.0		Korea		September 30(*5)
Partner One Value Up I Private Equity Fund	Other financial services		23.3		23.3		Korea		December 31, 2019
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership	Other financial services		20.0		20.0		Korea		December 31, 2019
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund	Other financial services		25.0		25.0		Korea		December 31, 2019
Woori-Shinyoung Growth-Cap Private Equity Fund I (*8)	Other financial services		24.5		—		Korea		December 31, 2019
LOTTE CARD Co.,ltd.(*8)	Credit card and installment financing		20.0		—		Korea		September 30, 2019 (*5)
Woori-Q Corporate Restructuring Private Equity Fund (*8)	Trust and collective investment		28.4		—		Korea		December 31, 2019
PCC-Woori LP Secondary Fund (*8)	Other financial services		26.9		—		Korea		December 31, 2019
Woori Investment Bank Co., Ltd.:
Nomura-Rifa Private Real Estate Investment Trust No.17 (*9)	Other financial services		—		19.4				—

(*1) Most of the significant business transactions of associates are with the Group as of December 31, 2019 and 2018.

(*2) The Group can participate in decision-making body and exercise significant influence over financial policies and operational policies decision making of the associates

(*3) Equity securities that have published market price among investment assets of associates are common shares of Chin Hung International Inc.

(*4) There is no investment balance as of December 31, 2019 and 2018.

(*5) The equity method was applied using the most recent financial statements available from the settlement date because no financial statements were available at the end of December and the significant transactions or events that occurred between the end of the reporting period of the associate and the end of the reporting period of the subsidiary were duly reflected.

(*6) The entity was excluded from the associate as the group sold its entire stake during the year ended December 31, 2019.

(*7) The Group has signed a contract that the Group (or the third party designated by the Bank) has the priority to purchase the underlying assets (Aju Capital Co. Ltd ) when it is disposed by Well to Sea No. 3 Private Equity Fund .

(*8) Due to capital contribution by the Group for the year ended December 31, 2018, the entities has been included in the investment in associates.

(*9) Woori Investment Bank Co., Ltd. has been excluded from consolidation scope as it became a wholly owned subsidiary of Woori Financial Group Inc., the group during the year ended December 31, 2019

(*10) Woori Card Co., Ltd. has been transferred in to Woori Financial Group Inc.’s subsidiary and therefore the Group’s stake decreased.

- 93 -

(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 year ended December 31, 2019
	Acquisition cost		January 1, 2019		Share of profits (losses)			Acquisition		Disposal and others (*)			Dividends			Change in capital			Impairment		Others		December 31, 2019
Woori Service Networks Co., Ltd.		108		157		31			—		—			(2	)		—			—		—		186
Korea Credit Bureau Co., Ltd.		3,313		6,790		190			—		—			(135	)		—			—		—		6,845
Korea Finance Security Co., Ltd.		3,267		3,456		(169	)		—		—			—			—			—		—		3,287
Chin Hung International Inc.		130,779		44,741		6,426			—		—			—			9			—		—		51,176
Saman Corporation		8,521		1,014		(198	)		—		—			—			33			—		—		849
Woori Growth Partnerships New Technology Private Equity Fund		18,666		25,091		1,466			309		(7,490	)		(164	)		—			—		—		19,212
2016KIF-IMM Woori Bank Technology Venture Fund		12,385		15,300		1,193			—		(2,615	)		—			1,263			—		—		15,141
K BANK Co., Ltd.		73,150		43,709		(18,233	)		5,807		—			—			(29	)		—		—		31,254
Smart Private Equity Fund No.2		2,915		2,890		(41	)		—		(85	)		—			—			—		—		2,764
Woori Bank-Company K Korea Movie Asset Fund		3,000		2,700		623			—		—			—			—			—		—		3,323
Well to Sea No.3 Private Equity Fund		101,483		197,393		30,343			—		—			(18,836	)		123			—		—		209,023
Partner One Value Up I Private Equity Fund		10,000		9,948		(40	)		—		—			—			—			—		—		9,908
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		4,576		4,426		—			150		—			—			—			—		—		4,576
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		4,375		3,025		—			1,350		—			—			—			—		—		4,375
Woori-Shinyoung Growth-Cap Private Equity Fund I		9,742		—		(657	)		9,742		—			—			—			—		—		9,085
LOTTE CARD Co., ltd		346,000		—		63,444			346,000		—			—			—			—		—		409,444
Woori-Q Corporate Restructuring Private Equity Fund		4,532		—		—			4,532		—			—			—			—		—		4,532
PCC-Woori LP Secondary Fund		1,750		—		—			1,750		—			—			—			—		—		1,750
Nomura-Rifa Private Real Estate Investment Trust No.17		1,000		787		(114	)		—		(673	)		—			—			—		—		—
		739,562		361,427		84,264			369,640		(10,863	)		(19,137	)		1,399			—		—		786,730

- 94 -

	For the year ended December 31, 2018
	Acquisition cost		January 1, 2018		Share of profits (losses)			Acquisition		Disposal and others (*)			Dividends			Change in capital			Impairment			Others			December 31, 2018
Kumho Tire Co., Inc.		175,652		98,933		(10,451	)		—		(83,286	)		—			(5,196	)		—			—			—
Woori Service Networks Co., Ltd.		108		158		1			—		—			(2	)		—			—			—			157
Korea Credit Bureau Co., Ltd.		3,313		5,816		1,087			—		—			(113	)		—			—			—			6,790
Korea Finance Security Co., Ltd.		3,267		3,519		(10	)		—		—			(54	)		1			—			—			3,456
Chin Hung International Inc.		130,779		45,101		1,206			—		—			—			(1,725	)		—			159			44,741
Poonglim Industrial Co., Ltd.		13,916		—		—			—		—			—			—			—			—			—
STX Corporation		50,760		6,947		(816	)		—		(5,865	)		—			(266	)		—			—			—
Saman Corporation		8,521		1,254		(98	)		—		—			—			35			(177	)		—			1,014
Woori Growth Partnerships New Technology Private Equity Fund		25,847		27,611		950			360		(3,346	)		(484	)		—			—			—			25,091
2016KIF-IMM Woori Bank Technology Venture Fund		15,000		6,840		—			8,160		—			—			300			—			—			15,300
K BANK Co., Ltd.		67,343		31,735		(10,705	)		21,951		—			—			144			—			584			43,709
Smart Private Equity Fund No.2		3,000		2,932		(42	)		—		—			—			—			—			—			2,890
Woori Bank-Company K Korea Movie Asset Fund		3,000		2,957		(257	)		—		—			—			—			—			—			2,700
Well to Sea No.3 Private Equity Fund		101,992		182,309		22,546			—		(508	)		(517	)		(6,437	)		—			—			197,393
Partner One Value Up Ist Private Equity Fund		10,000		—		(52	)		10,000		—			—			—			—			—			9,948
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		4,426		—		—			4,426		—			—			—			—			—			4,426
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		3,025		—		—			3,025		—			—			—			—			—			3,025
Nomura-Rifa Private Real Estate Investment Trust No.17		1,000		939		(152	)		—		—			—			—			—			—			787
Uri Hanhwa Eureka Private Equity Fund		350		—		(11	)		350		—			—			—			—			(339	)		—
		621,299		417,051		3,196			48,272		(93,005	)		(1,170	)		(13,144	)		(177	)		404			361,427

(*) Investments in joint ventures and associates decreased by 83,286 million Won through transfers to financial assets at FVTOCI which occurred during the year ended December 31, 2018.

- 95 -

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

	December 31, 2019
	Assets		Liabilities		Operating revenue		Net income (loss)
Woori Service Networks Co., Ltd.		5,742		1,969		17,572		1,322
Korea Credit Bureau Co., Ltd.		96,855		30,289		91,200		1,480
Korea Finance Security Co., Ltd.		32,574		10,660		61,939		(1,265	)
Chin Hung International Inc.		335,147		229,764		499,152		26,617
Saman Corporation		92,206		66,184		91,088		(485	)
Woori Growth Partnerships New Technology Private Equity Fund		83,583		330		7,866		6,355
2016KIF-IMM Woori Bank Technology Venture Fund		72,768		343		8,939		7,462
K BANK Co., Ltd.		2,679,968		2,464,168		84,928		(89,779	)
Smart Private Equity Fund No.2		13,872		51		2		(204	)
Woori Bank-Company K Korea Movie Asset Fund		13,294		2		4,532		2,492
Well to Sea No. 3 Private Equity Fund		7,073,363		6,470,540		524,319		48,357
Partner One Value Up I Private Equity Fund		42,602		—		457		(175	)
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		21,208		691		766		(676	)
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		16,939		124		10		(494	)
Woori-Shinyoung Growth-Cap Private Equity Fund I		37,642		620		2		(2,679	)
LOTTE CARD Co., ltd. (*)		12,936,977		10,659,889		1,366,512		42,538
Woori-Q Corporate Restructuring Private Equity Fund		15,975		823		—		(823	)
PCC-Woori LP Secondary Fund		6,498		—		—		(2	)

(*) Adjustments of fair value which occurred during acquisition and of difference between the Group’s financial reporting standard and the firm’s have been reflected.

	December 31, 2018
	Assets		Liabilities		Operating revenue		Net income (loss)
Woori Service Networks Co., Ltd.		5,066		1,886		15,803		819
Korea Credit Bureau Co., Ltd.		88,797		22,788		78,018		9,901
Korea Finance Security Co., Ltd.		35,155		12,114		60,706		17
Chin Hung International Inc.		412,205		332,268		606,192		6,402
Saman Corporation		97,720		69,915		75,825		(869	)
Woori Growth Partnerships New Technology Private Equity Fund		109,167		440		5,943		4,117
2016KIF-IMM Woori Bank Technology Venture Fund		73,231		12		16		(1,510	)
K BANK Co., Ltd.		2,024,856		1,807,502		60,039		(69,256	)
Smart Private Equity Fund No.2		14,502		51		1		(209	)
Woori Bank-Company K Korea Movie Asset Fund		10,805		5		1,663		(299	)
Well to Sea No.3 Private Equity Fund		5,968,591		5,395,307		429,742		39,711
Partner One Value Up Ist Private Equity Fund		42,776		—		326		(224	)
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		21,200		757		390		(1,268	)
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		12,014		105		3		(191	)
Nomura-Rifa Private Real Estate Investment Trust No.17		20,197		16,178		10		(228	)
Uri Hanhwa Eureka Private Equity Fund		42,332		181		1		(1,349	)

- 96 -

(4) The entities that the Group has not applied equity method of accounting although the Group’s ownership interest is more than 20% as of December 31, 2019 and 2018, are as follows:

	December 31, 2019
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
CL Tech Co., Ltd.		13,759		38.6

	December 31, 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
CL Tech Co., Ltd.		13,759		38.6

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

- 97 -

(5) As of December 31, 2019 and 2018, 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):

	December 31, 2019
	Total net asset		Ownership (%)		Ownership portion of net assets		Basis difference		Impairment			Intercompany transaction			Book value
Woori Service Networks Co., Ltd.		3,774		4.9		186		—		—			—			186
Korea Credit Bureau Co., Ltd.		66,566		9.9		6,597		246		—			2			6,845
Korea Finance Security Co., Ltd.		21,914		15.0		3,287		—		—			—			3,287
Chin Hung International Inc.(*1)		105,382		25.3		26,646		24,565		—			(35	)		51,176
Saman Corporation		26,023		9.2		2,391		5,373		(6,915	)					849
Woori Growth Partnerships New Technology Private Equity Fund		83,253		23.1		19,215		—		—			(3	)		19,212
2016KIF-IMM Woori Bank Technology Venture Fund		72,425		20.0		14,485		—		—			656			15,141
K BANK Co., Ltd. (*1)(*2)		215,800		14.5		31,248		3,634		(3,634	)		6			31,254
Smart Private Equity Fund No.2		13,820		20.0		2,764		—		—			—			2,764
Woori Bank-Company K Korea Movie Asset Fund		13,293		25.0		3,323		—		—			—			3,323
Well to Sea No. 3 Private Equity Fund		418,250		50.0		209,041		—		—			(18	)		209,023
Partner One Value Up I Private Equity Fund		42,602		23.3		9,909		—		—			(1	)		9,908
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		20,517		20.0		4,103		—		—			473			4,576
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		16,815		25.0		4,204		—		—			171			4,375
Woori-Shinyoung Growth-Cap Private Equity Fund I		37,021		24.5		9,085		—		—			—			9,085
LOTTE CARD Co., ltd.(*1)		2,047,220		20.0		409,444		—		—			—			409,444
Woori-Q Corporate Restructuring Private Equity Fund		15,152		28.4		4,299		—		—			233			4,532
PCC-Woori LP Secondary Fund		6,498		26.9		1,749		—		—			1			1,750

(*1) The net asset equity amount is after the debt-for-equity swap.

(*2) As a result of conducting an impairment test on the investment stocks of the related companies, the recoverable value was less than the carrying amount and thus the impairment loss was recognized

	December 31, 2018
	Total net asset		Ownership (%)		Ownership portion of net assets		Basis difference		Impairment			Intercompany transaction			Book value
Woori Service Networks Co., Ltd.		3,180		4.9		157		—		—			—			157
Korea Credit Bureau Co., Ltd.		66,009		9.9		6,544		246		—			—			6,790
Korea Finance Security Co., Ltd.		23,041		15.0		3,456		—		—			—			3,456
Chin Hung International Inc. (*)		79,793		25.3		20,192		24,565		—			(16	)		44,741
Saman Corporation		27,805		9.2		2,556		5,373		(6,915	)		—			1,014
Woori Growth Partnerships New Technology Private Equity Fund		108,727		23.1		25,091		—		—			—			25,091
2016KIF-IMM Woori Bank Technology Venture Fund		73,219		20.0		14,644		—		—			656			15,300
K BANK Co., Ltd.(*)		290,597		14.1		40,984		2,725		—			—			43,709
Smart Private Equity Fund No.2		14,451		20.0		2,890		—		—			—			2,890
Woori Bank-Company K Korea Movie Asset Fund		10,800		25.0		2,700		—		—			—			2,700
Well to Sea No.3 Private Equity Fund (*)		396,248		50.0		198,027		—		—			(634	)		197,393
Partner One Value Up Ist Private Equity Fund		42,776		23.3		9,948		—		—			—			9,948
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		20,443		20.0		4,089		—		—			337			4,426
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		11,909		25.0		2,977		—		—			48			3,025
Nomura-Rifa Private Real Estate Investment Trust No.17		4,019		19.4		780		—		—			7			787

- 98 -

	December 31, 2018
	Total net asset		Ownership (%)		Ownership portion of net assets		Basis difference		Impairment		Intercompany transaction			Book value
Uri Hanhwa Eureka Private Equity Fund		42,151		0.8		339		—		—		(339	)		—

(*) The net asset equity amount is after the debt-for-equity swap

14. INVESTMENT PROPERTIES

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

	December 31, 2019			December 31, 2018
Acquisition cost		655,556			416,649
Accumulated depreciation		(37,967	)		(38,580	)
Net carrying amount		617,589			378,069

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

	For the years ended December 31
	2019			2018
Beginning balance		378,069			371,301
Acquisition		246,319			15,195
Disposal		(193	)		(3,045	)
Depreciation		(4,978	)		(4,045	)
Transfers from (to) premises and equipment		3,273			7,623
Classified to assets held for distribution (sale)		—			(10,056	)
Changes in consolidated scope		(5,816	)		—
Foreign currencies translation adjustments		402			(5	)
Others		513			1,101
Ending balance		617,589			378,069

(3) Fair value of investment properties amounted to 714,803 million Won and 438,407 million Won as of December 31, 2019 and 2018, respectively. The fair value of investment properties has been assessed on the basis of recent similar real estate market price and officially assessed land price in the area of the investment properties, is classified as level 3 on the fair value hierarchy.

(4) Rental fee earned from investment properties amounted to 19,881 million Won and 5,080 million Won for the years ended December 31, 2019 and 2018, respectively. Operating expenses directly related to the investment properties where rental fee was earned amounted to 5,816 million Won and 4,120 million Won.

(5) The minimum lease payments expected to be received in the future under the non-refundable lease agreement as of the end of the current term and the prior term is as follows:

	December 31, 2019		December 31, 2018
Lease payments:
Within a year		12,863		5,844
More than 1 year and within 2 years		6,722		3,707
More than 2 years and within 3 years		4,379		3,009
More than 3 years and within 4 years		3,640		2,619
More than 4 years and within 5 years		3,126		2,222
More than 5 years		241		—
Total		30,971		17,401

- 99 -

15. PREMISES AND EQUIPMENT

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

	December 31, 2019
	Land		Building		Equipment and vehicles		Leasehold improvement		Construction in progress		Structures		Total
Premises and equipment		1,528,172		685,408		237,786		51,240		1,286		—		2,503,892
Right of use assets		—		421,704		13,680		—		—		—		435,384
Carrying value		1,528,172		1,107,112		251,466		51,240		1,286		—		2,939,276

(2) Details of premises and equipment (owned) as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Land		Building			Equipment and vehicles			Leasehold improvement			Construction in progress		Structures		Total
Acquisition cost		1,528,172		920,196			766,222			449,193			1,286		—		3,665,069
Accumulated depreciation		—		(234,788	)		(528,436	)		(397,953	)		—		—		(1,161,177	)
Net carrying value		1,528,172		685,408			237,786			51,240			1,286		—		2,503,892

	December 31, 2018
	Land		Building			Equipment and vehicles			Leasehold improvement			Construction in progress		Structures			Total
Acquisition cost		1,481,776		872,063			717,141			445,157			8,381		20			3,524,538
Accumulated depreciation		—		(210,301	)		(485,119	)		(387,960	)		—		(17	)		(1,083,397	)
Net carrying value		1,481,776		661,762			232,022			57,197			8,381		3			2,441,141

- 100 -

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

	For the year ended December 31, 2019
	Land			Building			Equipment and vehicles			Leasehold improvement			Construction in progress			Structures			Total
Beginning balance		1,481,776			661,762			232,022			57,197			8,381			3			2,441,141
Acquisitions		51,855			46,141			102,051			25,864			5,540			—			231,451
Disposals		(3,284	)		(2,245	)		(558	)		(2,526	)		—			—			(8,613	)
Depreciation (*)		—			(27,871	)		(78,289	)		(25,996	)		—			—			(132,156	)
Changes in consolidated scope		(4,295	)		(816	)		(20,729	)		(997	)		—			(3	)		(26,840	)
Classified to assets held for distribution (sale)		(21	)		(74	)		—			—			—			—			(95	)
Transfer		991			6,040			1,101			988			(12,393	)		—			(3,273	)
Foreign currencies translation adjustments		880			801			1,459			609			36			—			3,785
Others		270			1,670			729			(3,899	)		(278	)		—			(1,508	)
Ending balance		1,528,172			685,408			237,786			51,240			1,286			—			2,503,892

	For the year ended December 31, 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		1,372			14,701			76,783			17,527			8,285			—		118,668
Disposals		(29	)		—			(5,192	)		(737	)		(187	)		—		(6,145	)
Depreciation		—			(26,014	)		(76,171	)		(32,162	)		—			—		(134,347	)
Classified to assets held for distribution (sale)		(3,746	)		(2,742	)		(7,991	)		(397	)		(718	)		—		(15,594	)
Transfer		(2,863	)		(4,760	)		63,432			—			(63,432	)		—		(7,623	)
Foreign currencies translation adjustments		(236	)		(257	)		(69	)		323			(126	)		—		(365	)
Acquisition through business combination		—			—			969			661			—			—		1,630
Others		—			(12	)		189			7,195			—			—		7,372
Ending balance		1,481,776			661,762			232,022			57,197			8,381			3		2,441,141

(4) Details of right-of-use assets are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Building			Properties for business use			Total
Acquisition cost		576,147			21,712			597,859
Accumulated depreciation		(154,443	)		(8,032	)		(162,475	)
Net carrying value		421,704			13,680			435,384

(5) Details of changes in right-of-use assets are as follows (Unit: Korean Won in millions)

	December 31, 2019
	Building			Properties for business use			Total
Beginning balance		420,712			20,458			441,170
New contracts		254,054			6,326			260,380
Changes in coontracts		(47	)		—			(47	)
Cancelled contracts		(3,740	)		(69	)		(3,809	)
Depreciation (*)		(216,015	)		(10,643	)		(226,658	)
Changes in consolidated scope		(32,412	)		(2,411	)		(34,823	)
Others		(848	)		19			(829	)
Ending balance		421,704			13,680			435,384

(*) Profits and losses from discontinued operations are included

- 101 -

16. INTANGIBLE ASSETS

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

	December 31, 2019
	Goodwill		Software			Industrial property rights			Development cost			Others			Membership deposit			Construction in progress		Total
Acquisition cost		163,731		24,729			1,429			321,716			801,237			18,157			4,066		1,335,065
Accumulated amortization		—		(9,144	)		(787	)		(120,182	)		(626,271	)		—			—		(756,384	)
Accumulated impairment losses		—		—			—			—			(25,848	)		(803	)		—		(26,651	)
Net carrying value		163,731		15,585			642			201,534			149,118			17,354			4,066		552,030

	December 31, 2018
	Goodwill		Software			Industrial property rights			Development cost			Others			Membership deposit			Construction in progress		Total
Acquisition cost		153,602		38,839			1,250			305,114			728,399			24,099			10,415		1,261,718
Accumulated amortization		—		(12,602	)		(688	)		(68,696	)		(589,557	)		—			—		(671,543	)
Accumulated impairment losses		—		—			—			—			—			(2,920	)		—		(2,920	)
Net carrying value		153,602		26,237			562			236,418			138,842			21,179			10,415		587,255

- 102 -

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

	For the year ended December 31, 2019
	Goodwill			Software			Industrial property rights			Development cost			Others			Membership deposit			Construction in progress			Total
Beginning balance		153,602			26,237			562			236,418			138,842			21,179			10,415			587,255
Acquisitions		—			6,389			314			31,102			85,902			3,976			8,755			136,438
Disposal		—			—			—			—			—			(813	)		—			(813	)
Amortization (*1)		—			(4,882	)		(176	)		(59,856	)		(52,119	)		—			—			(117,033	)
Provision for impairment loss(*2)		—			—			—			—			(25,848	)		(471	)		—			(26,319	)
Classified to assets held for distribution (sale)		(105	)		(13,885	)		(59	)		(14,058	)		(5,686	)		(7,371	)		—			(41,164	)
Transfer		—			—			—			7,928			7,175			—			(15,103	)		—
Foreign currencies translation adjustment		10,234			1,268			—			—			1,023			59			—			12,584
Others		—			458			1			—			(171	)		795			(1	)		1,082
Ending balance		163,731			15,585			642			201,534			149,118			17,354			4,066			552,030

(*1) Amortization of other intangible assets amounting to 22,317 million Won is included in other operating expenses.

(*2) The impairment test for other intangible assets indicates that the recoverable value is less than the carrying amount and thus the impairment loss is recognized. Also, membership is an intangible asset with an indefinite useful life that recognizes an impairment loss if recoverable value is lower than its carrying amount, while the reversal of an impairment loss should be recognized when the recoverable value is higher than its carrying amount.

	For the year ended December 31, 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		—			6,839			195			20,935			45,205			5,162			97,067			175,403
Disposal		—			(4,359	)		—			—			(196	)		(2,871	)		—			(7,426	)
Amortization (*1)		—			(14,028	)		(172	)		(46,045	)		(73,913	)		—			—			(134,158	)
Reversal of impairment loss (*2)		—			—			—			—			—			674			—			674
Classified to assets held for distribution (sale)		—			(3,490	)		—			(3,902	)		(455	)		(2,419	)		—			(10,266	)
Transfer		—			—			—			188,189			51,672			—			(239,861	)		—
Acquisition through business combination		46,752			763			—			—			—			—			—			47,515
Foreign currencies translation adjustment		(1,857	)		(165	)		—			—			(227	)		(52	)		—			(2,301	)
Others		—			5			—			—			(790	)		—			—			(785	)
Ending balance		153,602			26,237			562			236,418			138,842			21,179			10,415			587,255

(*1) Amortization of other intangible assets amounting to 51,770 million Won is included in other operating expenses.

(*2) Membership is an intangible asset with an indefinite useful life that recognizes an impairment loss if recoverable value is lower than its carrying amount, while the reversal of an impairment loss should be recognized when the recoverable value is higher than its carrying amount.

- 103 -

(3) Goodwill

1) Details of major goodwill as of December 31, 2019 and 2018 are as follow (Unit: Korea Won in millions)

	For the years ended December 31
Cash Generated Unit (*1)	2019		2018
PT Bank Woori Saudara Indonesia 1906 Tbk(*2)		106,173		98,229
WB Finance Co., Ltd.(*3)		49,374		47,681
Total		155,547		145,910

(*1) The goodwill has been allocated to the cash-generating unit that will benefit from the synergies of the business combination, and the cash-generating unit generally consists of a sales unit or its sub-sector.

(*2) The Group has acquired Saudara Bank to expand retail sales in Indonesia, and recognized the goodwill as it is expected to strengthen our competitiveness by securing a local sales network in Indonesia.

(*3) The Group has acquired VisionFund Cambodia to expand Cambodian retail sales, and recognized goodwill based on the economies of scale and acquired customer base.

2) Impairment Test

The recoverable amount of the cash-generating unit is measured at larger amount among the fair value less costs to sell or the value to use.

The net fair value is calculated by deducting costs of disposal from the amount received from the sale of the cash-generating unit in an arm’s length transaction between the parties with reasonable judgment and willingness to negotiate. In case of difficulty in measuring this amount, the sale amount of a similar cash-generating unit in the past market is calculated by reflecting the characteristics of the cash-generating unit. If reliable information related to fair value less costs to sell is not available, value in use is considered as recoverable amount. Value in use is the present value of future cash flows expected to be generated by the cash-generating unit. Future cash flows are estimated based on the latest financial budget approved by the management, with an estimated period of up to five years. The Group estimates cash flows based on an annual growth rate of 4.0% in case of PT Bank Woori Saudara Indonesia 1906 Tbk and 3.0% in case of WB Finance Co., Ltd. in relation to cash flows after the longest period. The main assumptions used to estimate cash flows are about the size of the market and the share of the group. The appropriate discount rate for discounting future cash flows is the pre-tax discount rate, including assumptions about risk-free interest rates, market risk premium, and systemic risk of cash-generating units. The impairment test, which compares the carrying amount and recoverable amount of the cash-generating unit to which goodwill has been allocated, is conducted every year and every time an impairment sign occurs.

Category	PT Bank Woori Saudara Indonesia 1906 Tbk		WB Finance Co., Ltd
Discount rate (%).		18.3		17.3
Terminal growth rate (%)		4.0		3.0
Recoverable amount.		952,692		133,149
Carrying amount		577,075		93,143

As a result of the damage test on goodwill, it is determined that the carrying amount of the cash-generating unit to which the goodwill has been distributed will not exceed the recoverable amount.

- 104 -

17. ASSETS HELD FOR DISTRIBUTION (SALE)

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

	December 31, 2019		December 31, 2018
Disposal group as held for distribution		—		75,590
Premises and equipment, etc. (*)		95		17,912
Total		95		93,502

(*) The Group classified premises and equipment that are highly likely to be sold within one year as assets held for distribution (sale).

(2) Disposal group as held for distribution:

In accordance with the establishment of financial holding company and plans on share transfer, the Group classified assets, liabilities and equity of each subsidiary as of the end of the reporting period. The details of disposal group held for sale as of December 31, 2018 as follows:

	Gross amount		Intercompany eliminations			Net amount
Disposal group as held for distribution
Cash And Cash Equivalents		90,771		(55,500	)		35,271
Financial assets at FVTPL		133		—			133
Loans and other financial assets at amortized cost		66,514		(57,251	)		9,263
Investments in joint ventures and associates		339		—			339
Investment properties		127		—			127
Premises and equipment		9,351		—			9,351
Intangible assets		10,265		—			10,265
Current tax assets		242		—			242
Deferred tax assets		9,778		—			9,778
Others		821		—			821
Total		188,341		(112,751	)		75,590
Liabilities of a disposal group classified as held for distribution
Debentures		10,000		—			10,000
Provisions		1,451		—			1,451
Net defined benefit liability		34,427		—			34,427
Current tax liabilities		2,519		—			2,519
Other financial liabilities		17,979		(576	)		17,403
Other liabilities		6,860		—			6,860
Total		73,236		(576	)		72,660

The Group calculated net fair value of each subsidiary subject to future distribution as of December 31, 2018 based on the value of net asset and net income. The computed value is classified as Level 3 in the fair value hierarchy.

The Group measured assets held for distribution (sale) as the smaller amount between the fair value less cost of sale and book value.

- 105 -

(3) Net gain from discontinued operations

Details of discontinued operations are as follows: (Unit: million in Korean Won)

.	For the year ended December 31, 2019									For the year ended December 31, 2018
	Total			Intercompany eliminations			Net amount			Total			Intercompany eliminations			Net amount
Interest income
Financial assets at FVTPL		882			—			882			1,808			—			1,808
Financial assets at amortized cost		480,192			(351	)		479,841			668,431			(400	)		668,031
Interest expense		116,555			(393	)		116,162			160,642			(689	)		159,953
Net interest income		364,519			42			364,561			509,597			289			509,886
Fees and commissions income		369,197			(83	)		369,114			601,443			(76	)		601,367
Fees and commissions expense		371,439			(86,667	)		284,772			592,533			(149,816	)		442,717
Net fees and commissions income		(2,242	)		86,584			84,342			8,910			149,740			158,650
Dividend income		5,836			—			5,836			10,154			—			10,154
Net gain on financial instruments at FVOCI		—			—			—			941			—			941
Net gain arising on financial assets at amortized cost		17,687			—			17,687			35,345			—			35,345
Impairment losses due to credit loss		(172,552	)		—			(172,552	)		(244,762	)		—			(244,762	)
General and administrative expenses		(120,774	)		250			(120,524	)		(170,766	)		30,645			(140,121	)
Other net operating income		5,002			—			5,002			7,116			—			7,116
Operating income		97,476			86,876			184,352			156,535			180,674			337,209
Non-operating income (expense)		15,725			—			15,725			(5,546	)		3,099			(2,447	)
Net income before income tax expense		113,201			86,876			200,077			150,989			183,773			334,762
Income tax expense		27,164			—			27,164			36,222			—			36,222
Loss on disposal of assets from discontinued operations		(644,360	)		—			(644,360	)		—			—			—
Net income (loss) from discontinued operations		(558,323	)		86,876			(471,447	)		114,767			183,773			298,540

(4) Cash flow from discontinued operations

Details of cash flow from discontinued operations as of December 31, 2019 and 2018 are as follows: (Unit: million in Korean Won)

	December 31, 2019			December 31, 2018
Cash flow from operating activities		(86,511	)		(1,014,398	)
Cash flow from investing activities		(90,619	)		(15,318	)
Cash flow from financing activities		71,856			891,641

- 106 -

18. ASSETS SUBJECT TO LIEN AND ASSETS ACQUIRED THROUGH FORECLOSURES

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

		December 31, 2019
		Collateral given to	Amount		Reason for collateral
Loan at amortized cost and other financial assets	Due from banks on time in local currency	Branch of IBK at Phnom Penh and others		11,352	Right of pledge
	Due from banks in local currencies	Samsung Securities Co., Ltd. and others		17,345	Margin deposit for futures or option
	Due from banks in foreign currencies	Korea Investment & Securities Co., Ltd. and others		180,919	Foreign margin deposit for future or option and others
				82,594
Financial assets at FVTOCI	Korean financial institutions’ debt securities and others	The BOK and others		5,127,383	Settlement risk and others
	Korean financial institutions’ debt securities	Banco Bilbao Vizcaya Argentaria, S.A		56,975	Related to bonds sold under repurchase agreements (*)
Securities at amortized cost	Korean treasury and government bonds	Korea Securities Depository		5,570	Related to bonds sold under repurchase agreements (*)
	Korean treasury and government bonds and others	The BOK and others		6,190,630	Settlement risk and others
Premises and equipment		Credit Counselling & Recovery Service and others		37,271	Right to collateral and others
		Total		11,710,039

		December 31, 2018
		Collateral given to	Amount		Reason for collateral
Loan at amortized cost and other financial assets	Due from banks on time in local currency	Daishin AMC and others		1,500	Right of pledge
	Due from banks in local currencies	Samsung Securities Co., Ltd. and others		38,112	Margin deposit for futures or option
	Due from banks in foreign currencies	Korea Investment & Securities Co., Ltd. and others		202,156	Foreign margin deposit for future or option and others
Financial assets at FVTOCI	Korean financial institutions’ debt securities and others	The BOK and others		2,919,042	Settlement risk and others
	Korean financial institutions’ debt securities	Banco Bilbao Vizcaya Argentaria, S.A		33,588	Related to bonds sold under repurchase agreements (*)
Securities at amortized cost	Korean treasury and government bonds	Korea Securities Depository		5,552	Related to bonds sold under repurchase agreements (*)
	Korean treasury and government bonds and others	The BOK and others		6,382,188	Settlement risk and others
Premises and equipment	Land and building	Credit Counselling & Recovery Service and others		5,987	Right to collateral and others
		Total		9,588,125

(*) The Group has the agreements to repurchase the sold assets at the predetermined price or the price that includes the rate of return and to provide the guarantee on the assets. The transferee has the right to sell or to provide as guarantee. Therefore, the Group does not derecognize the assets, but recognizes the relevant amounts as liability (bonds sold under repurchase agreements).

(2) As of December 31, 2019 and December 31, 2018 there is no asset acquired through foreclosures.

- 107 -

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

		December 31, 2019		December 31, 2018		Loaned to
Financial assets at FVTOCI	Korean financial institutions’ debt securities and others		80,737		40,029	Korea Securities Finance Corporation
Total			80,737		40,029

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

	December 31, 2019
	Fair values of collaterals		Fair values of collaterals were disposed or re-subjected to lien
Securities		9,340,517	—

	December 31, 2018
	Fair values of collaterals		Fair values of collaterals were disposed or re-subjected to lien
Securities		12,262,041	—

19. OTHER ASSETS

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

	December 31, 2019		December 31, 2018
Prepaid expenses		128,384		160,327
Advance payments		1,399		18,448
Others		13,204		18,057
Total		142,987		196,832

- 108 -

20. FINANCIAL LIABILITIES AT FVTPL

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

	December 31, 2019		December 31, 2018
Financial liabilities at fair value through profit or loss mandatorily measured at fair value		2,868,668		2,117,919
Financial liabilities at fair value through profit or loss designated as upon initial recognition		87,626		164,767
Total		2,956,294		2,282,686

(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):

	December 31, 2019		December 31, 2018
Deposits
Gold banking liabilities		27,530		27,058
Derivative liabilities		2,841,138		2,090,861
Total		2,868,668		2,117,919

(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):

	December 31, 2019		December 31, 2018
Equity-linked securities index
Equity-linked securities index in short position		87,626		164,767
Total		87,626		164,767

Financial liabilities at fair value through profit or loss designated as upon initial recognition are designated in order to eliminate or significantly reduce accounting mismatch arising from recognition or measurement.

(4) Accumulated changes in credit risk adjustments to financial liabilities at fair value through profit or loss designated as upon initial recognition does not have.

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 carrying amount and maturity amount of financial liabilities at fair value through profit or loss designated as upon initial recognition (Financial liabilities designated as at FVTPL) are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Carrying amount		87,626			164,767
Nominal amount at maturity		97,503			217,280
Difference		(9,877	)		(52,513	)

- 109 -

21. DEPOSITS DUE TO CUSTOMERS

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

	December 31, 2019			December 31, 2018
Deposits in local currency:
Deposits on demand		8,680,286			11,076,417
Deposits at termination		225,426,329			204,051,570
Mutual installment		28,574			30,783
Deposits on notes payables		—			1,891,556
Deposits on CMA		—			137,316
Customer deposit for security investment		—			30,000
Certificate of deposits		973,625			6,510,571
Other deposits		1,401,469			1,409,505
Sub-total		236,510,283			225,137,718
Deposits in foreign currency:
Deposits in foreign currencies		27,141,776			23,626,234
Present value discount		(8,095	)		(73,013	)
Total		263,643,964			248,690,939

- 110 -

22. BORROWINGS AND DEBENTURES

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

	December 31, 2019
	Lenders	Interest rate (%)		Amount
Borrowings in local currency:
Borrowings from The BOK	The BOK		0.5 ~ 0.8		1,770,726
Borrowings from government funds	Small Enterprise And Market Service and others		0.0 ~ 2.8		1,844,798
Others	The Korea Development Bank and others		0.0 ~ 5.0		6,035,448
Sub-total					9,650,972
Borrowings in foreign currencies:
Borrowings in foreign currencies	The Export-Import Bank of Korea and others		(0.3) ~ 8.3		8,566,872
Offshore borrowings in foreign currencies	JPMORGAN CHASE BANK		3.0		34,734
Sub-total					8,601,606
Bills sold	Others		0.0 ~ 1.6		9,366
Call money	Bank and others		(0.3) ~ 3.5		133,519
Bonds sold under repurchase agreements	Other financial institutions		4.0 ~ 12.7		180,402
Present value discount					(299	)
Total					18,575,566
	December 31, 2018
	Lenders	Interest rate (%)		Amount
Borrowings in local currency:
Borrowings from The BOK	The BOK		0.5 ~ 0.8		1,335,459
Borrowings from government funds	Small Enterprise And Market Service and others		0.0 ~ 3.5		1,771,379
Others	The Korea Development Bank and others		0.0 ~ 4.0		4,716,231
Sub-total					7,823,069
Borrowings in foreign currencies:
Borrowings in foreign currencies	The Export-Import Bank of Korea and others		0.0 ~ 7.5		7,308,857
Offshore borrowings in foreign currencies	JPMORGAN CHASE BANK		2.9		33,543
Sub-total					7,342,400
Bills sold	Others		0.0 ~ 1.8		19,336
Call money	Bank and others		0.0 ~ 7.3		975,358
Bonds sold under repurchase agreements	Other financial institutions		0.8 ~ 12.7		42,907
Present value discount					(84	)
Total					16,202,986

- 111 -

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

	December 31, 2019					December 31, 2018
	Interest rate (%)		Amount			Interest rate (%)		Amount
Face value of bond(*):
Ordinary bonds		0.0 ~ 4.3		17,064,976			1.6 ~ 4.5		22,422,183
Subordinated bonds		2.7 ~ 5.9		5,782,688			3.0 ~ 12.6		5,358,838
Other bonds		17.0		4,156			1.9 ~ 17.0		974,230
Sub-total				22,851,820					28,755,251
Discounts on bonds				(17,412	)				(29,389	)
Total				22,834,408					28,725,862

(*) Included debentures under fair value hedge relationships are 3,151,172 million Won and 2,956,565 million Won as of December 31, 2019 and 2018, respectively. Also, debentures under cash flow hedge amounting to 823,219 million Won are included as of December 31, 2018.

23. PROVISIONS

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

	December 31, 2019		December 31, 2018
Asset retirement obligation		60,477		67,093
Provisions for guarantees (*1)		92,486		89,761
Provisions for unused loan commitments		60,228		121,535
Provisions for customer reward credits		—		49,180
Other provisions (*2)		166,006		62,293
Total		379,197		389,862

(*1) Provisions for guarantees includes provision for financial guarantee of 62,764 million Won and 47,817 million Won as of December 31, 2019 and 2018, respectively.

(*2) Other provisions consist of provision for litigation and others.

- 112 -

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

1) Provisions for guarantees

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		44,903			33,760			11,098			89,761
Replaced with 12-month expected credit loss		13,568			(13,568	)		—			—
Replaced with expected credit loss for the entire period		(317	)		532			(215	)		—
Replaced with credit-impaired financial assets		(30	)		(32	)		62			—
Provisions used		(27,711	)		—			—			(27,711	)
Net reversal of unused amount		(14,400	)		5,611			4,437			(4,352	)
Others (*)		34,788			—			—			34,788
Ending balance		50,801			26,303			15,382			92,486

(*) Others have occurred as a result of new financial guarantee contract valued at initial fair value.

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		47,132			18,281			127,511			192,924
Replaced with 12-month expected credit loss		92			(92	)		—			—
Replaced with expected credit loss for the entire period		(237	)		91,008			(90,771	)		—
Replaced with credit-impaired financial assets		(38	)		(29	)		67			—
Provisions used		(20,429	)		—			—			(20,429	)
Net reversal of unused amount		(4,866	)		(75,410	)		(25,709	)		(105,985	)
Others (*)		23,249			2			—			23,251
Ending balance		44,903			33,760			11,098			89,761

(*) Others have occurred as a result of new financial guarantee contract valued at initial fair value.

2) Provisions for unused loan commitment

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		74,624			45,285			1,626			121,535
Replaced with 12-month expected credit loss		10,179			(10,117	)		(62	)		—
Replaced with expected credit loss for the entire period		(1,665	)		1,745			(80	)		—
Replaced with credit-impaired financial assets		(217	)		(213	)		430			—
Net provision (reversal) of unused amount (*)		(17,632	)		8,199			1,262			(8,171	)
Changes in consolidated scope		(34,835	)		(15,016	)		(3,176	)		(53,027	)
Others		(108	)		(1	)		—			(109	)
Ending balance		30,346			29,882			—			60,228

(*) Profit or loss from discontinued operations are included.

- 113 -

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		75,232			27,875			1,878			104,985
Replaced with 12-month expected credit loss		7,770			(7,396	)		(374	)		—
Replaced with expected credit loss for the entire period		(2,376	)		2,525			(149	)		—
Replaced with credit-impaired financial assets		(213	)		(1,579	)		1,792			—
Net provision (reversal) of unused amount (*)		(5,813	)		23,860			(1,521	)		16,526
Others		24			—			—			24
Ending balance		74,624			45,285			1,626			121,535

(*) Profit or loss from discontinued operations are included.

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

	For the years ended December 31
	2019			2018
Beginning balance		67,093			61,872
Provisions provided		3,097			1,489
Provisions used		(1,774	)		(913	)
Reversal of provisions unused (*)		(2,667	)		(1,038	)
Amortization		431			564
Changes in consolidated scope		(5,286	)		—
Increase in restoration costs and others		(417	)		5,119
Ending balance		60,477			67,093

(*) Profit or loss from discontinued operations are included.

The amount of the asset retirement obligation is the present value of the best estimate of future expected expenditure to settle the obligation – arising from leased premises as of December 31, 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 inflation rate for last year in order to estimate future recovery cost.

- 114 -

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

	For the year ended December 31, 2019
	Provisions for customer reward credits			Other provisions			Total
Beginning balance		49,180			62,293			111,473
Provisions provided (*)		—			107,473			107,473
Provisions used		(49,180	)		(4,928	)		(54,108	)
Reversal of provisions unused		—			(25	)		(25	)
Foreign currencies translation adjustments		—			1,193			1,193
Ending balance		—			166,006			166,006

(*) Profit or loss from discontinued operations are included.

	For the year ended December 31, 2018
	Provisions for customer reward credits			Other provisions			Total
Beginning balance		40,445			58,791			99,236
Provisions provided (*1)		70,138			8,384			78,522
Provisions used		(98,170	)		(6,940	)		(105,110	)
Reversal of unused amount		—			(52	)		(52	)
Foreign currencies translation adjustments		—			(194	)		(194	)
Transfer (*2)		9,228			—			9,228
Others		27,539			2,304			29,843
Ending balance		49,180			62,293			111,473

(*1) Profit or loss from discontinued operations are included.

(*2) Provision for customer reward credits have increased for the Group due to the point transfer from partners during the nine months ended in December 31, 2018.

(5) Others

1) As of September 23, 2019, the Group temporarily suspended the won-payment business due to tightened U.S. sanctions on Iran while it was ongoing to settle trade transactions between Korea and Iran. In connection with these services, the Group is currently being investigated by US government agencies including US prosecutors (United States Attorney’s Office and New York State Attorney General’s Office) and Office of Foreign Assets Control as to whether the Group has violated United States laws by participating in prohibited transactions involving the following countries: Iran, Sudan, Syria and Cuba, which have been sanctioned by the US.

2) The Group recognized the provision of the estimated compensation amount related to the incomplete selling of the Derivative Linked Fund (DLF) incurred during the current term and a fine expected to be imposed by the Financial Supervisory Service as the best estimate for the expenditure required to meet its obligations at the end of the reporting period. On the other hand, the actual amount of compensation of the Group may change as the global spread of the new coronavirus has caused abnormal interest rate changes since the end of the reporting period

- 115 -

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

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

Volatility of asset	The defined benefit obligation was estimated with an interest rate 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 increase.

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

	December 31, 2019			December 31, 2018
Present value of defined benefit obligation		1,312,690			1,209,669
Fair value of plan assets		(1,264,412	)		(1,070,987	)
Net defined benefit liability		48,278			138,682

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

		For the year ended December 31, 2019			For the year ended December 31, 2018
Beginning balance			1,209,669			1,071,170
Subsequent amount from transfer company			601			—
Current service cost (*)			147,421			144,394
Interest cost(*)			31,161			32,143
Remeasurements	Financial assumption		50,720			59,429
	Demographic assumptions		32,566			7,728
	Experience adjustment		(45,269	)		33,697
Foreign currencies translation adjustments			179			(3	)
Retirement benefit paid			(75,852	)		(74,952	)
Classification as assets held for sale			—			(65,351	)
Changes in consolidated scope			(37,527	)		—
Others			(979	)		1,414
Ending balance			1,312,690			1,209,669

(*) Profit or loss from discontinued operations are included.

- 116 -

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

	For the year ended December 31, 2019			For the year ended December 31, 2018
Beginning balance		1,070,987			1,027,906
Interest income(*)		29,493			33,825
Remeasurements		(8,350	)		(14,783	)
Employer’s contributions		282,666			128,926
Retirement benefit paid		(73,984	)		(71,672	)
Classification as assets held for sale		—			(30,924	)
Changes in consolidated scope		(34,145	)		—
Others		(2,255	)		(2,291	)
Ending balance		1,264,412			1,070,987

(*) Profit or loss from discontinued operations are included.

(4) Plan assets wholly consist of fixed deposits as of December 31, 2019 and 2018. Among plan assets, realized returns on plan assets amount to 21,143 million Won and 19,042 million Won for the years ended December 31, 2019 and 2018, respectively.

Meanwhile, the contribution expected to be paid in the next accounting year amounts to 148,124 million Won.

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

	For the year ended December 31, 2019		For the year ended December 31, 2019
Current service cost		147,421		144,394
Net interest income		1,668		(1,682	)
Cost recognized in net income		149,089		142,712
Remeasurements		46,367		115,637
Cost recognized in total comprehensive income		195,456		258,349

Retirement benefits related to defined contribution plans recognized as expenses are 2,171 million Won and 2,286 million Won for the nine months ended December 31, 2019 and 2018, respectively.

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

	December 31, 2019	December 31, 2018
Discount rate	2.42%	2.69%
Future wage growth rate	2.64%	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 11.85 years.

- 117 -

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

		December 31, 2019			December 31, 2018
Discount rate	Increase by 1% point		(139,312	)		(116,812	)
	Decrease by 1% point		164,744			136,990
Future wage growth rate	Increase by 1% point		162,701			135,767
	Decrease by 1% point		(140,339	)		(118,020	)

25. OTHER FINANCIAL LIABILITIES AND OTHER LIABILITIES

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

	December 31, 2019			December 31, 2018
Other financial liabilities:
Accounts payable		5,513,235			5,407,025
Accrued expenses		2,359,851			2,212,350
Borrowings from trust accounts		3,277,795			3,747,492
Agency business revenue		362,820			396,735
Foreign exchange payables		1,153,457			539,554
Domestic exchange settlement credits		1,257,280			7,134,966
Lease liabilities		388,609			—
Other miscellaneous financial liabilities		2,283,352			1,990,426
Present value discount		(1,001	)		(2,484	)
Sub-total		16,595,398			21,426,064
Other liabilities:
Unearned income		56,700			204,034
Other miscellaneous liabilities		121,701			134,241
Sub-total		178,401			338,275
Total		16,773,799			21,764,339

- 118 -

26. DERIVATIVES

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

	December 31, 2019
			Assets				Liabilities
	Nominal amount		For fair value hedge		For trading		For cash flow hedge		For trading
Interest rate:
Futures		79,021		—		—		—
Swaps		150,731,987		111,764		301,116		43		413,195
Purchase options		460,000		—		11,888		—		—
Written options		395,789		—		—		—		9,655
Currency:
Forwards		113,859,491		—		1,447,598		—		1,028,238
Swaps		81,359,428		—		965,346		—		1,106,423
Purchase options		1,588,746		—		18,835		—		—
Written options		2,341,179		—		—		—		9,403
Equity:
Forwards		11		—		—		—		—
Futures		630,562		—		—		—		—
Swaps		1,280,436		—		1,217		—		54,393
Purchase options		8,851,984		—		175,221		—		—
Written options		8,978,953		—		—		—		219,831
Total		370,557,587		111,764		2,921,221		43		2,841,138

	December 31, 2018
			Assets				Liabilities
	Nominal amount		For fair value hedge		For trading		For cash flow hedge		For fair value hedge		For trading
Interest rate:
Swaps		150,710,490		35,503		218,140		665		17,654		266,207
Purchase options		530,000		—		10,461		—		—		—
Written options		525,000		—		—		—		—		12,438
Currency:
Futures		320,213		—		—		—		—		—
Forwards		88,376,776		—		843,621		—		—		777,039
Swaps		67,179,195		—		761,907		33,089		—		773,701
Purchase options		1,933,454		—		17,544		—		—		—
Written options		3,134,774		—		—		—		—		20,747
Equity:
Futures		186,737		—		—		—		—		—
Swaps		441,573		—		31,377		—		—		1,217
Purchase options		4,925,315		—		143,029		—		—		—
Written options		6,145,935		—		—		—		—		239,512
Total		324,409,462		35,503		2,026,079		33,754		17,654		2,090,861

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

- 119 -

(2) Overview of the Group’s hedge accounting

The hedging relationships the entity applies fair value hedge accounting and cash flow hedge accounting to are affected by interest rate which is related with Interest Rate Benchmark Reform. The interest rates to which the hedging relationships are exposed are USD 3M LIBOR, USD 6M LIBOR, and 3M EURIBOR. The nominal amounts of hedging instruments related to 3M LIBOR, 6M LIBOR and 3M EURIBOR are USD 2,150,000,000, USD 500,000,000, and EUR 26,635,556, respectively. The entity pays close attention to discussions in the market and industry regarding the applicable alternative benchmark interest rates for the exposed interest rate. The entity judges related uncertainty is expected to be no longer present when the exposed interest rates are replaced by the applicable benchmark interest rates.

1) Fair value hedge

As of the current period end, the Group has applied fair value hedge on fixed interest rate foreign currency denominated debentures amounting to 3,151,172 million Won. The purpose of the hedging is to avoid fair value volatility risk of fixed interest rate foreign currency denominated debentures derived from fluctuations of market interest rate, and as such the Group entered into interest rate swap agreements designated as hedging instruments.

Pursuant to the interest rate swap agreement, by swapping the calculated difference between the fixed interest rate and floating interest rate applied to the nominal value, the fair value fluctuation risk is hedged as the foreign currency denominated debentures fixed interest rate terms are converted to floating interest rate. Pursuant to the interest rate swap agreement, hedge ratio is determined by matching the nominal value 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.

- 120 -

2) Cash Flow Hedge

As of the current period end, the Group has applied cash flow hedge on borrowings in foreign currency amounting to 34,443 million Won. The Group’s hedging strategy is to mitigate risks of cash flow fluctuation from variable interest rate borrowings in foreign currency due to changes in market interest rate by entering into an interest rate swap contract and thereby designating it as hedging instrument.

This means exchanging a predetermined nominal amount as set forth in the interest rate swap contract adjusted by the differences between the fixed and variable interest rates, which results in the conversion of interest rates of borrowings from variable interest into fixed interest, eliminating the cash flow fluctuation risk.

The hedge ratio is determined by matching the nominal amount of the hedging instrument to the face amount of the hedged item in accordance with interest rate swap. Only interest rate and foreign exchange rate fluctuation risk, which is the most significant factor in the cash flow fluctuation of the hedged item, is addressed in this hedging relationship, and other risk factors such as credit risk are not subject to hedging.

Thus, there could be hedge ineffectiveness arising from price margin set by the counterparty of hedging instruments and unilateral change in credit risk of any party to the transaction. The interest rate swap and the hedged item are all affected by the changes in market interest rate and foreign exchange rates which are basic factors of the derivative.

- 121 -

(3) The nominal amounts of the hedging instrument are as follows (Unit: USD, SGD and Korean Won in millions):

	December 31, 2019
	1 year or less		1 year to 5 years		More than 5 years		Total
Fair value hedge
Interest rate risk
Interest rate swap (USD)		350,000,000		2,000,000,000		300,000,000		2,650,000,000
Cash flow hedge
Interest rate risk
Interest rate swap (EUR)		—		26,635,556		—		26,635,556

	December 31, 2018
	1 year or less		1 year to 5 years		More than 5 years		Total
Fair value hedge
Interest rate risk
Interest rate swap (USD)		—		1,350,000,000		1,300,000,000		2,650,000,000
Cash flow hedge
Interest rate risk
Interest rate swap (KRW)		—		100,000		—		100,000
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 December 31, 2019 and December 31, 2018 are as follows :

	December 31, 2019
	Average interest rate and average exchange rate
Fair value hedge
Interest rate risk
Interest rate swaps (USD)	Fixed 3.96% receipt and Libor 3M+1.61% floating paid Fixed 5.88% receipt and Libor 6M+2.15% floating paid
Cash flow hedge
Interest rate risk
Interest rate swaps (EUR)	3M EURIBOR floating receipt and fixed EUR 0.09% paid

	December 31, 2018
	Average interest rate and average exchange rate
Fair value hedge
Interest rate risk
Interest rate swaps (USD)	Fixed 3.96% receipt and Libor 3M+1.61% floating paid Fixed 5.88% receipt and Libor 6M+2.15% floating paid
Cash flow hedge
Interest rate risk
Interest rate swaps (KRW)	CMS 3Y+0.40% receipt, 2.38% paid
Foreign currencies translation risk and interest rate risk
Currency swap (USD)	USD 3M Libor+0.70% receipt, KRW 1.74% paid, USD/KRW = 1,136 USD 1M Libor+0.52% receipt, KRW 1.71% paid, USD/KRW = 1,178
Foreign currencies translation risk
Currency swap (SGD)	SGD 1.91% receipt, KRW 1.98% paid, SGD/KRW = 828

- 122 -

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

	December 31, 2019
	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 (USD)		2,650,000,000		111,764		—	Derivative assets (designated for hedging) Derivative liabilities (designated for hedging)		90,244
Cash flow hedge
Interest rate risk
Interest rate swap (EUR)		26,635,556		—		43	Derivative assets (designated for hedging) Derivative liabilities (designated for hedging)		(43	)

	December 31, 2018
	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 (USD)		2,650,000,000		35,503		17,654	Derivative assets (Designated for hedging) Derivative liabilities (Designated for hedging)		(27,362	)
Cash flow hedge
Interest rate risk
Interest rate swap (KRW)		100,000		—		665	Derivative liabilities (Designated for hedging)		(665	)
Foreign currencies translation risk and interest rate risk
Currency swap (USD)		500,000,000		—		28,907	Derivative liabilities (Designated for hedging)		21,582
Foreign currencies translation risk
Currency swap (SGD)		204,000,000		—		4,182	Derivative liabilities (Designated for hedging)		2,353

- 123 -

(6) Details of carrying amount to hedge and amount due to hedge accounting are as follows (Unit: Korean won in millions):

December 31, 2019

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

Fair value hedge

Interest rate risk

Debenture

3,151,172

91,368

Debentures

(85,984

)

Cash flow hedge

Interest rate risk

Borrowings in foreign currency

34,443

Borrowings in foreign currency

43

(43

)

	December 31, 2018
	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
Fair value hedge
Interest rate risk
Debenture		—		2,956,565		—		5,200		Debentures		25,498			—
Cash flow hedge
Interest rate risk
Debenture		—		99,911		—		—		Debentures		521			(371	)
Foreign currencies translation risk and interest rate risk
Debenture		—		557,186		—		—		Debentures		(16,790	)		(1,211	)
Foreign currencies translation risk
Debenture		—		166,122		—		—		Debentures		(1,762	)		(2,287	)

(*) After tax amount

- 124 -

(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):

		For the year ended December 31, 2019
		Hedge ineffectiveness recognized in profit or loss		Line item in the profit or loss that includes hedge ineffectiveness
Fair value hedge	Interest rate risk		4,260	Other net operating income (expense)

		For the year ended December 31, 2018
		Hedge ineffectiveness recognized in profit or loss			Line item in the profit or loss that includes hedge ineffectiveness
Fair value hedge	Interest rate risk		(1,864	)	Other net operating income (expense)

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

		For the year ended December 31, 2019
		Changes in the value of hedging instruments recognized in OCI			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 due to reclassification
Cash flow hedge	Interest rate risk		(43	)		—			—		Other net operating income (expense)		—		Other net operating income (expense)
		For the year ended December 31, 2018
		Changes in the value of hedging instruments recognized in OCI			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 due to reclassification
Cash flow hedge	Interest rate risk		(517	)		(148	)		—		Other net operating income (expense)		—		Other net operating income (expense)
	Foreign currencies translation risk and interest rate risk		21,429			153			(882	)	Other net operating income (expense)		(23,084	)	Other net operating income (expense)
	Foreign currencies translation risk		2,353			—			(491	)	Other net operating income (expense)		(3,601	)	Other net operating income (expense)

- 125 -

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 years ended December 31
	2019			2018
Beginning balance		25,463			7,416
New transactions		53,289			23,678
Amounts recognized in losses		(26,493	)		(5,631	)
Ending balance		52,259			25,463

In case some variables to measure fair values of financial instruments are not observable in the market, valuation techniques are utilized to evaluate such financial instruments. Those financial instruments are recorded the transaction price as at the time of acquisition, even though there are difference noted between the transaction price and the fair value. The table above presents the difference yet to be realized as profit or losses as of the years ended December 31, 2019 and 2018..

28. CAPITAL STOCK AND CAPITAL SURPLUS

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

	December 31, 2019		December 31, 2018
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 are no changes in the number of shares issued and outstanding for the years ended December 31, 2019 and 2018.

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

	December 31, 2019		December 31, 2018
Capital in excess of par value		269,533		269,533
Capital Surplus by the Equity Method		1,153		—
Other capital surplus		16,794		16,356
Total		287,480		285,889

- 126 -

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 (%)		December 31, 2019			December 31, 2018
Securities in local currency		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
		June 3, 2015		June 3, 2045		4.4		240,000			240,000
		July 26, 2018		—		4.4		400,000			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
		October 4, 2019		—		4.3		662,035			—
Issuance cost								(17,021	)		(13,837	)
Total								3,660,814			3,161,963

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.

30. OTHER EQUITY

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

	December 31, 2019			December 31, 2018
Accumulated other comprehensive loss:
Net loss on valuation of financial assets at FVTOCI		(102,544	)		(87,182	)
Share of other comprehensive gain (loss) of joint ventures and associates		675			302
Loss on foreign currency translation of foreign operations		(153,403	)		(244,735	)
Remeasurement loss related to defined benefit plan		(250,629	)		(223,529	)
Gain (loss) on valuation of derivatives designated as cash flow hedges		(43	)		(3,869	)
Other comprehensive income related to assets held for sale		—			(13,197	)
Sub-total		(505,944	)		(572,210	)
Treasury shares		—			(34,113	)
Other capital adjustments		(1,614,653	)		(1,607,647	)
Total		(2,120,597	)		(2,213,970	)

- 127 -

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

	For the year ended December 31, 2019
	Beginning balance			Increase (decrease) (*)			Reclassification adjustments (*)			Changes in consolidated scope			Income tax effect			Ending balance
Net gain (loss) on valuation of financial assets at FVTOCI		(87,182	)		(34,247	)		43,038			(32,422	)		8,269			(102,544	)
Share of other comprehensive gain (loss) of joint ventures and associates		302			441			—			—			(68	)		675
Gain (loss) on foreign currency translation of foreign operations		(244,735	)		96,303			—			(720	)		(4,251	)		(153,403	)
Remeasurement gain (loss) related to defined benefit plan		(223,529	)		(41,016	)		—			7,785			6,131			(250,629	)
Gain (loss) on valuation of derivatives designated as cash flow hedges		(3,869	)		25,934			(26,535	)		5,567			(1,140	)		(43	)
Transfer to assets held for sale		(13,197	)		—			(6,593	)		19,790			—			—
Total		(572,210	)		47,415			9,910			—			8,941			(505,944	)

(*) Net gain (loss) on valuation of financial assets at FVTOCI included the 46,612 million Won transfer to retained earnings due to disposal of equity securities.

	For the year ended December 31, 2018
	Beginning balance			Increase (decrease) (*1)(*2)			Reclassification adjustments			Related to assets held for distribution (sale)			Income tax effect			Ending balance
Net gain (loss) on valuation of financial assets at FVTOCI		(88,906	)		(8,677	)		8,015			—			2,386			(87,182	)
Gain (loss) on financial liabilities at FVTPL (K-IFRS 1109) designated as upon initial recognition due to own credit risk		(96	)		132			—			—			(36	)		—
Share of other comprehensive gain (loss) of joint ventures and associates		(2,656	)		4,080			—			—			(1,122	)		302
Gain (loss) on foreign currency translation of foreign operations		(242,806	)		(2,661	)		—			—			732			(244,735	)
Remeasurement gain (loss) related to defined benefit plan		(152,358	)		(85,007	)		—			(13,197	)		27,033			(223,529	)
Gain (loss) on valuation of derivatives designated as cash flow hedges		777			30,655			(26,871	)		—			(8,430	)		(3,869	)
Transfer to assets held for distribution (sale)		4,145			(17,342	)		—			—			—			(13,197	)
Total		(481,900	)		(78,820	)		(18,856	)		(13,197	)		20,563			(572,210	)

(*1) Net gain (loss) on valuation of financial assets at FVTOCI included the 1,009 million Won transfer to retained earnings due to disposal of equity securities.

(*2) Gain (loss) on financial liabilities at fair value through profit or loss designated as upon initial recognition due to own credit risk included the 4 million Won transfer to retained earnings due to redemption.

- 128 -

31. RETAINED EARNINGS AND OTHER RESERVE

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

		December 31, 2019		December 31, 2018
Legal reserve	Earned surplus reserve		2,039,754		1,857,754
	Other legal reserve		46,635		46,384
	Sub-total		2,086,389		1,904,138
Voluntary reserve	Business rationalization reserve		8,000		8,000
	Reserve for financial structure improvement		235,400		235,400
	Additional reserve		8,576,105		7,759,804
	Regulatory reserve for credit loss		2,017,063		2,578,457
	Revaluation reserve		714,018		715,860
	Sub-total		11,550,586		11,297,521
Retained earnings before appropriation (*)			3,709,010		3,922,998
Total			17,345,985		17,124,657

i. Earned surplus reserve

In accordance with the Article 40, 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.

v. 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 K-IFRS for the accounting purpose are lower than provisions under RSBB, the Bank limits such shortfall amount as regulatory reserve for credit loss.

- 129 -

vii. Revaluation reserve

In accordance with appendix 3 of the Regulation on Supervision of Banking Business Enforcement Rules 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 K-IFRS.

32. REGULATORY RESERVE FOR CREDIT LOSS

In accordance with Paragraph 1 and 2 of Article 29 of the Banking Supervision Regulations, the Group calculates and discloses the regulatory reserve for credit loss.

(1) Balance of the planned regulatory reserve for credit loss is as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Beginning balance(*)		2,356,246			2,578,457
Planned provision of regulatory reserve (reversal) for credit loss		(209,898	)		(222,211	)
Ending balance		2,146,348			2,356,246

(*) Effect of the changes in consolidated scope of the Group as it newly transferred into subsidiary of Woori Financial Group Inc. as of December 31, 2019, has been applied.

(2) Planned reserves provided, adjusted net income after the planned reserves provided and adjusted EPS after the planned reserves provided are as follows (Unit: Korean Won in millions, except for EPS amount):

	For the years ended December 31
	2019			2018
Net income		1,527,065			2,051,649
Provision of regulatory reserve for credit loss(*)		(209,898	)		40,875
Adjusted net income after the provision of regulatory reserve		1,736,963			2,010,774
Adjusted EPS after the provision of regulatory reserve (Unit: Korean Won)		2,371			2,762

(*) The amount of reserve for credit loss for the year ended December 31, 2018 is calculated considering only the change in the reserve for credit loss after the accounting policy change due to adoption of K-IFRS 1109. Therefore, the effect of reducing the reserve for credit losses due to changes in accounting policies was excluded.

33. DIVIDENDS

Dividends for the year ended December 31, 2019 and 2018 are 1,000 Won and 650 Won per share, respectively. The total amount of dividends approved are 676,000 million Won and 437,626 million Won, respectively. Also, the Bank paid interim dividend during the year 2019, and the amount is 1,000 Won for share, 676,000 million Won for total. Dividends for the year ended December 31, 2019 will be brought up as an agenda in the annual shareholder’s meeting scheduled for March 24, 2020.

- 130 -

34. NET INTEREST INCOME

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

	For the years ended December 31
	2019		2018
Financial assets at FVTPL		43,318		52,434
Financial assets at FVTOCI		474,132		280,371
Financial assets at amortized cost
Securities at amortized cost		436,340		376,788
Loans and other financial assets at amortized cost:
Interest on due from banks		139,073		111,262
Interest on loans		8,692,425		8,166,153
Interest of other receivables		27,250		27,652
Sub-total		8,858,748		8,305,067
Total		9,812,538		9,014,660

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

	For the years ended December 31
	2019		2018
Interest on deposits due to customers		3,417,193		2,917,165
Interest on borrowings		381,366		306,599
Interest on debentures		599,791		560,637
Interest on lease liabilities		8,309		—
Other interest expense		89,183		89,193
Total		4,495,842		3,873,594

35. NET FEES AND COMMISSIONS INCOME

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

	For the years ended December 31
	2019		2018
Fees and commission received for brokerage		194,482		162,344
Fees and commission received related to credit		183,661		171,076
Fees and commission received for electronic finance		137,456		121,250
Fees and commission received on foreign exchange handling		61,756		60,433
Fees and commission received on foreign exchange		92,408		66,036
Fees and commission received for guarantee		71,106		65,254
Fees and commission received on credit card		2,266		1,599
Fees and commission received on securities business		103,053		96,379
Fees and commission from trust management		170,937		177,456
Fees and commission received on credit Information		—		12,984
Other fees		127,261		144,586
Total		1,144,386		1,079,397

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

	For the years ended December 31
	2019		2018
Fees and commissions paid		168,622		163,052
Credit card commission		703		565
Brokerage commission		614		1,833
Others		2,192		2,623
Total		172,131		168,073

- 131 -

36. DIVIDEND INCOME

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

	For the years ended December 31
	2019		2018
Financial assets at FVTPL		85,947		67,892
Financial assets at FVTOCI		15,144		12,506
Total		101,091		80,398

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

	For the years ended December 31
	2019		2018
Dividend income recognized from assets held Equity securities		15,144		12,232
Dividend income recognized in assets derecognized		—		274
Total		15,144		12,506

37. NET GAIN OR LOSS ON FINANCIAL INSTRUMENTS AT FVTPL

(1) Details of gains or losses related to net gain or loss on financial instruments at FVTPL are as follows (Unit: Korean won in millions):

	For the years ended December 31
	2019			2018
Gain on financial instruments at fair value through profit or loss mandatorily measured at fair value		52,492			196,959
Gain on financial instruments at fair value through profit or loss designated as upon initial recognition		(33,237	)		17,484
Total		19,255			214,443

- 132 -

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

			For the years ended December 31
			2019			2018
Financial assets at FVTPL (financial assets held for trading)	Securities	Gain on valuation		116,157			137,237
		Gain on disposals		59,979			45,105
		Loss on valuation		(59,541	)		(25,499	)
		Loss on disposals		(16,597	)		(26,728	)
		Sub-total		99,998			130,115
	Loans	Gain on valuation		1,037			1,606
		Gain on disposals		519			4,136
		Loss on valuation		(20	)		(4,805	)
		Loss on disposals		—			(117	)
		Sub-total		1,536			820
	Other financial assets	Gain on valuation		2,062			2,050
		Gain on disposals		1,901			530
		Loss on valuation		(1,755	)		(2,280	)
		Loss on disposals		(1,815	)		(86	)
		Sub-total		393			214
Sub-total				101,927			131,149
Derivatives (for trading)	Interest rate derivatives	Gain on transactions and valuation		1,501,055			1,255,581
		Loss on transactions and valuation		(1,610,697	)		(1,303,244	)
		Sub-total		(109,642	)		(47,663	)
	Currency derivatives	Gain on transactions and valuation		6,870,353			4,935,922
		Loss on transactions and valuation		(6,852,529	)		(4,822,915	)
		Sub-total		17,824			113,007
	Equity derivatives	Gain on transactions and valuation		838,057			486,560
		Loss on transactions and valuation		(795,197	)		(484,986	)
		Sub-total		42,860			1,574
	Other derivatives	Gain on transactions and valuation		690			4,138
		Loss on transactions and valuation		(1,167	)		(5,246	)
		Sub-total		(477	)		(1,108	)
Sub-total				(49,435	)		65,810
Total				52,492			196,959

(3) Details of net gain (loss) on financial instruments at fair value through profit or loss designated as upon initial recognition and Losses on financial instruments designated as at fair value through profit or loss are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Gain (loss) on equity-linked securities:
Loss on disposal of equity-linked securities		(16,006	)		(2,058	)
Gain (loss) on valuation of equity-linked securities		(17,231	)		17,945
Sub-total		(33,237	)		15,887
Gain on other securities:
Gain on valuation of other securities					—
Gain on other financial instruments:
Gain on valuation of other financial instruments		—			1,597
Total		(33,237	)		17,484

- 133 -

38. NET GAIN OR LOSS ON FINANCIAL ASSETS AT FVTOCI AND AFS FINANCIAL ASSETS

Details of net gain or loss on financial assets at FVTOCI recognized are as follows (Unit: Korean won in millions):

	For the years ended December 31
	2019		2018
Gain on redemption of securities		15		53
Gain on transactions of securities		10,886		1,052
Total		10,901		1,105

39. REVERSAL OF (PROVISION FOR) IMPAIRMENT LOSSES DUE TO CREDIT LOSS

Reversal of (provision for) impairment losses due to credit loss are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Impairment loss due to credit loss on financial assets measured at FVTOCI		(3,297	)		(1,812	)
Impairment loss due to credit loss on securities at amortized cost		1,415			(1,922	)
Reversal (provision) for credit loss on loan and other financial assets at amortized cost		(131,942	)		(170,419	)
Reversal of provision on guarantee		4,353			105,981
Reversal of provision on (provision for) unused loan commitment		11,222			(16,641	)
Total		(118,249	)		(84,813	)

- 134 -

40. GENERAL AND ADMINISTRATIVE EXPENSES AND OTHER NET OPERATING INCOME (EXPENSES)

(1) Details of general and administrative expenses recognized are as follows (Unit: Korean Won in millions):

			For the years ended December 31
			2019		2018
Salaries	Short-term employee benefits	Salaries		1,391,925		1,428,164
		Employee benefits		430,050		455,279
	Share-based payment			5,509		—
	Retirement benefit service costs			148,553		140,254
	Termination			146,620		225,106
	Sub-total			2,122,657		2,248,803
Depreciation and amortization				438,207		205,257
Other general and administrative expenses	Rent			65,398		304,270
	Taxes and public dues			121,642		101,761
	Service charges			223,292		218,743
	Computer and IT related			250,503		86,500
	Telephone and communication			43,018		64,766
	Operating promotion			41,290		42,188
	Advertising			82,505		68,598
	Printing			7,560		8,423
	Traveling			11,470		12,496
	Supplies			6,651		6,544
	Insurance premium			8,185		8,062
	Reimbursement			21,021		22,686
	Maintenance			17,520		17,362
	Water, light and heating			14,884		14,671
	Vehicle maintenance			9,678		9,936
	Others			8,659		42,846
	Sub-total			933,276		1,029,852
Total				3,494,140		3,483,912

(2) Details of other operating income recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Gain on transactions of foreign exchange		592,190		1,227,559
Gain related to derivatives (Designated for hedging)		90,244		9,118
Gain on fair value hedged items		231		42,797
Others (*)		20,252		56,057
Total		702,917		1,335,531

(*) Other income includes income amounting to 29,316 million Won, for the years ended December 31, 2018, , that the Group recognized for it is to receive from other creditor financial institutions in accordance with the creditor financial institutions committee agreement.

- 135 -

(3) Details of other operating expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Losses on transactions of foreign exchange		152,271		963,821
KDIC deposit insurance premium		332,497		315,315
Contribution to miscellaneous funds		317,667		298,416
Losses related to derivatives (Designated for hedging)		—		36,488
Losses on fair value hedged items		86,214		17,299
Others (*)		114,808		105,897
Total		1,003,457		1,737,236

(*) Other expense includes such expenses amounting to 1,594 million Won for the years ended December 31, 2018, which is 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 22,317 million Won and 51,770 million Won, for the years ended December 31, 2019 and 2018, respectively, of intangible asset amortization expense.

(4) Share-based payment

Details of performance condition share-based payment granted to executives as of December 31, 2019 is as follows.

i. Performance condition share-based payment

Subject to	Shares granted for the year 2019
Type of payment	Cash-settled
Vesting period	January 1, 2019 ~ December 31, 2022
Date of payment	2023-01-01
Number of shares measured as of the closing date (*)	524,746 shares

(*) The number of payable stock is granted at the initial contract date and the payment rate is determined based on the achievement of the pre-determined performance targets. Performance is evaluated as long-term performance indication including relative shareholder return, net income, return on equity (ROE), non-performing loan ratio and job performance.

ii. The Group accounts for performance condition share-based payments according to the cash-settled method and the fair value of the liabilities is reflected in the compensation costs by re-measuring every closing period. As of December 31, 2019, the book value of the liabilities related to the performance condition share-based payments recognized by the Group is 5,509 million Won.

- 136 -

41. OTHER NON-OPERATING INCOME (EXPENSES)

(1) Details of gains or losses on valuation of investments in joint ventures and associates are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Gains on valuation of investments in joint ventures and associates		103,716			25,791
Losses on valuation of investments in joint ventures and associates		(15,840	)		(22,595	)
Impairment losses of investments in joint ventures and associates		(3,634	)		(177	)
Total		84,242			3,019

(2) Details of other non-operating income and expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Other non-operating incomes		244,625			125,961
Other non-operating expenses		(276,724	)		(80,963	)
Total		(32,099	)		44,998

(3) Details of other non-operating income recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Rental fee income		19,881		6,835
Gains on disposal of investments in joint ventures and associates		189,154		50,511
Gains on disposal of premises and equipment, intangible assets and other assets		1,226		30,278
Reversal of impairment loss of premises and equipment, intangible assets and other assets		85		491
Others		34,279		37,846
Total		244,625		125,961

(4) Details of other non-operating expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Depreciation on investment properties		5,004		4,045
Interest expenses of refundable deposits		843		786
Losses on disposal of investment in joint ventures and associates		—		2,931
Losses on disposal of premises and equipment, intangible assets and other assets		55,361		1,110
Impairment losses of premises and equipment, intangible assets and other assets		26,915		87
Donation		60,587		48,137
Others		128,014		23,867
Total		276,724		80,963

- 137 -

42. INCOME TAX EXPENSE

(1) Details of income tax expenses are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Current tax expense:
Current tax expense with respect to the current period		583,175			432,645
Adjustments recognized in the current period in relation to the tax expense of prior periods		(64,722	)		5,923
Sub-total		518,453			438,568
Deferred tax expense (income):
Changes in deferred tax assets (liabilities) relating to the temporary differences		145,018			314,655
Current tax charged to equity and others directly:		8,941			—
Sub-total		153,959			314,655
Income tax expense
Income tax expense from continuing operations		645,248			717,001
Income tax expense from discontinued operations		27,164			36,222

(2) Income tax expense reconciled to net income before income tax expense is as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Net income before income tax expense		2,199,477			2,804,872
Net income before income tax expense from continuing operations		2,643,760			2,470,111
Net income before income tax expense from discontinued operations		(444,283	)		334,761
Tax calculated at statutory tax rate (*)		760,384			760,978
Adjustments:
Effect of income that is exempt from taxation		(61,620	)		(49,418	)
Effect of expenses that are not deductible in determining taxable income		22,859			18,639
Adjustments recognized in the current period in relation to the current tax of prior periods		(64,722	)		5,923
Consolidated income tax return		(13,748	)		—
Others		29,259			17,101
Sub-total		(87,972	)		(7,755	)
Income tax expense		672,412			753,223
Income tax expense from continuing operations		645,248			717,001
Income tax expense from discontinued operations		27,164			36,222
Effective tax rate		30.6	%		26.9	%
Effective tax rate of continuing operations		24.4	%		29.0	%
Effective tax rate of discontinued operations		—			10.8	%

(*) 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.

- 138 -

(3) Changes in cumulative temporary differences for the years ended Deferred 31, 2019 and 2018, are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Beginning balance			Recognized as income (expense)			Recognized as other comprehensive income (expense)(*2)			Ending Balance(*3)
Gain (loss) on financial assets		372,346			(86,999	)		8,269			293,616
Gain on valuation using the equity method of accounting		28,354			(17,597	)		(68	)		10,689
Gain (loss) on valuation of derivatives		(27,507	)		(46,276	)		369			(73,414	)
Accrued income		(55,846	)		(9,207	)		—			(65,053	)
Provision for loan losses		(52,345	)		(440	)		—			(52,785	)
Loan and receivables written off		6,672			(2,107	)		—			4,565
Loan origination costs and fees		(154,431	)		(2,185	)		—			(156,616	)
Defined benefit liability		360,087			(4,277	)		6,131			361,941
Deposits with employee retirement insurance trust		(318,330	)		(44,266	)		—			(362,596	)
Provision for guarantee		11,374			(3,459	)		—			7,915
Other provision		75,194			(4,671	)		—			70,523
Others (*1)		(204,083	)		(8,471	)		(5,760	)		(218,314	)
Net deferred tax assets		41,485			(229,955	)		8,941			(179,529	)

(*1) Includes the amounts of Woori Card Co., Ltd. and Woori Investment Bank which were acquired by Woori Financial Group Inc. during the term.

(*2) Includes 2,800 million Won presented on non-controlling interests.

	For the year ended December 31, 2018
				K-IFRS 1109 adoption effect
	Beginning balance			Recognized as retained earnings			Recognized as other comprehensive income (loss)		Beginning balance after K-IFRS 1109 adoption			Business combination		Recognized as income (expense)			Recognized as other comprehensive income (expense)(*2)			Ending Balance(*3)
Gain (loss) on financial assets		479,065			(150,140	)		149,796		478,721			—		(102,170	)		(4,205	)		372,346
Gain on valuation using the equity method of accounting		24,482			—			—		24,482			—		3,203			669			28,354
Gain (loss) on valuation of derivatives		(10,260	)		(3,990	)		—		(14,250	)		—		(13,617	)		360			(27,507	)
Accrued income		(60,987	)		—			—		(60,987	)		621		4,520			—			(55,846	)
Provision for loan losses		(47,697	)		47,446			—		(251	)		399		(52,493	)		—			(52,345	)
Loan and receivables written off		9,777			—			—		9,777			—		(3,105	)		—			6,672
Loan origination costs and fees		(137,320	)		36			—		(137,284	)		—		(17,147	)		—			(154,431	)
Defined benefit liability		284,234			—			—		284,234			317		43,821			31,715			360,087
Deposits with employee retirement insurance trust		(287,333	)		—			—		(287,333	)		—		(31,092	)		95			(318,330	)
Provision for guarantee		30,602			1,370			—		31,972			—		(20,598	)		—			11,374
Other provision		45,153			25,879			—		71,032			—		4,162			—			75,194
Others (*1)		(72,265	)		4,917			—		(67,348	)		44		(130,137	)		(6,642	)		(204,083	)
Net deferred tax assets		257,451			(74,482	)		149,796		332,765			1,381		(314,653	)		21,992			41,485

- 139 -

(*1) Among the deferred tax assets and liabilities classified as ‘Others,’ the deferred tax asset arising from unused tax losses amounts to 18,154 million Won.

(*2) Includes 1,429 million Won presented on non-controlling interests.

(*3) Includes 9,778 million Won presented on assets held for distribution (sale) (Note 17).

(4) Unrealizable temporary differences are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Deductible temporary differences		162,457			272,911
Tax loss carry forward		—			149,035
Taxable temporary differences		(108,055	)		(868,541	)
Total		54,402			(446,595	)

No deferred income tax asset has been recognized for the deductible temporary difference of KRW 162,457 million associated with investments in subsidiaries and associates as of December 31, 2019, because it is not probable that the temporary differences will be reversed in the foreseeable future.

No deferred income tax liability has been recognized for the taxable temporary difference of KRW 108,055 million associated with investment in subsidiaries and associates as of December 31, 2019, due to the following reasons:

- The Group is able to control the timing of the reversal of the temporary difference.

- It is probable that the temporary difference will not be reversed in the foreseeable future.

(5) Details of accumulated deferred tax charged directly to other equity are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Net gain on valuation of financial assets at FVTOCI		39,691			31,422
Share of other comprehensive loss of and associates		(353	)		(285	)
Gain on foreign currency translation of foreign operations		3,932			8,183
Remeasurements of the net defined benefit liability		94,258			88,127
Gain (loss) on derivatives designated as cash flow hedge		—			1,140
Total		137,528			128,587

(6) Current tax assets and liabilities are as follows (Unit: Korean Won in millions)

	December 31, 2019		December 31, 2018
Current tax assets		46,253		20,488
Current tax liabilities		135,490		156,559

- 140 -

43. EARNINGS PER SHARE (“EPS”)

(1) Basic EPS of the controlling interest is calculated by dividing the net income attributable to controlling interest by the weighted-average number of common shares outstanding (Unit: Korean Won in millions, except for EPS and number of shares):

	For the years ended December 31
	2019			2018
Net income attributable to Owners		1,505,547			2,033,182
Dividends to hybrid securities		(134,421	)		(151,194	)
Net income attributable to common shareholders		1,371,126			1,881,988
Continuing operations		1,842,573			1,583,448
Discontinued operations		(471,447	)		298,540
Weighted average number of common shares outstanding		676			673
Basic EPS		2,028 Won			2,796 Won
Continuing operations		2,725 Won			2,353 Won
Discontinued operations		(697) Won			443 Won

Diluted EPS is equal to basic EPS because there is no dilution effect for the years ended December 31, 2019 and 2018.

(2) The weighted average number of common shares outstanding is as follows:

	For the year ended December 31, 2019
	Period		Number of shares			Dates		Accumulated number of shares outstanding during period
Common shares issued at the beginning of the period		2019-01-01 ~ 2019-12-31		673,271,226			365		245,743,997,490
Purchase of treasury stock		2019-01-09 ~ 2019-01-10		(11,453,702	)		2		(22,907,404	)
Disposal of treasury stock		2019-01-11 ~ 2019-12-31		2,728,774			355		968,714,770
Sub-total (①)									246,689,804,856
Weighted average number of common shares outstanding (②=(①/365)									675,862,479

	For the year ended December 31, 2018
	Period		Number of shares		Dates		Accumulated number of shares outstanding during period
Common shares issued at the beginning of the period		2018-01-01 ~ 2018-12-31		673,271,226		365		245,743,997,490
Sub-total (①)								245,743,997,490
Weighted average number of common shares outstanding (②=(①/365)								673,271,226

Diluted EPS is equal to basic EPS because there is no dilution effect for the three months ended December 31, 2019 and 2018.

- 141 -

44. CONTINGENT LIABILITIES AND COMMITMENTS

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

	December 31, 2019		December 31, 2018
Confirmed guarantees
Guarantee for loans		89,699		125,870
Acceptances		391,688		371,525
Guarantees in acceptances of imported goods		224,746		158,179
Other confirmed guarantees		6,982,889		6,452,791
Sub-total		7,689,022		7,108,365
Unconfirmed guarantees
Local letters of credit		193,096		305,057
Letters of credit		3,081,390		3,322,731
Other unconfirmed guarantees		771,378		669,677
Sub-total		4,045,864		4,297,465
Commercial paper purchase commitments and others		884,031		1,260,587
Total		12,618,917		12,666,417

(2) Details of unused loan commitments and others are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Loan commitments		70,303,900		97,796,704
Other commitments		3,204,654		5,041,314

(3) Litigation case

Legal cases where the Group is involved are as follows (Unit: Korean Won in millions):

	December 31, 2019				December 31, 2018
	As plaintiff		As defendant		As plaintiff		As defendant
Number of cases (*)		34 cases		133 cases		77 cases		154 cases
Amount of litigation		229,930		197,731		494,645		246,826
Provisions for litigations				21,562				17,925

(*) The number of lawsuits as of December 31, 2019 and 2018 does not include fraud lawsuits, etc. and those lawsuits that are filed only to extend the statute of limitation.

(4) The Financial Supervisory Service is currently in the process of examining the adequacy of internal controls related to the selection and the sale of derivatives-linked products linked to foreign interest rate. The financial impact cannot be rationally estimated for the interim consolidated financial statements as of the end of current period.

- 142 -

45. RELATED PARTY TRANSACTIONS

Related parties of the Group as of December 31, 2018 and 2017, and assets and liabilities recognized, guarantees and commitments, major transactions with related parties and compensation to key management for the years ended December 31, 2018 and 2017 are as follows:

(1) Related parties

	Related parties
Parent	Woori Financial Holdings Co., Ltd.
Associates	Woori Service Networks Co., Ltd., Korea Credit Bureau Co., Ltd., Korea Finance Security Co., Ltd., Lotte Card Co., Ltd., Chin Hung International Inc, 2016KIF-IMM Woori Bank Technology Venture Fund, K BANK Co., Ltd., Well to Sea No. 3 Private Equity Fund, and others (Dongwoo C & C Co., Ltd. and 28 associates)
Other related parties	Woori Card Co., Ltd. and its subsidiaries, Woori Investment Bank Co., Ltd. and its subsidiaries,, Woori FIS Co., Ltd, Woori Private Equity Asset Management Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Service Co., Ltd., Woori Asset Management Co., Woori global asset management co., Ltd., Woori asset trust. Ltd., Godo Kaisha Oceanos 1, Uri Hanhwa Eureka Private Equity Fund, Japanese Hotel Real Estate Private Equity Fund 2, Woori Growth Partnerships New Technology Private Equity Fund 1, Tongyang China Convertible Bond Fund, WOORIG China Value Equity (C/C(F))

(2) Assets and liabilities from transactions with related parties are as follows (Unit: Korean Won in millions):

Related party		A title of account	December 31, 2019			December 31, 2018
Parent	Woori Financial Group Inc.(*1)	Deposits due to customers		1,173,670			—
		Other liabilities		99,181			—
Associates
	Woori Service Networks Co., Ltd.	Loans		—			69
		Deposits due to customers		1,881			1,967
		Other liabilities		311			333
	Korea Credit Bureau Co., Ltd.	Loans		—			7
		Deposits due to customers		26			6,494
		Other liabilities		—			19
	Korea Finance Security Co., Ltd.	Loans		1,800			57
		Loss allowance		(3	)		(4	)
		Deposits due to customers		1,371			5,040
		Other liabilities		—			10
	Chin Hung International Inc.	Loans		—			411
		Loss allowance		—			(204	)
		Deposits due to customers		5,381			11,605
		Other liabilities		320			2,974
	Lotte Card Co., Ltd.	Loans		7,500			—
		Loss allowance		(30	)		—
		Deposits due to customers		2,726			—
	K BANK Co., Ltd.	Loans		—			190
	Well to Sea No.3 Private Equity Fund	Loans		4,490			1,857
		Loss allowance		(8	)		(9	)

- 143 -

Related party		A title of account	December 31, 2019			December 31, 2018
		Deposits due to customers		714			356
		Other liabilities		47			64
	Others (*2)	Loans		84			4,783
		Loss allowance		(84	)		(324	)
		Other assets		—			9
		Deposits due to customers		5,577			8,049
		Other liabilities		172			165
Other Related Parties	Woori Card Co., Ltd. and its subsidiaries(*3)	Loans		4,631			—
		Other assets		13,342			—
		Derivative assets		420			—
		Deposits due to customers		52,638			—
		Other liabilities		18,641			—
	Woori Investment Bank Co., Ltd. and its subsidiaries(*3)	Loans		24,000			—
		Loss allowance		(43	)		—
		Other assets		13,879			—
		Deposits due to customers		6,303			—
		Other liabilities		26,470			—
	Woori FIS Co., Ltd. (*3)	Other assets		114			—
		Deposits due to customers		42,693			—
		Other liabilities		24,326			—
	Woori Private Equity Asset Management Co., Ltd. (*3)	Deposits due to customers		1,370			—
	Woori Finance Research Institute Co., Ltd. (*3)	Deposits due to customers		2,132			—
	Woori Credit Information Co., Ltd. (*3)	Other assets		6			—
		Deposits due to customers		15,765			—
		Other liabilities		10,954			—
	Woori Fund Service Co., Ltd.(*3)	Deposits due to customers		11,238			—
		Other liabilities		1,192			—
	Woori Asset Management Co., Ltd.(*3)	Deposits due to customers		11,665			—
	Woori Global Asset Management Co., Ltd.(*3)	Deposits due to customers		98			—
	Woori Asset Trust Co., Ltd.(*3)	Deposits due to customers		29,546			—

(*1) Woori Financial Group Inc. was established during the current period and the Group was transferred as a wholly-owned subsidiary.

(*2) Saman Co., Ltd., Kyesan Industry Corporation, Daea S&C Co., Ltd., and etc. are included during the year ended December 31, 2019 and 2018.

(*3) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

- 144 -

(3) Gain or loss from transactions with related parties are as follows (Unit: Korean Won in millions):

			For the years ended December 31
Related party		A title of account	2019			2018
Parent company	Woori Financial Group (*1)	Fees income		264			—
		Other income		1,823			—
		Interest expenses`		7,741			—
Associates	Kumho Tire Co., Inc.(*2)	Interest income		—			1,098
		Reversal of allowance for credit loss		—			(156,712	)
	Woori Service Networks Co., Ltd.	Other income		32			30
		Interest expenses`		20			14
		Fees expenses		—			561
		Other expenses		—			580
	Korea Credit Bureau Co., Ltd.	Interest expenses`		29			62
		Fees expenses		—			2,310
	Korea Finance Security Co., Ltd.	Interest expenses		9			12
		Impairment losses due to credit loss (reversal of allowance for credit loss)		—			4
		Other expenses		—			146
	Chin Hung International Inc.	Interest expenses		35			43
		Impairment losses due to credit loss (reversal of allowance for credit loss)		—			182
	STX Engine Co., Ltd.(*3)	Interest income		—			333
		Interest expenses		—			86
		Impairment losses due to credit loss (reversal of allowance for credit loss)		—			(88,734	)
	STX Corporation (*3)	Interest expenses		—			2
		Reversal of allowance for credit loss		—			(31,210	)
	K BANK Co., Ltd.	Fees income		—			1,134
		Other income		—			19
	Well to Sea No. 3 Private Equity Fund	Interest income		1,774			2,179
		Interest expenses		11			9
		Reversal of allowance for credit loss		(18	)		(30	)
	Lotte Card Co., Ltd.	Interest income		213			—
		Fees income		593			—
		Interest expenses		53			—
		Reversal of allowance for credit loss		30			—

- 145 -

			For the years ended December 31
Related party		A title of account	2019			2018
	Others (*4)	Interest income		—			233
		Fees income		—			23
		Other income		17			14
		Interest expenses		55			40
		Reversal of allowance for credit loss		(5	)		(147	)
Other related parties	Woori Card Co., Ltd and its subsidiaries(*5)	Interest income		775			—
		Fees income		125,183			—
		Gain on derivatives		691			—
		Other income		696			—
		Interest expenses		185			—
		Reversal of allowance for credit loss		83			—
	Woori Investment Bank Co., Ltd. and its subsidiaries(*5)	Interest income		648			—
		Fees income		851			—
		Other income		543			—
		Interest expenses		21			—
		Impairment losses due to credit loss (reversal of allowance for credit loss)		43			—
	Woori FIS Co., Ltd.(*5)(*6)	Fees income		578			—
		Other income		7,675			—
		Interest expenses		4			—
		Other expenses		211,587			—
	Woori Private Equity Asset Management Co., Ltd.(*5)	Fees income		7			—
		Interest expenses		17			—
	Woori Finance Research Institute Co., Ltd.(*5)	Fees income		12			—
		Interest expenses		43			—
	Woori Credit Information Co., Ltd.(*5)	Fees income		83			—
		Other income		698			—
		Interest expenses		250			—
		Fees expenses		15,009			—
	Woori Fund Service Co., Ltd.(*5)	Fees income		25			—
		Other income		288			—
		Interest expenses		252			—
		Fees expenses		248			—
		Other expenses		32			—

- 146 -

			For the years ended December 31
Related party		A title of account	2019		2018
	Woori Asset Management Co., Ltd.(*5)	Fees income		21		—
		Other expenses		36		—
	Woori Global Asset Management Co., Ltd.(*5)	Fees income		1		—

- 147 -

(*1) Woori Financial Group Inc. was established during the current period and the Group was transferred as a wholly-owned subsidiary.

(*2) The Group lost significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution during the prior term, and thus the entity was excluded from the list of associates.

(*3) During the prior term, the account was replaced by assets held for sale and disposed of and excluded from the associate.

(*4) Saman Co., Ltd., Kyesan industry Corporation, Daea S&C Co., Ltd., and etc are included during the term and prior term.

(*5) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

(*6) Total amount of 3,445 million Won of lease liability repayment is included in other expenses.

(4) Major loan transactions with related parties for the years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019
Related parties		Beginning balance		Loan		Collection		Others			Ending balance(*1)
Associates	Well to Sea No. 3 Private Equity Fund		1,857		2,633		—		—			4,490
	Korea Finance Security Co., Ltd		—		1,800		—		—			1,800
	Lotte Card Co., Ltd.		—		7,500		—		—			7,500
Other related parties	Woori Investment Bank Co., Ltd. and its subsidiaries(*2)		37,900		21,300		35,200		—			24,000
	Woori Card Co., Ltd and its subsidiaries(*2)		—		4,551		—		80			4,631
		For the year ended December 31, 2018
Related parties		Beginning balance		Loan		Collection		Others			Ending balance(*1)
Associates	Kumho Tire Co., Inc.(*3)		57,470		—		7,057		(50,413	)		—
	Well to Sea No. 3 Private Equity Fund		73,810		16,857		88,810		—			1,857
	STX Engine Co., Ltd. (*4)		39,886		—		2,177		(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 or decrease.

(*2) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

(*3) The Group lost significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution during the year ended December 31, 2018, and thus the entity was excluded from the list of associates.

(*4) The shares of the entity were sold after it was transferred to assets held for distribution (sale) during the year ended December 31, 2018 and thus was excluded from the list of associates.

- 148 -

(5) Changes in major deposits due to customers with related parties for years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019
Related parties		Beginning balance		Borrowings		Repayment and others		Ending balance (*)
Parent company	Woori Financial Group		—		2,730,000		1,600,000		1,130,000
Associates	Saman Corporation		2,436		86		—		2,522
	Woori Service Networks Co., Ltd		1,180		1,460		1,460		1,180
	Chin Hung International Inc		765		400		765		400
.	Korea Credit Bureau Co., Ltd.		6,000		—		6,000		—
	Partner One Value Up I Private Equity Fund		1,403		1,617		1,870		1,150
	Korea Finance Security Co., Ltd.		535		25		560		—
Other related parties	Woori Investment Bank Co., Ltd.		1,000		1,000		—		2,000
	Woori Finance Research Institute Co., Ltd.,		1,800		3,700		5,500		—
	Woori Credit Information Co., Ltd.		13,199		12,000		11,000		14,199
	Woori Fund Service Co., Ltd		7,900		10,000		7,900		10,000
	Woori asset trust. Ltd		—		15,000		—		15,000

(*) The details of payments made between related parties and the deposits due to customers that can be taken in and out easily are excluded.

		For the year ended December 31, 2018
Related parties		Beginning balance		Borrowings		Repayment and others		Ending balance(*1)
Associates	Saman Corporation		2,334		102		—		2,436
	Woori Service Networks Co., Ltd		1,135		1,025		980		1,180
	Chin Hung International Inc		765		765		765		765
.	Korea Credit Bureau Co., Ltd.		4,000		12,000		10,000		6,000
	Partner One Value Up I Private Equity Fund		—		1,803		400		1,403
	Korea Finance Security Co., Ltd.		635		560		660		535
	STX Corporation(*2)		330		—		330		—
	STX Engine Co., Ltd.(*2)		10,256		—		10,256		—
	Kumho Tire Co., Inc.(*2)		37		—		37		—
	Hyunwoo International(*2)		41		—		41		—

(*1) The details of payments made between related parties and the deposits due to customers that can be taken in and out easily are excluded.

(*2) The shares of the entity were sold after it was transferred to assets held for distribution (sale) during the year ended December 31, 2018 and thus was excluded from the list of associates.

(6) There was no major borrowing transaction for the year ended December 31, 2018, and major borrowing transactions with related parties for the year ended December 31, 2019 is as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019
Related parties		Beginning balance		Loan		Collection		Others		Ending balance(*1)
Other related parties	Woori Card Co., Ltd and its subsidiaries		11,428		223,893		217,712		—		17,609

- 149 -

(7) Guarantees provided to the related parties are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018		Warranty
Woori Card Co., Ltd and its subsidiaries(*)		500,000		—		Unused loan commitment
Woori Investment Bank Co., Ltd. and its subsidiaries(*)		50,000		—		Unused loan commitment
Korea Finance Security Co., Ltd.		200		203		Unused loan commitment
Korea Credit Bureau Co., Ltd.		—		28		Unused loan commitment
Woori Service Networks Co., Ltd.		—		131		Unused loan commitment
Chin Hung International Inc.		31,749		32,058		Unused loan commitment
K BANK Co., Ltd.		—		15		Unused loan commitment
Well to Sea No.3 Private Equity Fund		210,510		208,143		Unused loan commitment
Lotte Card Co., Ltd.		150,000		—		Unused loan commitment

(*) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

For the guarantee provided to the related parties, the amount the Group has not recognized as provisions for guarantees as of December 31, 2019 and December 31, 2018.

The amount of guarantees and unused loan commitments provided by the related parties to the Bank as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	Warranty		December 31, 2019		December 31, 2018
Woori Card Co., Ltd and its subsidiaries		Loan commitment in local currency		167,880		174,287

(8) Commitments of derivatives to the related parties are as follows (Unit: Korean Won in millions):

	Warranty		December 31, 2019		December 31, 2018
Woori Card Co., Ltd and its subsidiaries.		Unsettled commitment		100,000		100,000
Well to Sea No. 3 Private Equity Fund		Unsettled commitment		584,377		439,243

(9) Compensation for key management is as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Short-term employee salaries		9,744		12,326
Retirement benefit service costs		364		489
Share-Based payment		1,965		—
Total		12,073		12,815

Key management includes registered executives and non-registered executives. Outstanding assets and liabilities from transactions with key management amount to 2,414 million Won and 2,816 million Won, respectively, as of December 31, 2019 and 2018, and with respect to the assets, the Group has not recognized any allowance nor related impairment loss due to credit losses. In addition, related liabilities recognized, as of December 31, 2019 and 2018 are 6,543 million Won and 6,096 million Won, respectively.

- 150 -

46. TRUST ACCOUNTS

(1) Trust accounts of the Bank are as follows (Unit: Korean Won in millions):

	Total assets				Operating income
	December 31, 2019		December 31, 2018		For the years ended December 31
					2019		2018
Trust accounts		60,288,399		53,560,071		1,118,746		1,049,105

(2) Receivables and payables between the Bank and trust accounts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Receivables:
Trust fees receivables		31,533		28,703
Payables:
Deposits due to customers		392,453		574,330
Borrowings from trust accounts		2,730,806		3,020,371
Total		3,123,259		3,594,701

(3) Significant transactions between the Bank and trust accounts are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Revenue:
Trust fees		171,072		177,913
Termination fees		488		5,885
Total		171,560		183,798
Expense:
Interest expenses on deposits due to customers		6,684		7,813
Interest expenses on borrowings from trust accounts		40,489		38,873
Total		47,173		46,686

- 151 -

(4) Principal guaranteed trusts and principal and interest guaranteed trusts are as follows;

1) The carrying value of principal guaranteed trusts and principal and interest guaranteed trusts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Partial principal guaranteed trusts:
Household money		9,430		9,989
Corporate money		630		633
Installment plan purpose		1,651		1,737
Sub-total		11,711		12,359
Principal guaranteed trusts:
Old-age pension trusts		3,298		3,564
Personal pension trusts		516,913		521,200
Pension trusts		824,735		819,102
Retirement trusts		34,374		42,187
New personal pension trusts :		7,807		8,104
New old-age pension trusts		1,742		2,134
Sub-total		1,388,869		1,396,291
Principal and interest guaranteed trusts
Development trusts		19		19
Unspecified money trusts		871		835
Sub-total		890		854
Total		1,401,470		1,409,504

2) The amounts that the Bank must pay by the operating results of the principal guaranteed trusts or the principal and interest guaranteed trusts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Liabilities for the account (subsidy for trust account adjustment)		35		33

- 152 -

47. LEASES

(1) The future lease payments under the lease contracts are as follows (Unit: Korean won in millions):

	December 31, 2019
Lease payments
Within one year		150,202
After one year but within five years		212,858
After five years		40,698
Total		403,758

(2) Total cash outflows from lease are as follows (Unit: Korean won in millions):

	For the year ended December 31, 2019
Cash outflows from lease		213,689

(3) Details of lease payments that are not included in the measurement of lease liabilities due to the fact that they are short-term leases or leases for which the underlying asset is of low value are as follows (Unit: Korean won in millions):

	For the year ended December 31, 2019
Lease payments for short-term leases		341
Lease payments for which the underlying asset is of low value		19
Total		360

48. EVENTS AFTER THE REPORTING PERIOD

The Coronavirus disease (COVID-19) outbreak in January, 2020 is having a negative impact on the global economy, including Korea. As a result, the macroeconomic environment is unstable overall. The Group is keeping a close eye on the situation, and credit portfolio is being reviewed to maintain proper capital ratio. Though the Group is considering various economic conditions in calculating expected credit losses, the effects of coronavirus were not explicitly considered due to the availability of limited information as of the end of the reporting period.

- 153 -

EX-99.2

Exhibit 99.2

WOORI BANK

SEPARATE FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED

DECEMBER 31, 2019 AND 2018

ATTACHMENT: INDEPENDENT AUDITORS’ REPORT

WOORI BANK

INDEPENDENT AUDITORS’ REPORT

English Translation of a Report Originally Issued in Korean on March 16, 2020

To the Shareholder and the Board of Directors of Woori Bank

Report on the Audited Separate Financial Statements

Audit Opinion

We have audited the accompanying separate financial statements of Woori Bank (the “Bank”), which comprise the separate statement of financial position as of December 31, 2019 and December 31, 2018, respectively, and the separate statement of comprehensive income, separate statement of changes in shareholder’s equity and separate statement of cash flows, for the years then ended, and a summary of significant accounting policies and other explanatory information.

In our opinion, the separate financial statements present fairly, in all material respects, the financial position of the Bank as of December 31, 2019 and December 31, 2018, respectively, and its financial performance and its cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

Basis for Audit Opinion

We conducted our audits in accordance with the Korean Standards on Auditing (“KSAs”). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the ethical requirements, including those related to independence, that are relevant to our audit of the separate financial statements in the Republic of Korea as required by prevailing audit regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and the Audit Committee for the Financial Statements

Management is responsible for the preparation of the accompanying separate financial statements in accordance with K-IFRS, and for such internal control as they determine is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the separate financial statements, management of the Bank is responsible for assessing and presenting the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

The audit committee is responsible for overseeing the Bank’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements.

As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the audit committee of the Bank regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

March 16, 2020

Notice to Readers

This report is effective as of March 16, 2020 the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the separate financial statements and may result in modifications to the auditors’ report.

WOORI BANK

SEPARATE FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS

ENDED DECEMBER 31, 2019 AND 2018

The accompanying separate financial statements, including all footnote disclosures, were

prepared by, and are the responsibility of, the management of Woori Bank.

Tae Seung Sohn

President and Chief Executive Officer

Headquarters: (Address) 51, Sogong-ro, Jung-gu, Seoul

                     (Phone Number)                02-2002-3000

WOORI BANK

SEPARATE STATEMENT OF FINANCIAL POSITION

AS OF DECEMBER 31, 2019 AND 2018

	December 31, 2019		December 31, 2018
	(Korean Won in millions)
ASSETS
Cash and cash equivalents (Notes 6 and 45)		5,398,102		5,723,801
Financial assets at fair value through profit or loss (“FVTPL”) (Notes 4, 7, 11, 12, 26 and 45)		5,429,401		3,877,858
Financial assets at fair value through other comprehensive income (“FVTOCI”) (Notes 4, 8, 11, 12, and 18)		26,548,853		17,040,674
Securities at amortized cost (Notes 4, 9, 11, 12 and 18)		20,147,137		22,802,050
Loans and other financial assets at amortized cost (Notes 4, 10, 11, 12, 18 and 45)		267,911,339		260,350,949
Investments in subsidiaries and associates (Note 13)		3,161,729		4,193,775
Investment properties (Note 14)		550,685		367,117
Premises and equipment (Note 15)		2,742,944		2,350,342
Intangible assets (Note 16)		349,273		353,167
Assets held for sale (Note 17)		95		143,288
Current tax assets (Note 42)		27,558		—
Deferred tax assets (Note 42)		—		7,360
Derivative assets (Designated for hedging) (Notes 4, 11, 12 and 26)		111,764		35,503
Other assets (Notes 19 and 45)		113,750		146,995
Total assets		332,492,630		317,392,879
LIABILITIES
Financial liabilities at FVTPL (Notes 4, 11 12, 20, 26 and 45)		2,956,332		2,279,373
Deposits due to customers (Notes 4, 11, 21 and 45)		252,625,294		237,426,765
Borrowings (Notes 4, 11, 12 and 22)		15,325,821		14,081,092
Debentures (Notes 4, 11 and 22)		22,830,252		21,666,331
Provisions (Notes 23, 44 and 45)		380,113		283,501
Net defined benefit liability (Note 24)		46,826		136,163
Liabilities related to assets held for sale (Note 17)		—		72,361
Current tax liabilities (Note 42)		115,513		110,127
Deferred tax liabilities (Note 42)		109,998		—
Derivative liabilities (Designated for hedging) (Notes 4, 11, 12 and 26)		—		17,654
Other financial liabilities (Notes 4, 11, 12, 25 and 45)		15,889,160		20,097,011
Other liabilities (Notes 25 and 45)		151,581		173,501
Total liabilities		310,430,890		296,343,879

(Continued)

WOORI BANK

SEPARATE STATEMENT OF FINANCIAL POSITION (CONTINUED)

AS OF DECEMBER 31, 2019 AND 2018

	December 31, 2019			December 31, 2018
	(Korean Won in millions)
EQUITY
Capital stock (Note 28)		3,381,392			3,381,392
Hybrid securities (Note 29)		3,660,814			3,161,963
Capital surplus (Note 28)		269,533			269,533
Other equity (Note 30)		(369,855	)		(386,840	))
Retained earnings (Notes 31 and 32)
(Regulatory reserve for credit loss as of December 31, 2019 and 2018 is 1,888,816 million Won and 2,091,721 million Won, respectively
Regulatory reserve for credit loss to be reserved (reversed) as of December 31, 2019 and 2018 is (162,779) million Won and 202,905 million Won, respectively
Planned provision of regulatory reserve(reversal) for credit loss as of December 31, 2019 and 2018 is (162,779) million Won and 202,905 million Won, respectively)		15,119,856			14,622,952
Total equity		22,061,740			21,049,000
Total liabilities and equity		332,492,630			317,392,879

See accompanying notes

WOORI BANK

SEPARATE STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean won in millions, except for per share data)
Interest income		9,015,701			8,331,967
Financial assets at fair value through profit or loss (FVTPL)		359			6,047
Financial assets at fair value through other comprehensive income (FVTOCI)		437,104			256,995
Financial assets at amortized cost		8,578,238			8,068,925
Interest expense		(4,155,365	)		(3,604,249	)
Net interest income (Notes 11, 34 and 45)		4,860,336			4,727,718
Fees and commissions income		1,167,983			1,151,201
Fees and commissions expense		(153,490	)		(148,554	)
Net fees and commissions income (Notes 11, 35 and 45)		1,014,493			1,002,647
Dividend income (Notes 36 and 45)		100,708			75,986
Net gain on financial instruments at FVTPL (Notes 11, 37 and 45)		26,733			204,649
Net gain on financial assets at FVTOCI (Notes 11 and 38)		8,245			1,333
Net gain on disposals of amortized cost		84,240			44,166
Net gain on disposals of securities at amortized cost		—			431
Net gain on disposals of loans and other financial assets at amortized cost		84,240			43,735
Impairment losses due to credit loss (Notes 11, 39 and 45)		(91,455	)		(58,823	)
General and administrative expenses (Notes 40 and 45)		(3,210,287	)		(3,189,336	)
Other net operating expenses (Notes 40 and 45)		(321,460	)		(392,649	)
Operating income		2,471,553			2,415,691
Share of impairment losses of subsidiaries and associates (Note 13)		(43,102	)		(241	)
Net other non-operating income(expense)		(63,323	)		70,181
Non-operating income(expense) (Note 41)		(106,425	)		69,940
Net income before income tax expense		2,365,128			2,485,631
Income tax expense (Note 42)		574,297			674,727

(Continued)

WOORI BANK

SEPARATE STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean won in millions, except for per share data)
Net income
(Net income after the provision for regulatory reserve for credit loss for the years ended December 31, 2019 and 2018, is 1,628,052 million won and 1,819,532 million won, respectively) (Note 32)		1,790,831			1,810,904
Net loss on valuation of equity securities at FVTOCI		(72,141	)		(29,290	)
Net gain on valuation of financial liabilities designated as at FVTPL due to own credit risk		—			100
Remeasurement of the net defined benefit liability		(30,984	)		(79,639	)
Items that will not be reclassified to profit or loss		(103,125	)		(108,829	)
Net gain on valuation of debt securities at FVTOCI		38,019			36,085
Gain on foreign currency translation of foreign operations		8,446			7,882
Items that may be reclassified to profit or loss		46,465			43,967
Other comprehensive loss, net of tax		(56,660	)		(64,862	)
Total comprehensive income		1,734,171			1,746,042
Earnings per share (Note 43)
Basic and diluted earnings per share (in Korean Won)		2,451			2,466

See accompanying notes

WOORI BANK

SEPARATE STATEMENT OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	Capital stock		Hybrid securities			Capital surplus		Other equity			Retained Earnings and other reserves			Total
	(Korean Won in millions)
January 1, 2018		3,381,392		3,017,888			269,533		(135,282	)		13,260,559			19,794,090
Cumulative effect of change in accounting policy		—		—			—		(393,473	)		246,464			(147,009	)
Adjusted balance, beginning of the year		3,381,392		3,017,888			269,533		(528,755	)		13,507,023			19,647,081
Net income		—		—			—		—			1,810,904			1,810,904
Dividends on common stocks		—		—			—		—			(336,636	)		(336,636	)
Net gain on valuation of financial liabilities designated as at FVTPL due to own credit risk		—		—			—		100			—			100
Changes in other comprehensive income due to redemption of financial liabilities designated as at FVTPL		—		—			—		(4	)		4			—
Net gain on valuation of financial assets at FVTOCI		—		—			—		6,795			—			6,795
Changes in other comprehensive income due to disposal of equity securities at FVTOCI		—		—			—		(1,009	)		1,009			—
Gain on foreign currency translation of foreign operations		—		—			—		7,882			—			7,882
Remeasurement loss related to defined benefit plan		—		—			—		(79,639	)		—			(79,639	)
Appropriation of retained earnings		—		—			—		208,158			(208,158	)		—
Dividends to hybrid securities		—		—			—		—			(151,194	)		(151,194	)
Issuance of hybrid securities		—		398,707			—		—			—			398,707
Redemption of hybrid securities		—		(254,632	)		—		(368	)		—			(255,000	)
December 31, 2018		3,381,392		3,161,963			269,533		(386,840	)		14,622,952			21,049,000
January 1, 2019		3,381,392		3,161,963			269,533		(386,840	)		14,622,952			21,049,000
Net income		—		—			—		—			1,790,831			1,790,831
Dividends on common stocks		—		—			—		—			(437,625	)		(437,625	)
Interim dividend		—		—			—		—			(676,000	)		(676,000	)
Net changes in treasury stock		—		—			—		28,040			—			28,040
Changes in other comprehensive income due to valuation of financial assets at FVTOCI		—		—			—		(34,122	)		—			(34,122	)
Changes in other comprehensive income due to disposal of equity securities at FVTOCI		—		—			—		45,513			(45,513	)		—
Gain on foreign currency translation of foreign operations		—		—			—		8,446			—			8,446
Remeasurement loss related to defined benefit plan		—		—			—		(30,984	)		—			(30,984	)
Appropriation of retained earnings		—		—			—		368			(368	)
Dividends to hybrid securities		—		—			—		—			(134,421	)		(134,421	)
Issuance of hybrid securities		—		658,470			—		—			—			658,470
Redemption of hybrid securities		—		(159,619	)		—		(276	)		—			(159,895	)
December 31, 2019		3,381,392		3,660,814			269,533		(369,855	)		15,119,856			22,061,740

See accompanying notes

WOORI BANK

SEPARATE STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean Won in millions)
Cash flows from operating activities:
Net income		1,790,831			1,810,904
Adjustments:
Income tax expense		574,297			674,727
Interest income		(9,015,700	)		(8,331,967	)
Interest expense		4,155,365			3,604,249
Dividend income		(152,982	)		(113,467	)
		(4,439,020	)		(4,166,458	)
Additions of expenses not involving cash outflows:
Loss on financial assets at FVTOCI		895			—
Impairment losses due to credit loss		91,455			58,823
Impairment loss on investments in subsidiaries and associates		43,102			241
Loss on transaction and valuation of derivatives (designated for hedging)		—			36,488
Loss on hedged items (fair value hedge)		86,214			17,299
Provision for other liabilities		108,749			10,823
Retirement benefits		146,022			128,447
Depreciation and amortization		417,168			217,074
Loss on disposal of premises and equipment, intangible assets and other assets		1,534			933
Impairment loss on premises and equipment, intangible assets and other assets		26,037			5,933
Loss on disposal of assets held for sale		205,046			—
		1,126,222			476,061
Deductions of income not involving cash inflows:
Gain on valuation of financial assets at FVTPL		288,073			216,135
Gain on financial assets at FVTOCI		9,140			1,333
Gain on disposal of securities at amortized cost		—			431
Gain on transaction and valuation of derivatives (designated for hedging)		90,244			9,126
Gain on hedged items (fair value hedge)		231			42,797
Reversal of provisions for other liabilities		3,866			1,883
Gain on disposal of investment in subsidiaries and associates		—			35,409
Gain on disposal of premises and equipment, intangible assets and other assets		1,216			25,537
Reversal of impairment loss on premises and equipment and other assets		85			491
Gain on disposal of assets held for sale		256,829			—
		649,684			333,142

(Continued)

WOORI BANK

SEPARATE STATEMENT OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean Won in millions)
Changes in assets and liabilities from operating activities:
Financial assets at FVTPL		(111,787	)		1,232,277
Loans and other financial assets at amortized cost		(7,879,149	)		(11,927,559	)
Other assets		(157,334	)		(23,497	)
Deposits due to customers		15,196,289			13,042,027
Provisions		4,360			7,781
Net defined benefit liability		(280,267	)		(118,735	)
Other financial liabilities		(4,901,977	)		6,919,137
Other liabilities		(10,270	)		45,077
		1,859,865			9,176,508
Cash received from operating activities:
Interest income received		8,971,435			8,305,699
Interest expense paid		(3,898,180	)		(3,416,210	)
Dividend received		152,982			111,426
Income tax paid		(457,514	)		(464,286	)
Net cash provided by(used in) operating activities		4,456,937			11,500,502
Cash flows from investing activities:
Cash in-flows from investing activities:
Disposal of Financial assets at FVTPL		11,355,894			11,918,394
Disposal of financial assets at FVTOCI		14,598,029			8,969,290
Redemption of securities at amortized cost		8,685,723			9,400,596
Disposal of investments in subsidiaries and associates		37,489			51,962
Disposal of premises and equipment		7,196			387
Disposal of intangible assets		80			2,845
Disposal of assets held for sale		996,885			81,650
		35,681,296			30,425,124
Cash out-flows from investing activities:
Acquisition of financial assets at FVTPL		11,823,630			12,322,160
Acquisition of financial instruments at FVTOCI		23,367,718			12,945,225
Acquisition of securities at amortized cost		6,030,871			15,575,213
Acquisition of investments in subsidiaries and associates		433,138			285,140
Acquisition of investment properties		185,173			12,957
Acquisition of premises and equipment		190,677			89,414
Acquisition of intangible assets		95,330			163,877
Decrease of liabilities held for sale		37,708			—
		42,164,245			41,393,986
Net cash used in investing activities		(6,482,949	)		(10,968,862	)

(Continued)

WOORI BANK

SEPARATE STATEMENT OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean Won in millions)
Cash flows from financing activities:
Cash in-flows from financing activities:
Increase in borrowings		12,748,051			8,539,312
Issuance of debentures		7,679,374			5,248,047
Issuance of hybrid securities		658,470			398,707
		21,085,895			14,186,066
Cash out-flows from financing activities:
Repayment of borrowings		11,204,529			8,280,546
Repayment of debentures		6,744,225			5,523,518
Repayment of lease liabilities		177,823			—
Dividends paid on common stocks		1,113,626			336,636
Redemption of hybrid securities		160,000			255,000
Dividends paid on hybrid securities		156,691			147,625
		19,556,894			14,543,325
Net cash provided by(used in) financing activities		1,529,001			(357,259	)
Net increase(decrease) in cash and cash equivalents		(497,011	)		174,381
Cash and cash equivalents, beginning of the year		5,723,801			5,328,960
Effects of exchange rate changes on cash and cash equivalents		171,312			220,460
Cash and cash equivalents, end of the year (Note 6)		5,398,102			5,723,801

See accompanying notes

WOORI BANK

NOTES TO SEPARATE FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

1. GENERAL

Summary of Woori Bank

Woori Bank (the “Bank”) 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 (hereinafter referred to as the “Capital Market Act”).

As of December 31, 2019, the Bank’s shares are wholly owned by Woori Financial Group Inc. (“Woori Financial Group”) which was established in accordance with the Financial Holding Companies Act on January 11, 2019. The Bank has 676 million shares and common stocks amounting to 3,381,392 million Korean won.

The headquarters of the Bank is located at 51, Sogong-ro, Jung-gu, Seoul, Korea. The Bank has 874 branches and offices in Korea, and 23 branches and offices overseas as of December 31, 2019.

2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

(1) Basis of preparation

The Bank is preparing its financial statements in accordance with the Korean Financial Reporting Standards (“K-IFRS”), and this separate financial statements are prepared in accordance with K-IFRS 1027 “Separate Financial Statements”. Separate financial statements are those presented by an investor who has significant influence over subsidiaries or investees in which the entity could elect to account for its investments in subsidiaries, joint ventures and associates either at cost, in accordance with K-IFRS 1109 “Financial Instruments”, or using the equity method as described in K-IFRS 1028 “Investments in Associates and Joint Ventures”.

The significant accounting policies applied in the preparation of financial statements are stated below, and the accounting policies applied are identical to ones used in the preparation of previous period’s financial statements, except for the effects of adopting new standards or interpretations as explained below.

The financial statements are prepared at the end of each reporting period on the historical cost basis, except for certain non-current assets and financial assets that are either revalued or measured in fair value. Historical cost is generally measured at the fair value of consideration given to acquire assets.

The financial statements of the Bank was approved by the Board of Directors on March 3, 2020, and is planned for an approval in the annual shareholder’s meeting on March 24, 2020.

1) The Bank has newly adopted the following K-IFRS that affected the Bank’s accounting policies:

① K-IFRS 1109 ‘Financial Instruments,’ K-IFRS 1107 ‘Financial Instruments: Disclosure’ amendments

The Bank has adopted the amendments of K-IFRS 1109 and 1107 for the first time in the current year. The amendments mainly deal with the addition of temporary exceptions from applying specific hedge accounting requirements while the uncertainty arises from interest rate benchmark reform. The amendment requires that for the purpose of determining whether a forecast transaction (or a component thereof) is highly probable, an entity shall assume that the interest rate benchmark on which the hedged cash flows (contractually or non-contractually specified) are based is not altered as a result of interest rate benchmark reform. When applying the prospective assessment, the amendment further requires that an entity shall assume that the hedged risk or the interest rate benchmark on which the hedged item or the hedging instrument is based is not altered as a result of the reform. Additionally, for a hedge of a non-contractually specified benchmark component of interest rate risk, an entity shall apply the requirement that the risk component shall be separately identifiable only at the inception of the hedging relationship. Meanwhile, an entity shall prospectively cease applying the temporary exceptions to a hedged item at the earlier of:

(a) when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the hedged item; and (b) when the hedging relationship that the hedged item is part of is discontinued. Note 26 sets out details of the hedge accounting applied by the Bank. These amendments will be effective from January 1, 2020 but the Bank has applied such amendments in current year as the early adoption is permitted.

- 2 -

② Leases

The Bank initially applied K-IFRS 1116 from January 1, 2019. Other accounting standards enacted from January 1, 2019 are not expected to have material impacts on the Bank’s financial statements.

K-IFRS 1116 introduces an accounting model for the single lessee and as a result, the Bank, as a lessee, recognizes right-of-use assets which represent a lessee’s right to use an underlying asset and lease liabilities which represent an obligation to make lease payments. An accounting model for the lessor is similar to the previous accounting policy.

The Bank recognized the cumulative effects due to the initial application of K-IFRS 1116 on January 1, 2019, which is the date of initial application. Therefore, the comparative financial information applies K-IFRS 1017 and the related interpretations as reported previously, and was not restated. The details of the changes to the accounting policy are described below.

i) Definition of a lease

Previously, the Bank determined whether an arrangement is, or contains, a lease on the arrangement date by applying K-IFRS 1017 and K-IFRS 2104 ‘Determining whether an arrangement contains a lease’. The Bank currently determines whether the contract is, or contains, a lease, based on the new definition of lease. According to K-IFRS 1116, a contract is, or contains a lease if the right to control the use of an identified asset is transferred in exchange for the consideration received for a period of time.

On the date of initial application for K-IFRS 1116, the Bank elected to apply a practical expedient which does not require the Bank to reassess whether the contract is a lease. The Bank applied K-IFRS 1116 only to the contracts that were previously identified as a lease and did not reassess the contracts that were not identified as a lease in line with K-IFRS 1017 and K-IFRS 2104. Therefore, the definition of a lease under K-IFRS 1116 is only applicable to contracts that are entered into or modified after January 1, 2019.

The Bank elected not to recognize right-to-use assets and lease liabilities for certain leases of low-value assets (e.g. IT equipment) and short-term leases (less than one year). The Bank will recognize the related lease payments as expenses equally over the lease period.

IFRS Interpretations Committee published its interpretation of ‘Lease Period and Lease Improvement Useful Life’ as of December 16, 2019. The Interpretation Committee discussed the calculation method of renewable lease and cancellable lease and etc., and according to the interpretation, the Bank shall identify factors to consider a wide range of economic disadvantages and calculate the lease period based on them. However, as the Bank is holding a large number of contracts and the conditions of the contract vary, sufficient time is required for analysis of the contract and accounting policy establishment. Therefore, the Bank is planning to reflect the effects in the financial statements after the analysis of the effects changes in accounting policies over the lease term is completed.

ii) Lessee

The Bank leases various assets, including buildings, vehicles and IT equipment.

Previously, the Bank classified its leases either as an operating lease or as a finance lease based on whether the lease substantially transfers the risk and reward of owning the underlying assets. According to K-IFRS 1116, the Bank recognizes right-of-use assets and lease liabilities for most of its leases, which means most of its leases are presented in the statement of financial position.

For the right-of-use assets that do not satisfy the definition of an investment property, the Bank presents those assets as the same item as the item that the corresponding underlying asset would have been presented for. Right-of-use assets that meet the definition of investment would be presented as investment properties.

- 3 -

For a contract that contains a lease component, the Bank allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease and non-lease components.

Transition requirements

For leases previously classified as operating leases applying K-IFRS 1017, the Bank measures lease liabilities at the present value of the remaining lease payments using the Bank’s incremental borrowing rates as of January 1, 2019. However, the Bank elected not to apply recognition, measurement and presentation requirements for leases of low-value assets. A right-of-use asset is measured using the following method.

• It is the same amount as the lease liability (adjusted for any advanced payments or payables) and the Bank adopts this method for all its leases.

For leases previously classified as operating leases applying K-IFRS 1017, the Bank applies the following practical expedient when applying K-IFRS 1116. The Bank does not apply the practical expedient that does not recognize assets and liabilities from lease contracts whose remaining lease term is less than 12 months from initial application.

• Did not apply single discount rate upon leases whose natures are quite alike.

• Any initial direct cost is excluded from the estimation of right-of-use assets on the date of initial application.

• As an alternative to impairment review, K-IFRS 1037 ‘Provisions, Contingent Liabilities and Contingent Assets’ is applied immediately prior to the date of initial application to determine whether the leases are onerous.

• Hindsight is used when determining a lease term for contracts that contain an extension option or termination option.

iii) Impacts to the financial statements

a) Impacts at the point of transition

As of the date of transition to K-IFRS 1116, the Bank additionally recognized the right-of-use assets and lease liabilities, and the impacts are as follows (Unit: Korean won in millions):

	January 1, 2019
Right-of-use assets presented as premises and equipment		322,986
Lease liability (*)		263,496

(*) The differences have occurred due to prepaid, unpaid lease payments, transfer, etc. There is no effect on retained earnings.

When measuring lease liabilities for the leases that were previously classified as operating leases, the Bank used its incremental borrowing rate as of January 1, 2019 as follows. The applied weighted-average incremental borrowing rate is 2.09%.

	January 1, 2019
Operating leases as of December 31, 2018		274,686
Amount discounted by incremental borrowing rate on January 1, 2019		263,496
Lease liability recognized on January 1, 2019		263,496

b) Impacts during the transition

The Bank recognized depreciation expenses and interest expenses instead of the operating lease expenses for the leases in line with K-IFRS 1116. For the year ended December 31, 2019, the Bank recognized depreciation expenses of 195,986 million won and interest expenses of 6,262 million won.

- 4 -

③ Share-based payment

For cash-settled share-based payment transactions that provide cash in return for the goods or services received, the Bank measures the goods or services received and the corresponding liability at the fair value, and recognizes as employee benefit, expenses and liabilities during the vesting period. The fair value of the liability is remeasured at the end of each reporting period and the settlement date until the liability is settled, and changes in fair value are recognized as employee benefits.

④ The following enacted/amended standards are not expected to significantly affect the Bank:

• K-IFRS 2123 – Uncertainty over Income Tax Treatments (enacted)

• Amendments to K-IFRS 1109

• Amendments to K-IFRS 1028

• Amendments to K-IFRS 1019

• Amendments to K-IFRS 1115

• Annual Improvements to K-IFRS 2015-2017 Cycle

These annual improvements include partial amendments of K-IFRS 1012 ‘Income Tax,’ K-IFRS 1023 ‘Borrowing Cost,’ K-IFRS 1103 ‘Business Combination’ and K-IFRS 1111 ‘Joint Arrangements’.

2) The details of K-IFRS that have been issued and published as of date of issue approval of financial statements, but have not yet reached the effective date, and which the Bank has not applied earlier, are as follows:

• Amendments to the conceptual framework for financial reporting

• Amendments to K-IFRS 1103 ‘Business combinations’

• Amendments to K-IFRS 1001 ‘Presentation of Financial Statements,’ and K-IFRS 1008 ‘Changes in Accounting Estimates and Errors’

The above amendments are not considered to have any significant impact on the Bank.

(2) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured as the sum of the acquisition-date fair values of the assets transferred by the Bank in exchange for control of the acquiree, liabilities assumed by the Bank and the equity interests issued by the Bank. Acquisition-related costs are generally recognized in profit or loss as incurred.

At the acquisition date, the acquiree’s identifiable assets, liabilities and contingent liabilities that meet the condition for recognition under K-IFRS 1103 are recognized at their fair value, except that:

• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with K-IFRS 1012 Income Taxes and K-IFRS 1019 Employee Benefits, respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Bank entered into to replace share-based payment arrangements of the acquiree are measured in accordance with K-IFRS 1102 Share-based Payment at the acquisition date; and

• non-current assets (or disposal groups) that are classified as held for sale in accordance with K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations are measured at the lower of their previous carrying amounts and fair value less costs to sell.

Any excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Bank’s previously held equity interest (if any) in the acquiree over the net of identifiable assets and liabilities assumed of the acquiree at the acquisition date is recognized as goodwill which is included in intangible assets.

If, after reassessment, the Bank’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognized immediately in net income (or other comprehensive income, if applicable) identical to the treatment assuming interests are sold directly.

- 5 -

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable.

When the consideration transferred by the Bank in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration other than the above is remeasured at subsequent reporting dates as appropriate, with the corresponding gain or loss being recognized in profit or loss.

When a business combination is achieved in stages, the Bank’s previously held equity interest in the acquiree is remeasured at fair value at the acquisition date (i.e., the date when the Bank obtains control) and the resulting gain or loss, if any, is recognized in net income (or other comprehensive income, if applicable). Amounts arising from changes in value of interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are recognized, identical to the treatment assuming interests are sold directly.

In cases where i) a common entity ultimately controls over all participating entities, or businesses, in a business combination transaction, prior to and after the transaction continuously, and ii) the control is not temporary, the transaction meets the definition of “business combination under common control” and it is deemed that the transaction only results in the changes in legal substance, and not economic substance, from the perspective of the ultimate controlling party. Thus, in such transactions, the acquirer recognizes the assets and liabilities of the acquiree in its financial statements at the book values as recognized in the ultimate controlling party’s consolidated financial statements, and the difference between the book value of consideration transferred to and the book value of net assets transferred in is recognized as equity.

(3) Investment in Joint operation

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

When the Bank operates as a joint operator, it recognizes in relation to its interest in a joint operation:

• its assets, including its share of any assets held jointly;

• its liabilities, including its share of any liabilities incurred jointly;

• its revenue from the sale of its share of the output arising from the joint operation;

• its share of the revenue from the sale of the output by the joint operation; and

• its expenses, including its share of any expenses incurred jointly.

The Bank accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the K-IFRSs applicable to the particular assets, liabilities, revenues and expenses.

When the Bank enters into a transaction with a joint operation in which it is a joint operator, such as a purchase of assets, it does not recognize proportional share of profit or loss until the asset is sold to a third party.

(4) Revenue recognition

K-IFRS 1115 requires the recognition of revenues based on transaction price allocated to the performance obligation when or as the Bank performs that obligation to the customer. Revenues other than those from contracts with customers, such as interest revenue and loan origination fee (cost), are measured through effective interest rate method.

- 6 -

1) Revenue from contracts with customers

The Bank recognizes revenue when the Bank satisfies a performance obligation by transferring a promised good or service to a customer. When a performance obligation is satisfied, the Bank recognizes as a revenue the amount of the transaction price that is allocated to that performance obligation. The transaction price is the amount of consideration to which the Bank expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

The Bank recognizes revenue by major sources as shown below:

① Fees and commission received for brokerage

The fees and commission received for agency are the amount of consideration or fee expected to be entitled to receive in return for providing goods or services to the other parties with the Bank acting as an agency, such as in the case of sales of bancassurance and beneficiary certificates. The majority of these fees and commission received for brokerage are from the business activities relevant to Consumer banking segment.

② Fees and commission received related to credit

The fees and commission received related to credit mainly include the lending fees received from the loan activity and the fees received in the L/C transactions. Except for the fees and commission accounted for in calculating the effective interest rate, it is generally recognized when the performance obligation has been performed. The majority of these fees and commission received related to credit are from the business activities relevant to Consumer banking and Corporate banking segment.

③ Fees and commission received for electronic finance

The fees and commission received for electronic finance include fees received in return for providing various kinds of electronic financial services through firm-banking and CMS. These fees are recognized as revenue immediately upon the completion of services. The majority of these fees and commission received for electronic finance are from the business activities relevant to Consumer banking and Corporate banking segment.

④ Fees and commission received on foreign exchange handling

The fees and commission received on foreign exchange handling consist of various fees incurred when transferring foreign currency. The point of processing the customer’s request is the time when performance obligation is satisfied, and revenue is immediately recognized when fees and commission are received after requests are processed. The business activities relevant to these fees and commission received on foreign exchange handling are substantially attributable to Corporate banking segment.

⑤ Fees and commission received on foreign exchange

The fees and commission received on foreign exchange consist of fees related to the issuance of various certificates, such as exchange, import and export performance certificates, purchase certificates, etc. The point of processing the customer’s request is the time when performance obligation is satisfied, and revenue is immediately recognized when fees and commission are received after requests are processed. The business activities relevant to these fees and commission received on foreign exchange are substantially attributable to Corporate banking segment.

⑥ Fees and commission received for guarantee

The fees and commission received for guarantee include the fees received for the various warranties. The activities related to the warranty consist mainly of performance obligations satisfied over time and fees and commission are recognized over the guarantee period. The business activities relevant to these fees and commission received for guarantee are substantially attributable to Corporate banking segment.

⑦ Fees and commission received on securities business

The fees and commission received on securities business consist mainly of fees and commission for the sale of beneficiary certificates, and these fees are recognized when the beneficiary certificates are sold to customers. The business activities relevant to these fees and commission received on credit card are substantially attributable to Consumer banking segment.

- 7 -

⑧ Fees and commission from trust management

The fees and commission from trust management consist of fees and commission received in return for the operation and management services for entrusted assets. These operation and management services are performance obligations satisfied over time, and revenue is recognized over the service period. Among the fees and commission from trust management, variable considerations such as profit commission that are affected by the value of entrusted assets and base return of the future periods are recognized as revenue when limitations to the estimates are lifted. The majority of these fees and commission received for brokerage are from the business activities relevant to Consumer banking segment.

⑨ Other fees

Other fees are usually fees related to remittances, but include fees related to various other services provided to customers by the Bank. These fees are recognized when transactions occur at the customers’ request and services are provided, at the same time when commissions are received. These other fees occur across all operating segments and no single operating segment represents majority of other fees.

2) Other revenue from contracts with customers

① Interest income

Interest income on financial assets measured at FVTOCI and financial assets at amortized costs is measured using the effective interest method.

The effective interest method is a method of calculating the amortized cost of debt securities (or group of financial assets) and of allocating the interest income over the expected life of the asset. The effective interest rate is the rate that exactly discounts estimated future cash flows to the instrument’s initial total carrying amount over the expected period, or shorter if appropriate. Future cash flows include commissions and cost of reward points (limited to the primary component of effective interest rate) and other premiums or discounts that are paid or received between the contractual parties, and future cash flows exclude expected credit loss when calculating the effective interest rate. All contractual terms of a financial instrument are considered when estimating future cash flows.

For purchased or originated credit-impaired financial assets, interest revenue is recognized by applying the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition. Even if the financial asset is no longer impaired in the subsequent periods due to credit improvement, the basis of interest revenue calculation is not changed from amortized cost to unamortized cost of the financial assets.

② Loan origination fees and costs

The commission fees earned on loans, which is part of the effective interest of loans, is accounted for as deferred origination fees. Incremental costs related to the origination of loans are accounted for as deferred origination fees and is being added or deducted to/from interest income on loans using effective interest rate method.

(5) Accounting for foreign currencies

The Bank’s separate financial statements are presented in Korean Won, which is the functional currency of the Bank. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at its prevailing exchange rates at the date. The effective portion of the changes in fair value of a derivative that qualifies as a cash flow hedge and the foreign exchange differences on monetary items that form part of net investment in foreign operations are recognized in equity.

Assets and liabilities of the foreign operations subject to consolidation are translated into Korean Won at foreign exchange rates at the end of the reporting period. Except for situations in which it is required to use exchange rates at the date of transaction due to significant changes in exchange rates during the period, items that belong to profit or loss are measured by average exchange rate, with foreign exchange differences recognized as other comprehensive income and added to equity (allocated to non-controlling interests, if appropriate). When foreign operations are disposed, the controlling interest’s share of accumulated foreign exchange differences related to such foreign operations will be reclassified to profit or loss, while non-controlling interest’s corresponding share will not be reclassified.

- 8 -

Adjustments to fair value of identifiable assets and liabilities, and goodwill arising from the acquisition of foreign operations will be treated as assets and liabilities of the corresponding foreign operation, and is translated using foreign exchange rates at the end of the period. The foreign exchange differences are recognized in equity.

(6) Cash and cash equivalents

The Bank is classifying cash on hand, demand deposits, interest-earning deposits with original maturities of up to three months on acquisition date, and highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value as cash and cash equivalents.

(7) Financial assets and financial liabilities

1) Financial assets

A regular way purchase or sale of financial assets is recognized or derecognized on the trade date. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose term requires delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

On initial recognition, financial assets are classified into financial assets at FVTPL, financial assets at FVTOCI, and financial assets at amortized cost.

a) Business model

The Bank evaluates the way business is being managed, and the purpose of the business model for managing a financial asset best reflects the way information is provided to the management at its portfolio level. Such information considers the following:

• The accounting policies and purpose specified for the portfolio, and the actual operation of such policies. This includes strategy of the management focusing on the receipt of contractual interest revenue, maintaining a certain level of interest income, matching the duration of financial assets and the duration of corresponding liabilities to obtain the asset, and outflow or realization of expected cash flows from disposal of assets

• The way the performance of a financial asset held under the business model is evaluated, and the way such evaluation is being reported to the management

• The risk affecting the performance of the business model (and financial assets held under the business model), and the way such risk is being managed

• The compensation plan for the management (e.g. whether the management is being compensated based on the fair value of assets or based on contractual cash flows received)

• Frequency, amount, timing and reason for sale of financial assets in the past, and forecast of future sale activities.

b) Contractual cash flows

The principal is defined to be the fair value of a financial assets at initial recognition. Interest is not only composed of consideration for the time value of money, consideration for the credit risk related to remaining principal at a certain period of time, and consideration for other cost (e.g. liquidity risk and cost of operation) and fundamental risk associated with lending, but also profit.

When evaluating whether contractual cash flows are solely payments of principal and interests, the Bank considers the contractual terms of the financial instrument. When a financial asset contains contractual conditions that modify the timing and amount of contractual cash flows, it is required to determine whether contractual cash flows that arise during the remaining life of the financial instrument due to such contractual condition are solely payments of principal and interest. The Bank considers the following elements when evaluating the following:

• Conditions that lead to modification of timing or amount of cash flows

• Contractual terms that adjust contractual nominal interest, including floating rate features

• Early payment features and maturity extension features

• Contractual terms that limit the Bank’s claim on cash flows arising from certain assets (e.g. non-recourse feature)

- 9 -

① Financial assets at FVTPL

The Bank is classifying those financial assets that are not classified as either financial assets at amortized cost or financial assets at FVTOCI, and those designated to be measured at FVTPL, as financial assets at FVTPL. Financial assets at FVTPL are measured at fair value, and related profit or loss is recognized in net income. Transaction costs related to acquisition at initial recognition is recognized in net income immediately upon its occurrence.

It is possible to designate a financial asset as financial asset at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial asset at FVTPL; (b) the financial asset forms part of the Bank’s financial instrument group (a group composed of a combination of financial asset or liability), is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial asset is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial asset at FVTPL is allowed under K-IFRS 1109 ‘Financial Instruments’. However, the designation is irrevocable.

② Financial assets at FVTOCI

When financial assets are held under a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at FVTOCI. Also, for investments in equity instruments that are not held for short-term trade, an irrevocable election is available at initial recognition to present subsequent changes in fair value as other comprehensive income.

At initial recognition, financial assets at FVTOCI is measured at its fair value plus any direct transaction cost, and is subsequently measured in fair value. However, for equity instruments that do not have a quotation in an active market and in which fair value cannot be measured reliably, they are measured at cost. The changes in fair value except for profit or loss items such as impairment losses (reversals), interest revenue calculated by using effective interest method, and foreign exchange gain or loss, and related income tax effects are recognized as other comprehensive income until the asset’s disposal. Upon derecognition, the accumulated other comprehensive income is reclassified from equity to net income for FVTOCI (debt instruments), and reclassified within the equity for FVTOCI (equity instruments)

③ Financial assets at amortized cost

When financial assets are held under a business model whose objective is to hold financial assets in order to collect contractual cash flows, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at amortized cost. At initial recognition, financial assets at amortized cost are recognized at fair value plus any direct transaction cost. Financial assets at amortized cost is presented at amortized cost using effective interest method, less any loss allowance.

2) Financial liabilities

At initial recognition, financial liabilities are classified into either financial liabilities at FVTPL or financial liabilities at amortized cost.

Financial liabilities are usually classified as financial liabilities at FVTPL when they are acquired with a purpose to repurchase them within a short period of time, when they are part of a certain financial instrument portfolio that is actually and recently being managed with a purpose of short-term profit and joint management by the Bank at initial recognition, and when they are derivatives that do not qualify as hedging instruments. Financial liabilities at FVTPL are measured at fair value with any direct transaction cost recognized in profit or loss, and are subsequently measured at fair value. Profit or loss arising from financial liabilities at FVTPL is recognized in net income when occurred.

It is possible to designate a financial liability as financial liability at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial liability at FVTPL; (b) the financial asset forms part of the Bank’s financial instrument group (a group composed of a combination of financial asset or liability) according to the Bank’s documented risk management or investment strategy, is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial liability is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial liability at FVTPL is allowed under K-IFRS 1109 ‘Financial Instruments’.

- 10 -

Financial liabilities designated as at FVTPL are initially recognized at fair value, with any direct transaction cost recognized in profit or loss, and are subsequently measured at fair value. Any profit or loss from financial liabilities at FVTPL are recognized in profit or loss.

Financial liabilities not classified as financial liabilities at FVTPL are measured at amortized cost. The Bank is classifying liabilities such as deposits due to customers, borrowings and debentures as financial liabilities at amortized cost.

3) Reclassification

Financial assets are not reclassified after initial recognition unless the Bank modifies the business model used to manage financial assets. When the Bank modifies the business model used to manage financial assets, all affected financial assets are reclassified on the first day of the first reporting period after the modification.

4) Derecognition

Financial assets are derecognized when contractual rights to cash flows from the financial assets are expired, or when substantially all of risk and reward for holding financial assets is transferred to another entity as a result of a sale of financial assets. If the Bank does not have and does not transfer substantially all of the risk and reward of holding financial assets with control of the transferred financial assets retained, the Bank recognizes financial assets to the extent of its continuing involvement. If the Bank holds substantially all the risk and reward of holding a financial asset, it continues to recognize that asset and proceeds are accounted for as collateralized borrowings.

When a financial asset is fully derecognized, the difference between the book value and the sum of proceeds and accumulated other comprehensive income is recognized as profit or loss in case of FVTOCI (debt instruments), and as retained earnings for FVTOCI (equity instruments).

In case when a financial asset is not fully derecognized, the Bank allocates the book value into amounts retained in the books and removed from the books, based on the relative fair value of each portion at the date of sale, and based on the degree of continuing involvement. For the derecognized portion of the financial assets, the difference between its book value and the sum of proceeds and the portion of accumulated other comprehensive income attributable to that portion will be recognized in profit or loss in case of debt instruments and recognized in retained earnings in case of equity instruments. The accumulated other comprehensive income is distributed to the portion of book value retained in the books, and to the portion of book value removed from the books.

The Bank derecognizes financial liabilities when, and only when, the Bank’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

When the Bank exchanges with the existing lender one debt instrument into another one with substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Bank accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability.

5) Fair value of financial instruments

Financial assets at FVTPL and financial assets at FVTOCI are measured and presented in financial statements at their fair values, and all derivatives are also subject to fair value measurement.

Fair value is defined as the price that would be received to exchange an asset or paid to transfer a liability in a recent transaction between independent parties that are reasonable and willing. Fair value is the transaction price of identical financial assets or financial liabilities generated in an active market. An active market is a market where trade volume is sufficient and objective price information is available due to the fact that bid and ask price differences are small.

- 11 -

When trade volume of a financial instrument is low, when transaction prices within the market show large differences among them, or when it cannot be concluded that a financial instrument is being traded within an active market due to disclosures being extremely shallow, fair value is measured using valuation techniques based on alternative market information or using internal valuation techniques based on general and observable information obtained from objective sources. Market information includes maturity and characteristics, duration, similar yield curve, and variability measurement of financial instruments of similar nature. Fair value amount contains unique assumptions on each entity (the Bank concluded that it is using assumptions applied in valuing financial instruments in the market, or risk-adjusted assumptions in case marketability does not exist).

The market approach and income approach, which are valuation techniques used to estimate the fair value of financial instruments, both require significant judgment. Market approach measures fair value using either a recent transaction price that includes the financial instrument, or observable information on comparable firm or assets. Income approach measures fair value through discounting future cash flows with a discount rate reflecting market expectations, and revenue, operating income, depreciation, capital expenditures, income tax, working capital and estimated residual value of financial investments are being considered when deriving future cash flows. Valuation techniques such as the above include estimates based on the financial instruments’ complexity and usefulness of observable information in the market.

The valuation techniques used in the evaluation of financial instruments are explained below.

a) Financial assets at FVTPL and Financial assets at FVTOCI

The fair value of equity securities included in financial assets at FVTPL and financial assets at FVTOCI category is recognized in the statement of financial position at its available market price. Debt securities traded in the over-the-counter market are generally recognized at an amount computed by an independent appraiser. When the Bank uses the fair value determined by independent appraisers, the Bank usually obtains three values from three different appraisers for each financial instrument, and selects the minimum amount without making additional adjustments. For equity securities without marketability, the Bank uses the amount determined by the independent appraiser. The Bank verifies the prices obtained from appraisers in various ways, including the evaluation of independent appraisers’ competency, indirect verification through comparison between appraisers’ price and other available market information, and reappraisal done by employees who have knowledge of valuation models and assumptions that appraisers used.

b) Derivatives

The Bank’s transactions involving derivatives such as futures and exchange traded options are measured at market value. A portion of exchange traded derivatives classified as level 2 in the fair value hierarchy, the fair value is estimated using internal valuation techniques. If there are no publicly available market prices because they are traded over-the-counter, fair value is measured through internal valuation techniques. When using internal valuation techniques to derive fair value, the types of derivatives, base interest rate or characteristics of prices, or stock market indices are considered. When variables used in the internal valuation techniques are not observable information in the market, such variables may contain significant estimates.

c) Adjustment of valuation amount

The Bank is exposed to credit risk when a counterparty to a derivative contract does not perform its contractual obligation, and the exposure amount is equal to the amount of derivative asset recognized in the statement of financial position. When the Bank earns income through derivatives, such income is recognized as derivative asset in the statement of financial position. Some of the derivatives are traded in the market, but most of the derivatives are measured at estimated fair value derived from internal valuation models that use observable information in the market. As such, in order to estimate the fair value there should be an adjustment made to incorporate counterparty’s credit risk, and credit risk adjustment is being considered when valuing derivative assets such as over-the counter derivatives. The amount of financial liabilities is also adjusted by the Bank’s own credit risk when valuing them.

The amount of adjustment is derived from counterparty’s probability of default and loss given default. This adjustment considers contractual matters that are designed to reduce the Bank’s exposure to each counterparty’s credit risk. When derivatives are under master netting arrangement, the exposure used in the computation of credit risk adjustment is a net amount after adding/deducting cash collateral received (or paid) from loss(or gain) position derivatives with the same counterparty.

- 12 -

6) Expected credit losses on financial assets

The Bank recognizes loss allowance on expected credit losses for the following assets:

• Financial assets at amortized cost

• Debt instruments measured at FVTOCI

• Contract assets as defined by K-IFRS 1115

Expected credit losses are weighted-average value of a range of possible results, considering the time value of money, and are measured by incorporating information on current conditions and forecasts of future economic conditions that are available without undue cost or effort.

The methods to measure expected credit losses are classified into following three categories in accordance with K-IFRS:

• General approach: Financial assets that do not belong to below two models and unused loan commitments

• Simplified approach: When financial assets are either trade receivables, contract assets or lease receivables

• Credit impairment model: Purchased or originated credit-impaired financial assets

The measurement of loss allowance under general approach is differentiated depending on whether the credit risk has increased significantly after initial recognition. That is, loss allowance is measured based on 12-month expected credit loss when the credit risk has not increased significantly after initial recognition, while loss allowance is measured at lifetime expected credit loss when credit risk has increased significantly. Lifetime is the expected remaining life of the financial instrument up to the maturity date of the contract.

The measurement of loss allowance under simplified approach is always based on lifetime expected credit loss, and loss allowance under credit impairment model is measured as the cumulative change in lifetime expected credit loss since initial recognition.

a) Measurement of expected credit losses on financial asset at amortized cost

The expected credit losses on financial assets at amortized cost is measured by the difference between the contractual cash flows during the period and the present value of expected cash flows. Expected cash inflows are computed for individually significant financial assets in order to calculate expected credit losses.

When financial assets are not individually significant, they are included in a group of financial assets with similar credit risk characteristics and expected credit losses of the group are calculated collectively.

Expected credit losses are deducted through loss allowance account, and when the financial asset is determined to be uncollectible, the loss allowance is written off from the books along with the related financial asset. When loan receivable previously written off is subsequently collected, the related loss allowance is increased and changes in loss allowance are recognized in profit or loss.

b) Measurement of expected credit losses on financial asset at FVTOCI

The measurement method of expected credit loss is identical to financial asset at amortized cost, but changes in the allowance is recognized in other comprehensive income. When financial assets at FVTOCI is disposed or repaid, the related allowance is reclassified from other comprehensive income to net income.

(8) Offsetting financial instruments

Financial assets and liabilities are presented as a net amount in the statements of financial position when the Bank has an enforceable legal right and an intention to settle on a net basis or to realize an asset and settle the liability simultaneously.

(9) Investment properties

The Bank classifies a property held to earn rentals and/or for capital appreciation as an investment property. Investment properties are measured initially at cost, including transaction costs, less subsequent depreciation and impairment.

Subsequent costs are included in the carrying amount of the asset or recognized as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Bank and the cost of an asset can be measured reliably, and the book value of a portion of an asset that are replaced by a subsequent expenditure is removed from the books. Routine maintenance and repairs are expensed as incurred.

- 13 -

While land is not depreciated, all other investment properties are depreciated based on the depreciation method and useful lives of premises and equipment. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, and when it is deemed appropriate to change them, the effect of any change is accounted for as a change in accounting estimates.

An investment property is derecognized from the separate financial statements on disposal or when it is permanently withdrawn from use and no future economic benefits are expected even from its disposal. The gain or loss from derecognition of an investment property is calculated as the difference between the net disposal proceeds and the carrying amount of the property, and is recognized in profit or loss of the period.

(10) Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of premises and equipment is expenditure directly attributable to their purchase or construction, which includes any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. It also includes the initial estimate of costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent costs are recognized in the carrying amount of an asset or as a separate asset (if appropriate) if it is probable that future economic benefit associated with the assets will flow into the Bank and the cost of an asset can be measured reliably. Routine maintenance and repairs are expensed as incurred.

While land is not depreciated, for all other premises and equipment, depreciation is charged to net income on a straight-line basis by applying the following estimated economic useful lives on the amount of cost or revalued amount less residual value.

	Useful life
Buildings used for business purpose	40 years
Structures in leased office	5 years
Properties for business purpose	5 years

The Bank reassesses the depreciation method, the estimated useful lives and residual values of premises and equipment at the end of each reporting period. If changes in the estimates are deemed appropriate, the changes are accounted for as a change in an accounting estimate. When there is an indicator of impairment and the carrying amount of a premises and equipment item exceeds the estimated recoverable amount, the carrying amount of such asset is reduced to the recoverable amount.

(11) Intangible assets and goodwill

The Bank is recognizing intangible assets measured at the manufacturing cost or acquisition cost plus additional incidental expenses less accumulated amortization and accumulated impairment losses. The Bank’s intangible asset are amortized over the following economic lives using the straight-line method. The estimated useful life and amortization method are reviewed at the end of each reporting period. If changes in the estimates are deemed appropriate, the changes are accounted for as a change in an accounting estimate.

	Useful life
Industrial property rights	10 years
Development costs	5 years
Other intangible assets	5 years

In addition, when an indicator that intangible assets are impaired is noted, and the carrying amount of the asset exceeds the estimated recoverable amount of the asset, the carrying amount of the asset is reduced to its recoverable amount.

Goodwill is not amortized, but is subject to an impairment test every year, and whenever there is an indicator that goodwill is impaired.

- 14 -

Goodwill is allocated to each of the Bank’s cash-generating unit (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill cannot be reversed in subsequent periods.

(12) Impairment of non-monetary assets

Intangible assets with indefinite useful lives or intangible assets that are not yet available for use are tested for impairment annually, regardless of whether or not there is any indication of impairment. All other assets are tested for impairment by estimating the recoverable amount when there is an objective indication that the carrying amount may not be recoverable. Recoverable amount is the higher of value in use or net fair value, less costs to sell. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and such impairment loss is recognized immediately in net income.

(13) Leases

As the Bank applied K-IFRS 1116 using the revised retrospective method, the comparative financial information has not been prepared. The Bank also applied K-IFRS 1017 and 2104. The accounting policies in accordance with K-IFRS 1017 and 2104 are separately disclosed.

Accounting policy applied since January 1, 2019

The Bank determines whether the agreement is a lease or includes a lease at the time of the agreement. In exchange for consideration in the contract, if the control over the use of the identified asset is transferred for a period of time, the contract is a lease or includes a lease. In determining whether a contract transfers control of the use of the identified asset, the Bank uses the definition of a lease in K-IFRS 1116.

This accounting policy applies to contracts entered into since January 1, 2019.

1) The Bank as a lessee

The Bank recognizes the right-of-use asset and the lease liability at the commencement date of the lease. The right-of-use asset is measured at cost, which comprises the amount of the initial measurement of the lease liability, lease payments made at or before the commencement date (less any lease incentives received), initial direct costs, and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located.

The right-of-use asset is subsequently depreciated on a straight-line basis from the commencement of the lease to the end of the lease term. However, if the lease transfers ownership of the underlying asset to the lessee by the end of the lease term or if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, the lessee depreciates the right-of-use asset same as a fixed asset from the commencement date to the end of the useful life of the underlying asset. The right-of-use asset may be reduced by an impairment of the underlying asset or adjusted by remeasurement of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, but if that cannot be readily determined, the Bank uses its incremental borrowing rate. The Bank generally uses the incremental borrowing rate.

- 15 -

The lease payments included in the measurement of the lease liability comprise the following:

• Fixed payments (including in-substance fixed payments)

• Variable lease payments that depend on an index (or a rate), initially measured using the index or rate as at the commencement date

• Amounts expected to be payable by the lessee under residual value guarantees

• The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, lease payments of the extended period if the lessee is reasonably certain to exercise extension option, and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease

The lease liability is subsequently increased by the interest expense recognized for the lease liability and decreased by reflecting the payment of the lease payments. The lease liability is remeasured if the future lease payments change depending on changes in the index(or a rate), changes in the expected amount to be paid under the residual value guarantee, and changes in the assessment of whether the purchase or extension option is reasonably certain to be exercised or not to exercise the terminate option.

When remeasureing a lease liability, the related right-of-use asset is adjusted and if the carrying amount of the right-of-use asset decreases to zero, the remeasurement amount is recognized in profit or loss.

The Bank applies its judgment when determining the lease term for some lease contracts that include the extension option. The assessment of whether the bank is reasonably certain to exercise the option significantly affects the lease term and therefore has a significant impact on the amount of lease liabilities and the right-of-use asset.

In the statement of financial position, the Bank classified the right-of-use assets that do not meet the definition of investment property as ‘fixed assets’ and the lease liabilities as ‘other financial liabilities.’

Short-term lease and leases for which the underlying asset is of low value

The Bank has chosen a practical expedient that does not recognize the right-of-use asset and lease liabilities for short-term leases with a lease term less than 12 months and leases for which the underlying asset is of low value. The Bank recognizes the lease payments associated with those leases as an expense on a straight-line basis over the lease term.

2) The Bank as a lessor

At the date of the agreement or the effective date of the modification containing the lease element, the Bank allocates the consideration of the contract to each lease element on the basis of its relative stand-alone price.

As a lessor, the Bank classifies its leases as either an operating lease or a finance lease at the commencement date.

The Bank subsequently judges whether the lease transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset, otherwise a lease is classified as an operating lease.

If the agreement contains both lease and non-lease elements, the Bank applies K-IFRS 1115 to allocate the consideration of the contract.

The Bank applies derecognition and impairment provisions of K-IFRS 1109 to its net investment in the lease. The Bank also carries out regular review of the unguaranteed residual value used to calculate total lease investment.

The Bank recognizes lease payments from operating lease as income on a straight-line basis.

The accounting policy that the Bank has applied as a lessor is not different from K-IFRS 1116.

- 16 -

3) Accounting policy applied before January 1, 2019

The Bank classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, and all lease contracts other than finance leases are classified as operating leases.

① The Bank as a lessee

In case of finance leases, the lesser amount of the present value of the minimum lease payments at the commencement date of the lease term or the fair value of the leased asset are recognized as financial lease assets and liabilities in the statement of financial position. Lease payments are allocated as interest expense and repayment of the lease liability so that the same period interest rate is calculated for the balance of the liability. Adjustment to the lease payments are accounted for as expenses during the period.

The operating lease payments are recognized as an expense on a straight-line basis if there is no other systematic basis that is more representative of the pattern in which benefit from the use of underlying asset. Adjustment lease payments from the operating leases are accounted for as expenses during the period in which they are incurred.

② The Bank as a lessor

The Bank recognizes a finance lease receivable equal to the present value of the minimum lease and the non-guaranteed residual value, which is the net investment of the finance lease. The accounting for recognizing interest income by reporting period is carried out on a financial lease receivable after the commencement date of the lease term by applying a method in which a certain interest rate of the Bank’s net investment in the lease is calculated.

The Bank recognizes income from lease payments of operating lease on a straight line basis over the lease term, and the direct costs of the lease incurred during the negotiation and contract phase of the operating lease is added to the carrying value of the lease asset and recognized as an expense over the lease term on a straight-line basis. Operating lease assets are included in other assets and are depreciated over their economic useful life.

(14) Derivative instruments

Derivative instruments are classified as forwards, futures, options and swaps, depending on the types of transactions and are classified at the point of transaction as either trading or hedging based on its purpose.

Derivatives are initially recognized at fair value at the date of contract and are subsequently measured at fair value at the end of each reporting period. The resulting gain or loss is recognized in net income immediately unless the derivative is designated and effective as a hedging instrument. If derivatives have been designated as hedging instruments and if it is effective, the point of recognition of gain or loss depends on the characteristics of hedging relationship.

1) Embedded derivatives

Embedded derivatives are components of a hybrid financial instrument that includes a non-derivative host contract. It has an effect of modifying part of cash flows of the hybrid financial instrument similar to an independent derivative.

Embedded derivatives that are part of a hybrid contract of which the host contract is a financial asset within the scope of K-IFRS 1109 is not separated. The classification is done by considering the hybrid contract as a whole, and subsequent measurement is either at amortized cost or fair value.

If embedded derivatives are part of a hybrid contract of which the host contract is not a financial asset within the scope of K-IFRS 1109 (e.g. financial liability), then these are treated as separate derivatives if embedded derivatives meet the definition of a derivative, characteristics and risk of the embedded derivatives are not closely related to that of host contract, and if the host contract is not measured at FVTPL.

In the previous year, all embedded derivatives which were part of a hybrid contract were treated as separate derivatives if embedded derivatives meet the definition of a derivative, characteristics and risk of the embedded derivatives are not closely related to that of host contract, and if the host contract is not measured at FVTPL

- 17 -

2) Hedge accounting

The Bank is applying K-IFRS 1109 in regards to hedge accounting. The Bank designates certain derivatives as hedging instrument against fair value changes in relation to the interest rate risk, foreign currency translation and interest rate risk, and foreign currency translation risk.

The Bank documents the relationship between hedging instruments and hedged items at the commencement of hedging in accordance with their purpose and strategy. Also, the Bank documents at the commencement and subsequent dates whether the hedging instrument effectively counters the changes in fair value of hedged items. A hedging instrument is effective only when it meets all the following criteria:

• When there is an economic relationship between the hedged items and hedging instruments.

• When the effect of credit risk is not stronger than the change in value due to the economic relationship between the hedged items and hedging instruments.

• When the hedge ratio is equal to the proportion and the number of hedged items to those of the hedging instruments.

When a hedging relationship no longer meets the hedging effectiveness requirements related to hedge ratio, but when the purpose of risk management on designated hedging relationship is still maintained, the hedge ratio of the hedging relationship is adjusted so that hedging relationship may meet the requirements again (Hedge ratio readjustment).

3) Fair value hedge

Gain or loss arising from valid hedging instrument is recognized in profit or loss. However, when the hedging instrument mitigates risks on equity instruments designated as financial assets at FVTOCI, related gain or loss is recognized in other comprehensive income.

The book value of hedged items that are not measured in fair value is adjusted by the changes in fair value arising from the hedged risk, with resulting gain or loss reflected in net income. In case of debt instruments measured at FVTOCI, book value is an amount that is already adjusted to fair value and thus gain or loss arising from the hedged risk is recognized in profit or loss instead of other comprehensive income without adjustments in book value. When the hedged item is equity instruments measured at FVTOCI, the gain or loss arising from hedged risk is retained at other comprehensive income in order to match the gain or loss with hedging instruments.

Hedge accounting ceases to apply only when hedging relationship (or part of it) does not meet the requirements of hedge accounting (even after hedging relationship readjustment, if applicable). This treatment holds in case of lapse, disposal, expiry and exercise of hedging instruments, and this cease of treatment applies prospectively. The fair value adjustments made to book value of hedged item due to hedged risk is amortized from the date of discontinuance of hedge accounting and is recognized in profit or loss.

(15) Assets (or disposal group) held for sale

The Bank classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

(16) Provisions

The Bank recognizes provision if (a) it has present or contractual obligations as a result of the past event, (b) it is probable that an outflow of resources will be required to settle the obligation and (c) the amount of the obligation is reliably estimated. Provision is not recognized for the future operating losses.

The Bank recognizes provision related to the unused membership points, payment guarantees, loan commitment and litigations. Where the Bank is required to restore a leased property that is used as a branch to an agreed condition after the contractual term expires, the present value of expected amounts to be used to dispose, decommission or repair the facilities is recognized as an asset retirement obligation.

Where there are a number of similar obligations, the probability that an outflow will be required in settlement is determined by considering the obligations as a whole. Although the likelihood of outflow for any one item may be small, if it is probable that some outflow of resources will be needed to settle the obligations as a whole, a provision is recognized.

- 18 -

(17) Capital and compound financial instruments

The Bank classifies a financial instrument that it issues as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. A financial liability is a contractual obligation to deliver cash or another financial asset to another entity. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The compound financial instruments issued by the Bank are financial instruments where it is neither a financial liability nor an equity instrument because it was designed to contain both equity and debt elements.

If the Bank reacquires its own equity instruments, the consideration paid including the direct transaction costs (net of tax expense) are presented as a deduction from total equity until such instruments are retired or reissued. When these instruments are reissued, the consideration received (net of direct transaction costs) is included in the shareholder’s equity.

(18) Financial guarantee liabilities

A financial guarantee contract is a contract where the issuer must pay a certain amount of money in order to compensate losses suffered by the creditor when debtor defaults on a debt instrument in accordance with original or modified contractual terms.

A financial guarantee is initially measured at fair value and is subsequently measured at the higher of the amounts below unless it is designated to be measured at FVTPL or when it arises from disposal of an asset.

• Loss allowance in accordance with K-IFRS 1109

• Initial book value less accumulated profit measured in accordance with K-IFRS 1115

(19) Employee benefits and pensions

The Bank recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by the employees. Also, the Bank recognizes expenses and liabilities in the case of accumulating compensated absences when the employees render services that entitle their right to future compensated absences. Similarly, the Bank recognizes expenses and liabilities for customary profit distribution or bonuses when the employees render services, even though the Bank does not have legal obligation to do so because it can be construed as constructive obligation.

The Bank is operating defined contribution plans and defined benefit plans. Contributions to defined contribution plans are recognized as an expense when employees have rendered services entitling them to receive the benefits. For defined benefit plans, the defined benefit liability is calculated through an actuarial assessment using the projected unit credit method every end of the reporting period, conducted by professional actuaries. Remeasurement, comprising actuarial gains and losses, the return on plan assets (excluding interest), and the effect of the changes to the asset ceiling (if applicable) is reflected immediately in the separate statement of financial position with a charge or credit recognized as other comprehensive income in the period in which they occur.

Remeasurement recognized in the statement of comprehensive income is not reclassified to profit or loss in the subsequent periods. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are composed of service cost (including current service cost and past service cost, as well as gains and losses on curtailments and settlements), net interest expense (income) and remeasurement.

The Bank presents the service cost and net interest expense (income) components in profit or loss, and the remeasurement component in other comprehensive income. Curtailment gains and losses are accounted for as past service costs.

The retirement benefit obligation recognized in the separate statement of financial position represents the actual deficit or surplus in the Bank’s defined benefit plans. Any surplus resulting from this calculation is recognized as an asset limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.

- 19 -

Liabilities for termination benefits are recognized at the earlier of either 1) the date when the Bank is no longer able to cancel its proposal for termination benefits or 2) the date when the Bank has recognized the cost of restructuring that accompanies the payment of termination benefits.

(20) Income taxes

Income tax expense is composed of current tax and deferred tax. That is, income tax expense is composed of taxes payable or refundable during the period and deferred taxes calculated by applying asset-liability method to taxable and deductible temporary differences arising from operating loss and tax credit carryforwards. Temporary differences are the differences between the carrying values of assets and liabilities for financial reporting purposes and their tax bases. Deferred income tax benefit or expense is recognized for the change in deferred tax assets or liabilities. Deferred tax assets and liabilities are measured as of the reporting date using the enacted or substantively enacted tax rates expected to apply in the period in which the liability is settled or asset realized. Deferred tax assets, including the carryforwards of unused tax losses, are recognized to the extent it is probable that the deferred tax assets will be realized.

Deferred income tax assets and liabilities are offset if, and only if, the Bank has a legally enforceable right to offset current tax assets against current tax liabilities, and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority or when the entity intends to settle current tax liabilities and assets on a net basis with different taxable entities.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill. Deferred tax assets or liabilities are not recognized if they arise from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity or when it arises from business combination.

The tax uncertainty arises from the compensation claim filed by the company, and the refund litigation for the amount of tax levied by the tax authority due to differences in tax law analysis

In response, the Bank paid taxes in accordance with K-IFRS 2123 due to the tax authority’s claim, but recognized as a corporate tax asset if it is highly probable of a refund in the future.

(21) Earnings per share (“EPS”)

Basic EPS is a calculation of net income per each common stock. It is calculated by dividing net income attributable to ordinary shareholders by the weighted-average number of common shares outstanding. Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of all dilutive potential common shares.

3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS

The significant accounting estimates and assumptions are continuously being evaluated based on numerous factors including historical experiences and expectations of future events considered to be reasonably possible. Actual results can differ from those estimates based on such definitions. The accounting estimates and assumptions that contain significant risk of materially changing current book values of assets and liabilities in the next accounting periods are as follows:

(1) Income taxes

The Bank has recognized current and deferred taxes based on best estimates of expected future income tax effect arising from the Bank’s operations until the end of the current reporting period. However, actual tax payment may not be identical to the related assets and/or liabilities already recognized, and these differences may affect current taxes and deferred tax assets/liabilities at the time when income tax effects are finalized. Deferred tax assets relating to tax losses carried forward and deductible temporary differences are recognized only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the deductible temporary differences can be utilized. In this case the Bank’s evaluation considers various factors such as estimated future taxable profit based on forecasted operating results, which are based on historical financial performance. The Bank is reviewing the book value of deferred tax assets every end of the reporting period and in the event that the possibility of earning future taxable income changes, the deferred tax assets are adjusted up to taxable income sufficient to use deductible temporary differences.

- 20 -

(2) Valuation of financial instruments

Financial assets at FVTPL and FVTOCI are recognized in the separate financial statements at fair value. All derivatives are measured at fair value. Valuation techniques are required in order to determine fair values of financial instruments where observable market prices do not exist. Financial instruments that are not actively traded and have low price transparency will have less objective fair value and require broad judgment in liquidity, concentration, uncertainty in market factors and assumption in price determination and other risks.

As described in Note 2-(7)-5), ‘Fair value of financial assets and liabilities’, when valuation techniques are used to determine the fair value of a financial instrument, various general and internally developed techniques are used, and various types of assumptions and variables are incorporated during the process.

(3) Impairment of financial instruments

K-IFRS 1109 requires entities to measure loss allowance equal to 12-month expected credit losses or lifetime expected credit losses after classifying financial assets into one of the three stages, which depends on the degree of increase in credit risk after their initial recognition.

Stage number	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 credit losses due to possible defaults on financial instruments within a 12-month period from the year-end.	Expected lifetime credit losses: Expected credit losses from all possible defaults during the expected lifetime of the financial instruments.

(*) Credit risk may be considered to not have been significantly increased when credit risk is low at year-end.

The Bank has estimated the allowance for credit losses based on reasonable and supportable information that was available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

Probability of default (PD) and Loss given default (LGD) for each category of financial asset is being calculated by considering factors such as debtor type, credit rating and portfolio. The estimates are regularly reviewed in order to reduce discrepancies with actual losses.

In measuring the expected credit losses, the Bank is also using reasonable and supportable macroeconomic indicators such as economic growth rate, interest rates, market index rates, etc., in order to forecast future economic conditions.

The Bank is conducting the following procedures to estimate and apply future economic forecast information.

• Development of estimation models by analyzing the correlation between default rates of corporate and retail exposures per year and macroeconomic indicators

• Calculation of estimated default rate incorporating future economic forecasts by applying estimated macroeconomic indicators provided by verified institutions such as Bank of Korea and National Assembly Budget Office to the estimation model developed.

- 21 -

At the end of every reporting period, the Bank evaluates whether credit risk reflected forward-looking information has significantly increased since the date of initial recognition. When evaluating whether credit risk has significantly been increased, the changes in the probability of default over the financial instrument’s remaining life is used instead of changes in the amount of expected credit losses. The Bank performs the above evaluation with distinctions made to corporate and retail exposures, and indicators of significant increase in credit risk are as follows:

Corporate Exposures	Retail Exposures
Asset quality level ‘Precautionary’ or lower	Asset quality level ‘Precautionary’ or lower
Overdue of 30 days or longer	Overdue of 30 days or longer
‘Warning’ level in early warning system	Significant decrease in credit rating(*)
Debtor experiencing financial difficulties (Capital impairment, Adverse opinion or Disclaimer of audit opinion)
Significant decrease in credit rating(*)

(*) Determining whether there has been a significant decrease in the credit rating of corporate and retail exposures applies only to credit ratings that are measured through 12-month expected credit loss. The Bank has applied the above indicators of significant decrease in credit rating since initial recognition as follows, and the estimation method is regularly being monitored.

	Credit rating	Indicators of significant decrease in credit rating
Corporate	AAA ~ A+	More than 4 steps
	A- ~ BBB	More than 3 steps
	BBB- ~ BB+	More than 2 steps
	BB ~ BB-	More than 1 step
Retail	1 ~ 3	More than 3 steps
	4 ~ 5	More than 2 steps
	6 ~ 10	More than 1 step

The Bank sees no significant increase in credit risk after initial recognition for debt securities, etc. with a credit rating of A + or higher, which are deemed to have low credit risk at the end of the reporting period.

The Bank concludes that credit is impaired when financial assets are under conditions stated below:

• When principal of loan is overdue for 90 days or longer due to significant deterioration in credit

• For loans overdue for less than 90 days, when it is determined that not even a portion of the loan will be recovered unless claim actions such as disposal of collaterals are taken

• When other objective indicators of impairment have been noted for the financial asset.

The Bank determines which loan is subject to write-off in accordance with internal guidelines, and writes off loan receivables when it is determined that the loans are practically irrecoverable. For example, loans are practically irrecoverable when application is made for rehabilitation under the Debtor Rehabilitation and Bankruptcy Act and loans are confirmed as irrecoverable by the court’s decision to waive debtor’s obligation, or when it is impossible to recover the loan amount through legal means such as auctioning of debtor’s assets or through any other means of recovery available. Notwithstanding the write-off, the Bank may still exercise its right of collection after the asset has been written off in accordance with its collection policies.

(4) Defined benefit plan

The Bank operates a defined benefit pension plan. Defined benefit obligation is calculated at every end of the reporting period by performing actuarial valuation, and estimation of assumptions such as discount rate, expected wage growth rate and mortality rate is required to perform such actuarial valuation. The defined benefit plan, due to its long-term nature, contains significant uncertainties in its estimates.

- 22 -

4. RISK MANAGEMENT

The Bank’s operating activity is exposed to various financial risks. The Bank is required to analyze and assess the level of complex risks, and determine the permissible level of risks and manage such risks. The Bank’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 Bank 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 Bank 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 Bank’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 Bank’s credit risk exposure to a permissible degree and to optimize the rate of return considering such credit risk.

1) Credit risk management

The Bank 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 Bank uses the credit rating model to assess the possibility of counterparty’s default risk; and when assessing the obligor’s credit grade, the Bank utilizes credit grades derived using statistical methods.

In order to manage credit risk limit, the Bank 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 Bank mitigates credit risk resulting from the obligor’s credit condition by using financial and physical collateral, guarantees, netting agreements and credit derivatives. The Bank 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 Bank regularly performs a revaluation of collateral reflecting such credit risk mitigation.

2) Maximum exposure to credit risk

The Bank’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 loan commitment.

- 23 -

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

		December 31, 2019		December 31, 2018
Loans and other financial assets at amortized cost	Korean treasury and government agencies		14,747,037		13,513,927
	Banks		14,582,652		19,965,172
	Corporates		91,102,467		87,357,986
	Consumers		147,479,183		139,513,864
	Sub-total		267,911,339		260,350,949
Financial assets at FVTPL(*)	Deposit		27,901		26,935
	Loans		9,037		21,492
	Derivative assets		2,945,273		2,034,988
	Sub-total		2,982,211		2,083,415
Financial assets at FVTOCI	Debt securities		25,776,164		16,254,592
Securities at amortized cost	Debt securities		20,147,137		22,802,050
Derivative assets	Derivative assets (Held for hedging)		111,764		35,503
Off-balance accounts	Guarantees		14,523,768		13,990,450
	Loan commitments		69,035,560		65,012,748
	Sub-total		83,559,328		79,003,198
	Total		400,487,943		380,529,707

(*) Puttable Financial instruments are not included.

a) Credit risk exposure by geographical areas

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

	December 31, 2019
	Korea		U.S.A		U.K		Japan		Others (*)		Total
Loans and other financial assets at amortized cost		254,467,439		3,030,372		1,844,374		1,172,209		7,396,945		267,911,339
Securities at amortized cost		20,104,604		—		—		—		42,533		20,147,137
Financial assets at FVTPL		2,981,487		—		—		724		—		2,982,211
Financial assets at FVTOCI		24,543,575		—		102,311		—		1,130,278		25,776,164
Derivative assets (designated for hedging)		111,764		—		—		—		—		111,764
Off-balance accounts		82,020,882		262,018		78,850		46,662		1,150,916		83,559,328
Total		384,229,751		3,292,390		2,025,535		1,219,595		9,720,672		400,487,943

	December 31, 2018
	Korea		U.S.A		U.K		Japan		Others (*)		Total
Loans and other financial assets at amortized cost		249,216,942		2,754,044		1,526,532		893,354		5,960,077		260,350,949
Securities at amortized cost		22,757,047		—		—		—		45,003		22,802,050
Financial assets at FVTPL		2,083,148		—		—		267		—		2,083,415
Financial assets at FVTOCI		15,642,031		—		16,718		—		595,843		16,254,592
Derivative assets (designated for hedging)		35,503		—		—		—		—		35,503
Off-balance accounts		77,614,417		257,816		136,727		34,999		959,239		79,003,198
Total		367,349,088		3,011,860		1,679,977		928,620		7,560,162		380,529,707

(*) Others consist of financial assets in Hong Kong, Singapore and Australia and others.

b) Credit risk exposure by industries

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

	December 31, 2019
	Service		Manufacturing		Finance and insurance		Construction		Individuals		Others		Total
Loans and other financial assets at amortized cost		49,207,201		30,848,489		32,356,929		2,445,858		143,965,810		9,087,052		267,911,339
Securities at amortized cost		8,545,838		—		10,892,540		364,591		—		344,168		20,147,137
Financial assets at FVTPL		122,809		144,614		2,674,784		9,057		15,430		15,517		2,982,211
Financial assets at FVTOCI		15,051		65,042		18,746,268		—		9,241		6,940,562		25,776,164
Derivative assets (designated for hedging)		—		—		111,764		—		—		—		111,764
Off-balance accounts		15,449,472		25,313,872		9,600,883		3,498,976		23,771,740		5,924,385		83,559,328
Total		73,340,371		56,372,017		74,383,168		6,318,482		167,762,221		22,311,684		400,487,943

- 24 -

	December 31, 2018
	Service		Manufacturing		Finance and insurance		Construction		Individuals		Others		Total
Loans and other financial assets at amortized cost		46,177,373		32,891,096		37,453,611		2,557,684		135,827,962		5,443,223		260,350,949
Securities at amortized cost		1,157,512		—		13,376,324		527,847		—		7,740,367		22,802,050
Financial assets at FVTPL		82,351		81,451		1,872,922		9,173		7,614		29,904		2,083,415
Financial assets at FVTOCI		326,333		41,673		12,830,631		194,562		5,535		2,855,858		16,254,592
Derivative assets (designated for hedging)		—		—		35,503		—		—		—		35,503
Off-balance accounts		15,205,797		23,696,274		8,784,514		3,706,275		21,663,309		5,947,029		79,003,198
Total		62,949,366		56,710,494		74,353,505		6,995,541		157,504,420		22,016,381		380,529,707

3) Credit risk exposure

a) Financial assets

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

	December 31, 2019
	Stage 1				Stage 2				Stage 3		Total		Loss allowance			Total, net
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Loans and other financial assets at amortized cost		233,368,538		17,470,260		8,099,456		9,054,064		1,155,612		, 269,147,930		(1,236,591	)		267,911,339
Korean treasury and government agencies		14,750,308		—		—		—		—		14,750,308		(3,271	)		14,747,037
Banks		14,452,687		2,316		146,664		—		—		14,601,667		(19,015	)		14,582,652
Corporates		74,515,326		13,313,552		433,256		2,987,899		727,743		91,977,776		(875,309	)		91,102,467
General business		41,610,937		4,537,441		390,456		1,343,639		494,382		48,376,855		(586,386	)		47,790,469
Small- and medium-sized enterprise		29,679,249		8,275,146		42,800		1,584,575		220,028		39,801,798		(266,116	)		39,535,682
Project financing and others		3,225,140		500,965		—		59,685		13,333		3,799,123		(22,807	)		3,776,316
Consumers		129,650,217		4,154,392		7,519,536		6,066,165		427,869		147,818,179		(338,996	)		147,479,183
Securities at amortized cost		20,152,619		—		—		—		—		20,152,619		(5,482	)		20,147,137
Financial assets at FVTOCI (*4)		25,710,935		65,229		—		—		—		25,776,164		(8,051	)		25,776,164
Total		279,232,092		17,535,489		8,099,456		9,054,064		1,155,612		315,076,713		(1,250,124	)		313,834,640

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

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

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

(*4) Financial assets at FVTOCI have been disclosed as the amount before deducting loss allowance because loss allowance does not reduce the carrying amount.

	December 31, 2018
	Stage 1				Stage 2				Stage 3		Total		Loss allowance			Total, net
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Loans and other financial assets at amortized cost		234,604,099		15,064,338		5,597,603		5,209,197		1,340,212		261,815,449		(1,464,500	)		260,350,949
Korean treasury and government agencies		13,517,080		—		—		—		—		13,517,080		(3,153	)		13,513,927
Banks		19,956,800		10,314		23,935		—		—		19,991,049		(25,877	)		19,965,172
Corporates		70,302,975		13,451,275		532,000		3,236,305		931,193		88,453,748		(1,095,762	)		87,357,986
General business		39,440,686		4,565,102		469,573		1,537,953		648,087		46,661,401		(736,204	)		45,925,197
Small- and medium-sized enterprise		27,303,978		8,337,471		62,427		1,545,602		269,059		37,518,537		(318,312	)		37,200,225
Project financing and others		3,558,311		548,702		—		152,750		14,047		4,273,810		(41,246	)		4,232,564
Consumers		130,827,244		1,602,749		5,041,668		1,972,892		409,019		139,853,572		(339,708	)		139,513,864
Securities at amortized cost		22,808,945		—		—		—		—		22,808,945		(6,895	)		22,802,050
Financial assets at FVTOCI (*4)		16,167,536		87,056		—		—		—		16,254,592		(5,413	)		16,254,592
Total		273,580,580		15,151,394		5,597,603		5,209,197		1,340,212		300,878,986		(1,476,808	)		299,407,591

- 25 -

	December 31, 2019		For the year ended December 31, 2019						December 31, 2018		For the year ended December 31, 2018
			Collateral value								Collateral value
Risk factor			Stage 1		Stage 2		Stage 3				Stage 1		Stage 2		Stage 3
Loans and other financial assets at amortized cost		182,360,472		167,284,524		14,420,473		655,475		170,983,239		161,494,496		8,815,347		673,396
Korean treasury and government agencies		—		—		—		—		11,600		11,600		—		—
Banks		613,357		611,329		2,028		—		363,436		360,102		3,334		—
Corporates		57,265,633		54,588,838		2,310,316		366,479		53,362,185		50,464,533		2,492,375		405,277
General business		22,685,764		21,464,348		998,586		222,830		20,175,240		18,803,891		1,150,747		220,602
Small- and medium-sized enterprise		32,972,767		31,517,388		1,311,730		143,649		31,255,455		29,779,557		1,291,223		184,675
Project financing and others		1,607,102		1,607,102		—		—		1,931,490		1,881,085		50,405		—
Consumers		124,481,482		112,084,357		12,108,129		288,996		117,246,018		110,658,261		6,319,638		268,119
Securities at amortized cost		—		—		—		—		—		—		—		—
Financial assets at FVTOCI (*4)		—		—		—		—		—		—		—		—
Total		182,360,472		167,284,524		14,420,473		655,475		170,983,239		161,494,496		8,815,347		673,396

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

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

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

(*4) Financial assets at FVTOCI have been disclosed as the amount before deducting loss allowance because loss allowance does not reduce the carrying amount.

b) Guarantees and loan commitments

The credit quality of the guarantees and loan commitments on December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019
Financial assets	Stage 1				Stage 2				Stage3		Total
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Off-balance accounts Guarantees		13,370,253		829,650		355		215,084		108,426		14,523,768
Loan commitments		64,611,094		2,605,074		1,270,196		549,196		—		69,035,560
Total		77,981,347		3,434,724		1,270,551		764,280		108,426		83,559,328

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

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

(*3) Credit grade of corporates are BBB- ~ C, and consumers are grades 7 ~ 10.

	December 31, 2018
Financial assets	Stage 1				Stage 2				Stage3		Total
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Off-balance accounts Guarantees		12,800,981		806,487		7,147		254,487		121,348		13,990,450
Loan commitments		60,405,878		2,663,904		1,404,007		538,959		—		65,012,748
Total		73,206,859		3,470,391		1,411,154		793,446		121,348		79,003,198

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

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

(*3) Credit grade of corporates are BBB- ~ C, and consumers are grades 7 ~ 10.

- 26 -

4) Collateral and other credit enhancements

There have been no significant decreases in the value of collateral or other credit enhancements held by the Bank during the current year or significant changes in collateral or other credit enhancements due to changes in the collateral policy of the Bank. As of December 31, 2019, there are no financial assets that do not recognize the allowance for losses due to collateral.

5) For the financial assets that record loss allowance as total expected credit loss, the amortized cost before the change in contractual cash flows is 18,735 million won, and the net loss due to the change is 82 million won.

6) As the Bank manages receivables that have not lost the right of claim to the debtor for the grounds of incomplete statute limitation and uncollected receivables under the related laws as receivable charge-offs, the balance as of December 31, 2019 and December 31, 2018 is 8,024,466 million won and 8,099,143 million Won respectively.

(2) Market risk

Market risk is the possible risk of loss arising from trading and non-trading activities in the volatility of market factors such as interest rates, stock prices, and foreign exchange rates. 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 the interest rates, credit spreads, foreign exchange rates and the price of equity securities.

For trading activities and non-trading activities, the Bank avoids, bears or mitigates risks by identifying the underlying source of risks, measuring parameters and evaluating their appropriateness. The process is called market risk management.

1) Market risk management for trading activities

The Bank 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.

The Bank measures Value at Risk (“VaR,” maximum losses) with Historical Simulation Method based on 99% confidence level and 10-day holding period of positions, and calculates the required market risk capital using the internal model, which has been approved by Financial Supervisory Service in Korea. For the internal management purpose, VaR is measured based on 99% confidence level and one-day holding period of positions and the limit management is performed on a daily basis. The validation of the model is assessed through the performance of back testing, which is to compare the actual gain or loss to the VaR measurements on a daily basis.

In addition, for crisis management, the Bank performs stress testing on a monthly basis, which is to measure the expected loss amount in case of extreme situation, such as IMF bailout in 1997 or global financial crisis in 2008.

Each year, the Risk Management Committee establishes the VaR limit, loss limit and risk capital limit discriminated by managerial unit(group, department, team, risk element, etc.), and as for minor operating units, the limits are decided by position operating department up to given limit. Limit compliance is independently monitored by risk general department and periodically reported to risk management committee and risk management council.

2) Market risk management for non-trading activities

For non-trading sectors of the Bank, the risk is managed and measured by DNII(change in Net Interest Income) and DEVE(change in Economic Value of Equity) through NII(Net Interest Income) and NPV(Net Present Value) simulation, and for the remaining subsidiaries, the risk is managed and measured with interest rate EaR(Earning at Risk, maximum of the expected change for profit or loss) and interest rate VaR that are in accordance with BIS Framework.

- 27 -

NII is a profit-based indicator for displaying the profit changes in the 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 an 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. Meanwhile, DNII means possible variation of net interest income induced by changes of interest rate during the certain future period of time(e.g. 1year), and DEVE is possible variation of present value of assets, liabilities, off-balance accounts and ultimately, economic value of shareholder’s equity which is incurred by the same reason as DNII.

a) Trading activities

The minimum, maximum and average VaR for the year ended December 31, 2019 and 2018, respectively, and the VaR as of December 31, 2019 and 2018, respectively, are as follows (Unit: Korean Won in millions):

	December 31, 2019			For the year ended December 31, 2019									December 31, 2018			For the year ended December 31, 2018
Risk factor				Average			Maximum			Minimum						Average			Maximum			Minimum
Interest rate		5,052			3,406			5,725			1,176			3,107			3,702			5,528			1,730
Stock price		3,730			3,203			5,935			1,146			2,353			2,669			5,081			1,138
Foreign currencies		5,028			5,033			6,469			4,395			4,972			4,678			6,136			3,439
Commodity					1			32			—			—			3			24			—
Diversification		(6,233	)		(5,127	)		(9,229	)		(2,339	)		(4,445	)		(4,869	)		(8,155	)		(1,815	)
Total VaR(*)		7,577			6,516			8,932			4,378			5,987			6,183			8,614			4,492

(*) VaR (Value at Risk): Maximum expected daily losses at 99% confidence level

b) Non-trading activities

For assets and liabilities as of December 31, 2019, DEVE and the DNII calculated based on interest rate risk in the banking book (IRRBB) are as follows (Unit: Korean Won in millions):

December 31, 2019
DEVE(*1)		DNII(*2)
	485,693		146,025

(*1) DEVE: change in Economic Value of Equity

(*2) DNII: change in Net Interest Income

For assets and liabilities as of December 31, 2018, NII and NPV calculated for the assets and liabilities owned by the Bank, respectively, by using the simulation method are as follows (Unit: Korean Won in millions):

Name of scenario	December 31, 2018
	NII(*1)		NPV(*2)
Base case		4,886,919		24,635,872
Base case (Prepay)		4,881,567		24,225,127
IR 100bp up		5,580,848		24,414,552
IR 100bp down		4,321,315		24,906,922
IR 200bp up		6,622,298		24,231,110
IR 200bp down		3,500,800		25,245,603
IR 300bp up		7,593,109		24,077,356
IR 300bp down		3,344,206		25,680,348

(*1) NII: Net Interest Income

(*2) NPV: Net Portfolio Value

- 28 -

The Bank estimates and manages risks related to changes in interest rate due to the difference in the maturities of interest-bearing assets and liabilities and discrepancies in the terms of interest rates. Cash flows (both principal and interest), interest-bearing assets and liabilities, presented by each repricing date, are as follows (Unit: Korean Won in millions):

	December 31, 2019
	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		136,468,173		46,964,614		11,045,037		9,406,431		51,908,166		4,286,512		260,078,933
Financial assets at FVTPL		23,808		1,352		37		36		1,161		13,347		39,741
Financial assets at FVTOCI		5,005,157		5,350,722		3,407,372		3,129,659		9,098,128		275,018		26,266,056
Securities at amortized cost		1,700,810		1,654,622		735,105		1,406,665		14,806,513		807,538		21,111,253
Total		143,197,948		53,971,310		15,187,551		13,942,791		75,813,968		5,382,415		307,495,983
Liability:
Deposits due to customers		111,584,479		44,934,733		31,569,737		24,123,007		41,724,832		59,140		253,995,928
Borrowings		8,893,123		1,422,464		1,027,528		682,473		2,992,835		500,685		15,519,108
Debentures		1,775,711		2,326,926		2,770,855		1,998,438		13,872,930		1,487,529		24,232,389
Total		122,253,313		48,684,123		35,368,120		26,803,918		58,590,597		2,047,354		293,747,425

	December 31, 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		145,015,086		43,247,365		7,827,430		9,077,245		41,492,032		3,419,576		250,078,734
Financial assets at FVTPL		117,324		50		160		49		2,281		27,536		147,400
Financial assets at FVTOCI		2,137,253		1,667,291		1,404,980		2,170,105		9,146,385		153,545		16,679,559
Securities at amortized cost		2,410,986		2,249,552		1,735,698		1,944,756		15,140,236		373,268		23,854,496
Total		149,680,649		47,164,258		10,968,268		13,192,155		65,780,934		3,973,925		290,760,189
Liability:
Deposits due to customers		96,816,710		41,903,982		28,169,284		33,573,893		38,622,661		64,425		239,150,955
Borrowings		8,806,595		1,290,054		580,935		460,078		2,664,135		495,516		14,297,313
Debentures		1,723,882		1,972,348		1,693,796		1,839,700		13,675,096		2,387,717		23,292,539
Total		107,347,187		45,166,384		30,444,015		35,873,671		54,961,892		2,947,658		276,740,807

- 29 -

3) Currency risk

Currency risk arises from the financial instrument 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, and EUR in millions and Korean Won in millions):

		December 31, 2019
		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		18,232		21,109,458		150,146		1,596,760		2,546		421,901		2,170		2,814,799		2,249,997		28,192,915
	Financial assets at FVTPL		154		178,149		5,322		56,602		—		—		105		135,827		100,965		471,543
	Financial assets at FVTOCI		2,282		2,642,470		—		—		—		—		—		—		223,365		2,865,835
	Securities at amortized cost		262		302,930		—		—		—		—		—		—		42,546		345,476
	Total		20,930		24,233,007		155,468		1,653,362		2,546		421,901		2,275		2,950,626		2,616,873		31,875,769
Liability	Financial liabilities at FVTPL		251		291,102		4,415		46,957		—		—		68		87,776		83,790		509,625
	Deposits due to customers		10,477		12,129,878		165,958		1,764,918		1,419		235,241		1,715		2,224,506		1,156,049		17,510,592
	Borrowings		6,084		7,043,586		10,931		116,252		75		12,382		421		546,752		177,807		7,896,779
	Debentures		3,519		4,074,200		—		—		—		—		105		136,230		96,646		4,307,076
	Other financial liabilities		2,731		3,162,520		11,237		119,503		2,105		348,841		357		463,411		148,930		4,243,205
	Total		23,062		26,701,286		192,541		2,047,630		3,599		596,464		2,666		3,458,675		1,663,222		34,467,277
Off-balance accounts			6,810		7,884,777		34,314		364,917		1,340		222,074		547		709,388		430,725		9,611,881

		December 31, 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		18,333		20,497,663		167,282		1,694,870		2,761		449,355		1,977		2,528,998		2,569,555		27,740,441
	Financial assets at FVTPL		72		80,953		1,425		14,434		—		—		59		75,169		90,925		261,481
	Financial assets at FVTOCI		1,472		1,646,081		—		—		—		—		—		—		187,959		1,834,040
	Securities at amortized cost		52		58,489		—		—		—		—		—		—		45,013		103,502
	Total		19,929		22,283,186		168,707		1,709,304		2,761		449,355		2,036		2,604,167		2,893,452		29,939,464
Liability	Financial liabilities at FVTPL		118		131,927		1,956		19,815		—		—		55		70,250		121,658		343,650
	Deposits due to customers		10,114		11,307,931		169,742		1,719,796		1,660		270,215		886		1,132,860		1,226,881		15,657,683
	Borrowings		6,372		7,123,977		3,749		37,985		26		4,169		270		344,905		81,868		7,592,904
	Debentures		3,145		3,516,034		—		—		—		—		—		—		103,050		3,619,084
	Other financial liabilities		2,387		2,669,323		28,955		293,362		1,282		208,665		188		240,478		94,540		3,506,368
	Total		22,136		24,749,192		204,402		2,070,958		2,968		483,049		1,399		1,788,493		1,627,997		30,719,689
Off-balance accounts			7,047		7,892,048		33,346		337,852		992		161,534		465		594,603		496,243		9,482,280

- 30 -

(3) Liquidity risk

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

1) Liquidity risk management

Liquidity risk management is to prevent potential cash shortage 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. Derivative instruments are excluded from those financial liabilities as they reflect expected cash flows for a predetermined period.

Assets and liabilities are grouped by account under Asset Liability Management (“ALM”) in accordance with the characteristics of the account. The Bank manages liquidity risk by identifying maturity gap, and then gap ratio through performing various cash flows analysis (i.e., based on remaining maturity and contract period, etc.), while maintaining the gap ratio at or below the target limit.

2) Maturity analysis of non-derivative financial liabilities

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

	December 31, 2019
	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		115,156		—		—		—		—		—		115,156
Deposits due to customers		160,955,482		35,917,880		23,560,412		28,653,283		5,305,862		543,242		254,936,161
Borrowings		5,516,024		2,522,971		2,068,362		1,742,550		3,213,689		500,685		15,564,281
Debentures		1,775,711		2,326,926		2,770,855		1,998,438		13,872,930		1,487,529		24,232,389
Lease liabilities		36,291		32,753		28,959		25,170		147,182		13,170		283,525
Other financial liabilities		9,637,118		—		—		—		—		2,533,989		12,171,107
Total		178,035,782		40,800,530		28,428,588		32,419,441		22,539,663		5,078,615		307,302,619

	December 31, 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		191,825		—		—		—		—		—		191,825
Deposits due to customers		139,983,251		32,838,781		20,969,174		40,220,788		5,701,940		509,189		240,223,123
Borrowings		4,979,142		2,682,745		1,775,656		1,512,857		2,917,566		495,516		14,363,482
Debentures		1,723,882		1,972,348		1,693,796		1,839,700		13,675,096		2,387,717		23,292,539
Other financial liabilities		14,057,046		—		—		—		—		2,182,602		16,239,648
Total		160,935,146		37,493,874		24,438,626		43,573,345		22,294,602		5,575,024		294,310,617

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

	December 31, 2019
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		115,156		—		—		—		—		—		115,156
Deposits due to customers		169,606,757		37,282,908		22,440,335		21,408,158		3,766,940		78,231		254,583,329
Borrowings		5,516,024		2,522,971		2,068,362		1,742,550		3,213,689		500,685		15,564,281
Debentures		1,775,711		2,326,926		2,770,855		1,998,438		13,872,930		1,487,529		24,232,389
Lease liabilities		36,291		32,753		28,959		25,170		147,182		13,170		283,525
Other financial liabilities		9,637,118		—		—		—		—		2,533,989		12,171,107
Total		186,687,057		42,165,558		27,308,511		25,174,316		21,000,741		4,613,604		306,949,787

- 31 -

	December 31, 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		191,825		—		—		—		—		—		191,825
Deposits due to customers		158,276,249		36,903,728		19,594,060		21,300,055		3,549,305		965		239,624,362
Borrowings		4,979,142		2,682,745		1,775,656		1,512,857		2,917,566		495,516		14,363,482
Debentures		1,723,882		1,972,348		1,693,796		1,839,700		13,675,096		2,387,717		23,292,539
Other financial liabilities		14,057,046		—		—		—		—		2,182,602		16,239,648
Total		179,228,144		41,558,821		23,063,512		24,652,612		20,141,967		5,066,800		293,711,856

3) Maturity analysis of derivative financial liabilities

Derivatives held for trading purposes are not managed in accordance with their contractual maturity since the Bank 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 purposes are estimated by offsetting cash inflows and cash outflows.

The cash flow by the maturity of derivative financial liabilities as of December 31, 2019 and 2018, is as follows (Unit: Korean Won in millions):

		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
December 31, 2019	Trading		2,841,176			—		—			—		—		—		2,841,176
December 31, 2018	Fair value hedge		(3,835	)		9,448		(3,541	)		9,133		6,991		—		18,196
	Trading		2,087,548			—		—			—		—		—		2,087,548

4) Maturity analysis of off-balance accounts (guarantees and loan commitments)

The Bank provides guarantees on behalf of customers. A financial guarantee represents an irrevocable undertaking that the Bank should meet customer’s obligations to third parties if the customer fails to do so. Under a loan commitment, the Bank agrees to make funds available to a customer in the future. Commitments to lend include commercial standby facilities and credit lines, liquidity facilities to commercial paper conduits and utilized overdraft facilities. The maximum limit to be paid by the Bank 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):

	December 31, 2019		December 31, 2018
Guarantees		14,523,768		13,990,450
Loan commitments		69,035,560		65,012,748

- 32 -

(4) Operational risk

The Bank defines the operational risk as the risk of potential losses arising from inadequate or incorrect internal procedures, human resource and system, and external factors.

1) Operational risk management

The Bank has been running the operational risk management system under Basel II. The Bank developed operational risk management system for the purpose of reducing the amount of risk capitals, managing the risk, and precaution for any unexpected occasions, etc. This system has been tested by an independent third party, and is approved by the Financial Supervisory Service.

2) Operational risk measurement

To quantify the required capital for operational risk, the Bank applies Advanced Measurement Approaches (AMA) using of internal and external loss data, business environment and internal control factors (BEICFs), and scenario analysis (SBA).

(5) Capital management

The Bank complies with the standard of capital adequacy provided by financial regulatory authorities. The capital adequacy standard is based on Basel published by Basel III Committee on Banking Supervision in Bank for International Settlement in 2010 and was implemented in Korea as of December 2013. The capital adequacy ratio is calculated by dividing own capital by asset (weighted with a risk premium – risk weighted assets) based on the consolidated financial statements of the Bank.

According to the above regulations, the Bank is required to meet the following new minimum requirements: Common Equity Tier 1 capital ratio of 8.00% and 7.13%, a Tier 1 capital ratio of 9.50% and 8.63% and a minimum total capital ratio of 11.50% and 10.63% as of December 31, 2019 and December 31, 2018, respectively.

Details of the Group’s capital adequacy ratio as of December 31, 2019 and 2018, and are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Tier 1 capital		17,321,301			17,275,539
Other Tier 1 capital		3,466,009			3,147,680
Tier 2 capital		3,526,902			3,827,573
Total risk-adjusted capital		24,314,212			24,250,792
Risk-weighted assets for credit risk		139,043,544			142,626,069
Risk-weighted assets for market risk		2,706,955			2,372,451
Risk-weighted assets for operational risk		9,197,928			9,972,430
Additional amount due to lower capital limit		6,941,108			—
Total risk-weighted assets		157,889,535			154,970,950
Common Equity Tier 1 ratio		10.97	%		11.15	%
Tier 1 capital ratio		13.17	%		13.18	%
Total capital ratio		15.40	%		15.65	%

- 33 -

5. OPERATING SEGMENTS

In evaluating the results of the Bank and allocating resources, the Bank’s Chief Operation Decision Maker (“CODM”) utilizes the information per type of customer. 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 Bank’s reporting segments comprise the following customers: consumer banking, corporate banking, investment banking, capital 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 securities and derivatives business, etc.

• Headquarters 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 year ended December 31, 2019
	Consumer banking			Corporate banking			Investment banking			Capital market			Headquarters and others			Sub-total			Adjustments (*)			Total
Net interest income(expense)
Interest income		3,782,031			3,648,980			152,368			6,635			1,065,068			8,655,082			360,619			9,015,701
Interest expense		(1,158,128	)		(2,549,507	)		—			—			(731,455	)		(4,439,090	)		283,725			(4,155,365	)
Intersegment		(868,580	)		885,816			(174,188	)		63,738			93,214			—			—			—
		1,755,323			1,985,289			(21,820	)		70,373			426,827			4,215,992			644,344			4,860,336
Net non-interest income(expense)
Non-interest income		541,013			662,186			283,304			9,963,528			(165,774	)		11,284,257			(9,896,348	)		1,387,909
Non-interest expense		(34,268	)		(119,374	)		(80,681	)		(9,877,111	)		297,795			(9,813,639	)		9,338,689			(474,950	)
Intersegment		126,756			72,052			—			—			(198,808	)		—			—			—
		633,501			614,864			202,623			86,417			(66,787	)		1,470,618			(557,659	)		912,959
Other income(expense)
General and administrative expense		(1,872,196	)		(913,239	)		(20,586	)		(22,902	)		(381,364	)		(3,210,287	)		—			(3,210,287	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(80,181	)		(12,617	)		9,343			(178	)		78,863			(4,770	)		(86,685	)		(91,455	)
		(1,952,377	)		(925,856	)		(11,243	)		(23,080	)		(302,501	)		(3,215,057	)		(86,685	)		(3,301,742	)
Operating income		436,447			1,674,297			169,560			133,710			57,539			2,471,553			—			2,471,553
Non-operating income(expense)		(99,015	)		(23,843	)		41,754			(9,453	)		(15,868	)		(106,425	)		—			(106,425	)
Net income before income tax expense		337,432			1,650,454			211,314			124,257			41,671			2,365,128			—			2,365,128
Income tax expense		(92,794	)		(447,731	)		(58,111	)		(34,171	)		58,510			(574,297	)		—			(574,297	)
Net income		244,638			1,202,723			153,203			90,086			100,181			1,790,831			—			1,790,831

(*) These adjustments are performed in order to present intersegment profit or loss adjustments based on managerial accounting as profit or loss in accordance with K-IFRS.

- 34 -

	For the year ended December 31, 2018
	Consumer banking			Corporate banking			Investment banking			Capital market			Headquarters and others			Sub-total			Adjustments (*)			Total
Net interest income(expense)
Interest income		3,529,645			3,409,835			152,273			8,945			896,479			7,997,177			334,790			8,331,967
Interest expense		(1,021,639	)		(2,168,000	)		(150	)		—			(685,647	)		(3,875,436	)		271,187			(3,604,249	)
Intersegment		(634,110	)		833,224			(163,962	)		25,963			(61,115	)		—			—			—
		1,873,896			2,075,059			(11,839	)		34,908			149,717			4,121,741			605,977			4,727,718
Non-interest income(expense)
Non-interest income		678,360			721,096			230,357			7,020,740			475,258			9,125,811			(7,648,476	)		1,477,335
Non-interest expense		(143,704	)		(290,347	)		(53,671	)		(6,964,671	)		(165,937	)		(7,618,330	)		7,077,127			(541,203	)
Intersegment		132,690			70,016			—			—			(202,706	)		—			—			—
		667,346			500,765			176,686			56,069			106,615			1,507,481			(571,349	)		936,132
Other income(expense)
General and administrative expense		(1,865,933	)		(868,608	)		(14,318	)		(18,452	)		(422,025	)		(3,189,336	)		—			(3,189,336	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(127,220	)		(61,064	)		62,454			(16,861	)		118,496			(24,195	)		(34,628	)		(58,823	)
		(1,993,153	)		(929,672	)		48,136			(35,313	)		(303,529	)		(3,213,531	)		(34,628	)		(3,248,159	)
Operating income		548,089			1,646,152			212,983			55,664			(47,197	)		2,415,691			—			2,415,691
Non-operating income(expense)		(20,208	)		900			32,738			—			56,510			69,940			—			69,940
Net income before income tax expense		527,881			1,647,052			245,721			55,664			9,313			2,485,631			—			2,485,631
Income tax expense		(145,167	)		(445,619	)		(67,573	)		(15,308	)		(1,060	)		(674,727	)		—			(674,727	)
Net income		382,714			1,201,433			178,148			40,356			8,253			1,810,904			—			1,810,904

(*) These adjustments are performed in order to present intersegment profit or loss adjustments based on managerial accounting as profit or loss in accordance with K-IFRS.IFRS.

(2) Information on financial products and services

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

(3) Information on geographical areas

Among the Bank’s revenue (interest income and non-interest income) from services, revenue from domestic operations for the nine months ended December 31, 2019 and 2018, amounted to 9,812,045 million Won and 9,288,996 million Won, respectively, and revenue from foreign operations amounted to 591,565 million Won and 520,306 million Won, respectively. Among the Bank’s non-current assets (investments in joint ventures and associates, investment properties, premises and equipment and intangible assets), non-current assets attributed to domestic subsidiaries as of December 31, 2019 and December 31, 2018, are 6,767,214 million Won and 7,256,271 million Won, respectively, and foreign subsidiaries are 37,417 million Won and 8,130 million Won, respectively.

(4) Information about major customers

The Bank does not have any single customer that generates 10% or more of the Bank’s total revenue.

6. CASH AND CASH EQUIVALENTS

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

	December 31, 2019		December 31, 2018
Cash		1,957,984		2,207,844
Foreign currencies		568,110		670,829
Demand deposits		2,872,008		2,618,265
Fixed deposits		—		226,863
Total		5,398,102		5,723,801

- 35 -

(2) Among the investing and financing activities, significant transactions not involving cash inflows and outflows are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Changes in other comprehensive income related to valuation of financial assets at FVTOCI		(34,122	)		6,795
Changes in financial assets at FVTOCI as a result of debt-equity swap		96,527			14,378
Changes in investments in associates due to accounts transfer		—			(223,366	)
Changes in unpaid dividends on hybrid equity securities		(22,269	)		3,569
Changes in intangible assets related to account payables		29,705			35,585
Changes in other comprehensive gain(loss) of foreign currency translation of foreign operations		8,446			7,882
Changes in other comprehensive loss due to remeasurement of defined benefit liabilities		(30,984	)		(79,639	)
Classified to assets held for distribution (sale) from premises and equipment		95			7,163
Classified to assets held for distribution (sale) from other assets		—			26,997
Increase in right-of-use assets and lease liabilities		449,872			—
Changes in investments in subsidiaries and associates due to the Changes in consolidated scope		1,418,074			116,620

(3) Adjustments of liabilities from financing activities in current year are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	January 1, 2019		Cash flow			Not involving cash inflows and outflows								December 31, 2019
						Foreign exchange			Variation of gains on valuation of hedged items		Others
Borrowings		14,081,092		1,543,522			(298,577	)		—		(216	)		15,325,821
Debentures		21,666,331		935,149			124,471			85,983		18,318			22,830,252
Lease liabilities (*)		263,496		(177,823	)		934			—		191,048			277,655
Total		36,010,919		2,300,848			(173,172	)		85,983		209,150			38,433,728

(*) The amount of lease liability at the beginning of the current in applying K-IFRS 1116 is reflected.

	For the year ended December 31, 2018
	January 1, 2018		Cash flow			Not involving cash inflows and outflows							December 31, 2018
						Foreign exchange		Variation of gains on valuation of hedged items			Others
Borrowings		13,662,984		258,766			159,261		—			81		14,081,092
Debentures		21,707,466		(275,471	)		240,828		(25,498	)		19,006		21,666,331
Total		35,370,450		(16,705	)		400,089		(25,498	)		19,087		35,747,423

- 36 -

7. FINANCIAL ASSETS AT FVTPL

Details of 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):

	December 31, 2019		December 31, 2018
Deposits:
Gold banking assets		27,901		26,935
Securities:
Equity securities		600,622		410,604
Capital contributions		470,579		386,096
Beneficiary certificates		1,375,989		997,743
Sub-total		2,447,190		1,794,443
Loans		9,037		21,492
Derivative assets		2,945,273		2,034,988
Total		5,429,401		3,877,858

As of December 31, 2019, and December 31, 2018, the Bank does not hold financial assets designated at FVTPL.

8. FINANCIAL ASSETS AT FVTOCI

(1) Details of financial assets at FVTOCI as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Debt securities:
Korean treasury and government agencies		1,152,711		1,353,401
Financial institutions		17,769,924		11,252,790
Corporates		3,906,957		1,774,332
Bond denominated in foreign currencies		2,865,835		1,834,040
Sub-total		25,695,427		16,214,563
Equity securities		772,689		786,082
Securities loaned		80,737		40,029
Total		26,548,853		17,040,674

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

	December 31, 2019		December 31, 2018
Purpose of acquisition	Fair value		Fair value
Investment for strategic business partnership purpose		517,244		498,092
Debt-equity swap		255,445		287,990
Total		772,689		786,082

- 37 -

(3) Changes in the loss allowance and gross carrying amount of financial assets at FVTOCI are as follows (Unit: Korean Won in millions):

1) Allowance for credit losses

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(5,413	)		—		—		(5,413	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses		(3,111	)		—		—		(3,111	)
Disposal		476			—		—		476
Others (*)		(3	)		—		—		(3	)
Ending balance		(8,051	)		—		—		(8,051	)

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(3,778	)		—		—		(3,778	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses		(1,704	)		—		—		(1,704	)
Others (*)		69			—		—		69
Ending balance		(5,413	)		—		—		(5,413	)

(*) Others consist of foreign currencies translation, etc.

2) Gross carrying amount

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		16,254,592			—		—		16,254,592
Transfer to 12-month expected credit losses		—			—		—
Transfer to lifetime expected credit losses		—			—		—
Transfer to credit-impaired financial assets		—			—		—
Acquisition		23,182,940			—		—		23,182,940
Disposal		(13,760,417	)		—		—		(13,760,417	)
Gain on valuation		47,827			—		—		47,827
Amortization on the effective interest method		11,522			—		—		11,522
Others (*)		39,700			—		—		39,700
Ending balance		25,776,164			—		—		25,776,164

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		12,247,623			—		—		12,247,623
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Acquisition		12,718,786			—		—		12,718,786
Disposal		(8,851,549	)		—		—		(8,851,549	)
Gain on valuation		69,825			—		—		69,825
Amortization on the effective interest method		6,894			—		—		6,894
Others (*)		63,013			—		—		63,013
Ending balance		16,254,592			—		—		16,254,592

(*) Others consist of foreign currencies translation, etc.

(4) The Bank disposed equity securities designated as financial assets at FVTOCI in accordance with the limitation from commercial law of acquiring holding company (Woori Financial Group Inc.) equity as a subsidiary. The fair value and accumulated loss on valuation of the equity securities at disposal date are 767,727 million Won and 23,782 million Won, respectively. The Bank disposed equity securities designated as financial assets at FVTOCI in accordance with the resolution of disposal from the creditors’ council during the current year. The fair value and accumulated loss on valuation of the equity securities at the disposal date are 34,640 million Won and 38,995 million Won, respectively.

- 38 -

9. SECURITIES AT AMORTIZED COST

(1) Details of securities at amortized cost as of December 31, 2018 and 2019 are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Korean treasury and government agencies		8,044,040			7,523,458
Financial institutions		6,694,614			9,474,922
Corporates		5,068,489			5,707,063
Bond denominated in foreign currencies		345,476			103,502
Allowance for credit losses		(5,482	)		(6,895	)
Total		20,147,137			22,802,050

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

1) Allowance for credit losses

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(6,895	)		—		—		(6,895	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net reversal of credit losses		1,413			—		—		1,413
Ending balance		(5,482	)		—		—		(5,482	)

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(4,996	)		—		—		(4,996	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses		(1,921	)		—		—		(1,921	)
Disposal		22			—		—		22
Ending balance		(6,895	)		—		—		(6,895	)

2) Gross carrying amount

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		22,808,945			—		—		22,808,945
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Acquisition		6,030,871			—		—		6,030,871
Disposal / Redemption		(8,685,723	)		—		—		(8,685,723	)
Amortization on the effective interest method		(3,286	)		—		—		(3,286	)
Others (*)		1,812			—		—		1,812
Ending balance		20,152,619			—		—		20,152,619

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		16,638,727			—		—		16,638,727
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Acquisition		15,575,213			—		—		15,575,213
Disposal / Redemption		(9,400,576	)		—		—		(9,400,576	)
Amortization on the effective interest method		(8,349	)		—		—		(8,349	)
Others (*)		3,930			—		—		3,930
Ending balance		22,808,945			—		—		22,808,945

(*) Others consist of foreign currencies translation, etc.

- 39 -

10. LOAN AND OTHER FINANCIAL ASSETS AT AMORTIZED COST

(1) Details of loans and other financial assets at amortized cost as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Due from banks		12,554,759		12,268,372
Loans		247,799,726		241,285,766
Other financial assets		7,556,854		6,796,811
Total		267,911,339		260,350,949

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

	December 31, 2019			December 31, 2018
Due from banks in local currency:
Due from The Bank of Korea (“BOK”)		11,028,850			11,034,602
Others		39,136			81,889
Allowance for credit losses		(2,591	)		(2,660	)
Sub-total		11,065,395			11,113,831
Due from banks in foreign currencies:
Due from banks on demand		862,747			622,354
Due from banks on time		42,539			40,527
Others		585,301			493,204
Allowance for credit losses		(1,223	)		(1,544	)
Sub-total		1,489,364			1,154,541
Total		12,554,759			12,268,372

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

	Counterparty	December 31, 2019		Reason of restriction
Due from banks in local currency:
Due from BOK	The BOK		11,028,850	Reserve deposits under the BOK Act
Others	The Korea Exchange and others		39,136	Central counterparty KRW margin and others
	Sub-total		11,067,986
Due from banks in foreign currencies:
Due from banks on demand	The BOK and others		861,027	Reserve deposits under the BOK Act and others
Others	Korea Investment & Securities Co., Ltd. and others		585,301	Deposits for foreign futures and options trading and others
	Sub-total		1,446,328
	Total		12,514,314

	Counterparty	December 31, 2018		Reason of restriction
Due from banks in local currency:
Due from BOK	The BOK		11,034,602	Reserve deposits under the BOK Act
Others	The Korea Exchange and others		81,889	Central counterparty KRW margin and others
	Sub-total		11,116,491
Due from banks in foreign currencies:
Due from banks on demand	The BOK and others		620,452	Reserve deposits under the BOK Act and others
Others	Korea Investment & Securities Co., Ltd. and others		493,204	Deposits for foreign futures and options trading and others
	Sub-total		1,113,656
	Total		12,230,147

- 40 -

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

1) Allowance for credit losses

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(4,204	)		—		—		(4,204	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net reversal of credit losses		390			—		—		390
Ending balance		(3,814	)		—		—		(3,814	)

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(2,464	)		—		—		(2,464	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses		(1,740	)		—		—		(1,740	)
Ending balance		(4,204	)		—		—		(4,204	)

2) Gross carrying amount

	For the year ended December 31, 2019
	Stage 1		Stage 2		Stage 3		Total
Beginning balance		12,272,576		—		—		12,272,576
Transfer to 12-month expected credit losses		—		—		—		—
Transfer to lifetime expected credit losses		—		—		—		—
Transfer to credit-impaired financial assets		—		—		—		—
Net increase		285,997		—		—		285,997
Ending balance		12,558,573		—		—		12,558,573

	For the year ended December 31, 2018
	Stage 1		Stage 2		Stage 3		Total
Beginning balance		7,394,885		—		—		7,394,885
Transfer to 12-month expected credit losses		—		—		—		—
Transfer to lifetime expected credit losses		—		—		—		—
Transfer to credit-impaired financial assets		—		—		—		—
Net increase		4,877,691		—		—		4,877,691
Ending balance		12,272,576		—		—		12,272,576

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

	December 31, 2019			December 31, 2018
Loans in local currency		219,156,962			208,837,131
Loans in foreign currencies		11,089,570			8,958,771
Domestic banker’s letter of credit		2,846,259			2,910,115
Bills bought in foreign currencies		4,633,210			7,727,904
Bills bought in local currency		16,012			19,385
Factoring receivables		20,737			45,661
Advances for customers on guarantees		11,425			12,364
Private placement bonds		62,468			81,368
Call loans		1,889,927			1,944,678
Bonds purchased under resale agreements		8,670,352			11,605,383
Others		470			590
Loan origination costs and fees		569,512			539,470
Discounted present value		(69	)		—
Loss allowance		(1,167,109	)		(1,397,054	)
Total		247,799,726			241,285,766

- 41 -

(6) Changes in the loss allowance on loans for the years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		(98,645	)		(41,383	)		(113,886	)		(317,581	)		(336,546	)		(489,013	)
Transfer to 12-month expected credit losses		(13,493	)		12,751			742			(57,996	)		49,345			8,651
Transfer to lifetime expected credit losses		13,381			(14,596	)		1,215			11,672			(28,524	)		16,852
Transfer to credit-impaired financial assets		1,216			4,136			(5,352	)		3,120			17,751			(20,871	)
Net reversal of (allowance for) credit losses		29,265			(32,564	)		(143,545	)		89,888			12,005			(54,851	)
Recovery from write-off receivables		—			—			(58,512	)		—			—			(60,484	)
Charge-off		—			—			197,072			—			—			198,394
Disposal		—			—			2,763			—			1			42,095
Unwinding effect		—			—			9,647			—			—			17,887
Others (*)		—			—			—			(19,108	)		—			(8	)
Ending balance		(68,276	)		(71,656	)		(109,856	)		(290,005	)		(285,968	)		(341,348	)

	For the year ended December 31, 2019
	Total
	Stage 1			Stage 2			Stage 3
Beginning balance		(416,226	)		(377,929	)		(602,899	)
Transfer to 12-month expected credit losses		(71,489	)		62,096			9,393
Transfer to lifetime expected credit losses		25,053			(43,120	)		18,067
Transfer to credit-impaired financial assets		4,336			21,887			(26,223	)
Net reversal of (allowance for) credit losses		119,153			(20,559	)		(198,396	)
Recovery from write-off receivables		—			—			(118,996	)
Charge-off		—			—			395,466
Disposal		—			1			44,858
Unwinding effect		—			—			27,534
Others (*)		(19,108	)		—			(8	)
Ending balance		(358,281	)		(357,624	)		(451,204	)

(*) Others consist of debt-equity swap, foreign currencies translation, etc.

	For the year ended December 31, 2018
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		(89,404	)		(32,352	)		(108,689	)		(342,921	)		(251,368	)		(849,467	)
Transfer to 12-month expected credit losses		(8,720	)		7,900			820			(24,116	)		22,451			1,665
Transfer to lifetime expected credit losses		5,058			(6,222	)		1,164			14,736			(407,442	)		392,706
Transfer to credit-impaired financial assets		66,967			36,871			(103,838	)		62,709			97,697			(160,406	)
Net reversal of (allowance for) credit losses		(72,546	)		(47,613	)		(39,332	)		(61,605	)		201,879			(85,654	)
Recovery		—			—			(50,381	)		—			—			(137,334	)
Charge-off		—			—			176,792			—			—			276,489
Disposal		—			33			1,633			—			237			49,902
Unwinding effect		—			—			7,945			—			—			23,274
Others (*)		—			—			—			33,616			—			(188	)
Ending balance		(98,645	)		(41,383	)		(113,886	)		(317,581	)		(336,546	)		(489,013	)

	For the year ended December 31, 2018
	Total
	Stage 1			Stage 2			Stage 3
Beginning balance		(432,325	)		(283,720	)		(958,156	)
Transfer to 12-month expected credit losses		(32,836	)		30,351			2,485
Transfer to lifetime expected credit losses		19,794			(413,664	)		393,870
Transfer to credit-impaired financial assets		129,676			134,568			(264,244	)
Net reversal of (allowance for) credit losses		(134,151	)		154,266			(124,986	)
Recovery		—			—			(187,715	)
Charge-off		—			—			453,281
Disposal		—			270			51,535
Unwinding effect		—			—			31,219
Others (*)		33,616			—			(188	)
Ending balance		(416,226	)		(377,929	)		(602,899	)

(*) Others consist of debt-equity swap, foreign currencies translation, etc

- 42 -

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

	For the year ended December 31, 2019
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		107,107,365			5,976,763			359,331			123,518,883			4,810,308			910,170
Transfer to 12-month expected credit losses		2,620,006			(2,607,808	)		(12,198	)		1,554,441			(1,543,871	)		(10,570	)
Transfer to lifetime expected credit losses		(8,215,779	)		8,233,760			(17,981	)		(2,268,548	)		2,304,243			(35,695	)
Transfer to credit-impaired financial assets		(140,980	)		(97,205	)		238,185			(251,440	)		(142,645	)		394,085
Charge-off		—			—			(197,072	)		—			—			(198,394	)
Disposal		—			(55	)		(67,924	)		—			(70	)		(161,318	)
Net increase (decrease)		5,584,609			897,046			77,256			1,248,174			(704,027	)		(194,210	)
Ending balance		106,955,221			12,402,501			379,597			123,801,510			4,723,938			704,068

	For the year ended December 31, 2019
	Total
	Stage 1			Stage 2			Stage 3
Beginning balance		230,626,248			10,787,071			1,269,501
Transfer to 12-month expected credit losses		4,174,447			(4,151,679	)		(22,768	)
Transfer to lifetime expected credit losses		(10,484,327	)		10,538,003			(53,676	)
Transfer to credit-impaired financial assets		(392,420	)		(239,850	)		632,270
Charge-off		—			—			(395,466	)
Disposal		—			(125	)		(229,242	)
Net increase (decrease)		6,832,783			193,019			(116,954	)
Ending balance		230,756,731			17,126,439			1,083,665

	For the year ended December 31, 2018
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		100,815,109			5,432,359			309,302			124,381,464			4,246,421			1,506,875
Transfer to 12-month expected credit losses		1,912,698			(1,903,350	)		(9,348	)		1,078,166			(1,074,810	)		(3,356	)
Transfer to lifetime expected credit losses		(3,163,028	)		3,176,368			(13,340	)		(2,250,991	)		2,708,867			(457,876	)
Transfer to credit-impaired financial assets		(197,915	)		(115,696	)		313,611			(348,147	)		(274,987	)		623,134
Charge-off		—			—			(176,792	)		—			—			(276,489	)
Disposal		—			(478	)		(31,910	)		—			(2,782	)		(166,346	)
Net increase (decrease)		7,740,501			(612,440	)		(32,192	)		658,391			(792,401	)		(315,772	)
Ending balance		107,107,365			5,976,763			359,331			123,518,883			4,810,308			910,170

	For the year ended December 31, 2018
	Total
	Stage 1			Stage 2			Stage 3
Beginning balance		225,196,573			9,678,780			1,816,177
Transfer to 12-month expected credit losses		2,990,864			(2,978,160	)		(12,704	)
Transfer to lifetime expected credit losses		(5,414,019	)		5,885,235			(471,216	)
Transfer to credit-impaired financial assets		(546,062	)		(390,683	)		936,745
Charge-off		—			—			(453,281	)
Disposal		—			(3,260	)		(198,256	)
Net increase (decrease)		8,398,892			(1,404,841	)		(347,964	)
Ending balance		230,626,248			10,787,071			1,269,501

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

	December 31, 2019			December 31, 2018
Receivables		5,411,855			4,528,060
Accrued income		855,296			879,274
Telex and telephone subscription rights and refundable deposits		961,058			951,761
Other receivables		394,313			500,958
Allowance for credit losses		(65,668	)		(63,242	)
Total		7,556,854			6,796,811

- 43 -

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

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		(1,120	)		(836	)		(61,286	)		(63,242	)
Transfer to 12-month expected credit losses		(145	)		136			9			—
Transfer to lifetime expected credit losses		68			(101	)		33			—
Transfer to credit-impaired financial assets		15			153			(168	)		—
Net reversal of (allowance for) credit losses		358			(75	)		(6,791	)		(6,508	)
Charge-off		—			—			2,397			2,397
Disposal		—			—			1,685			1,685
Ending balance		(824	)		(723	)		(64,121	)		(65,668	)

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		(1,302	)		(960	)		(52,496	)		(54,758	)
Transfer to 12-month expected credit losses		(93	)		83			10			—
Transfer to lifetime expected credit losses		62			(373	)		311			—
Transfer to credit-impaired financial assets		6,444			207			(6,651	)		—
Net reversal of (allowance for) credit losses		(6,231	)		205			(31,735	)		(37,761	)
Charge-off		—			—			28,012			28,012
Disposal		—			2			1,263			1,265
Ending balance		(1,120	)		(836	)		(61,286	)		(63,242	)

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

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		6,769,613			19,729			70,711			6,860,053
Transfer to 12-month expected credit losses		6,533			(6,517	)		(16	)		—
Transfer to lifetime expected credit losses		(15,999	)		16,060			(61	)		—
Transfer to credit-impaired financial assets		(803	)		(845	)		1,648			—
Charge-off		—			—			(2,397	)		(2,397	)
Disposal		—			—			(2,212	)		(2,212	)
Net increase (decrease)		764,150			(1,346	)		4,274			767,078
Ending balance		7,523,494			27,081			71,947			7,622,522

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		6,134,524			21,013			78,140			6,233,677
Transfer to 12-month expected credit losses		6,227			(6,210	)		(17	)		—
Transfer to lifetime expected credit losses		(9,744	)		10,059			(315	)		—
Transfer to credit-impaired financial assets		(7,375	)		(925	)		8,300			—
Charge-off		—			—			(28,012	)		(28,012	)
Disposal		—			(6	)		(1,639	)		(1,645	)
Net increase (decrease)		645,981			(4,202	)		14,254			656,033
Ending balance		6,769,613			19,729			70,711			6,860,053

- 44 -

11. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

(1) The fair value hierarchy

The fair value hierarchy is determined by the level of market observable inputs. The market observable inputs reflect unique characteristics of a financial instrument or market condition (including transparency and whether there are transactions among market participants), and when a financial instrument is traded in an active market, the best estimate of its fair value is the quoted price in the active market. The Bank maximizes the use of market observable inputs and minimizes the use of unobserved firm-specific inputs to selected valuation technique. Fair value of the Bank is measured based on the perspective of a market participant. As such, even when market observable inputs are not readily available, firm-specific inputs reflect factors that market participants would use for measuring the fair value of assets or liabilities.

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

• Level 1: When a financial instrument measures its fair value at the quoted price in the active market, the fair value of such financial instruments are classified as Level 1. 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: When fair value of a financial instrument is measured using valuation techniques, the fair value is classified as Level 2 when all major elements are market observable inputs. The types of financial instruments generally included in Level 2 are most debt securities both in local and foreign currencies and regular OTC derivatives such as swaps, forwards, options, etc.

• Level 3: When fair value of a financial instrument is measured using valuation techniques, the fair value is classified as Level 3 when one or more major elements are inputs that are not observable in the market. The types of financial assets or liabilities generally included in Level 3 are non-public securities and derivatives and debt securities whose 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 Bank’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.

- 45 -

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

	December 31, 2019
	Level 1 (*)		Level 2 (*)		Level 3		Total
Financial assets:
Financial assets at FVTPL
Due from banks		27,901		—		—		27,901
Equity securities		136,723		—		463,899		600,622
Capital contributions		—		—		470,579		470,579
Beneficiary certificates		—		27,476		1,348,513		1,375,989
Loans		—		—		9,037		9,037
Derivative assets		3,057		2,917,168		25,048		2,945,273
Sub-total		167,681		2,944,644		2,317,076		5,429,401
Financial assets at FVTOCI
Debt securities		2,014,978		23,680,449		—		25,695,427
Equity securities		441,655		—		331,034		772,689
Securities loaned		—		80,737		—		80,737
Sub-total		2,456,633		23,761,186		331,034		26,548,853
Derivative assets (designated for hedging)		—		111,764		—		111,764
Total		2,624,314		26,817,594		2,648,110		32,090,018
Financial liabilities:
Financial liabilities at FVTPL
Deposit due to customers		27,530		—		—		27,530
Derivative liabilities		4,336		2,764,801		72,039		2,841,176
Sub-total		31,866		2,764,801		72,039		2,868,706
Financial liabilities designated as at FVTPL Equity-linked securities		—		—		87,626		87,626
Total		31,866		2,764,801		159,665		2,956,332

	December 31, 2018
	Level 1 (*)		Level 2 (*)		Level 3		Total
Financial assets:
Financial assets at FVTPL
Due from banks		26,935		—		—		26,935
Equity securities		37,420		—		373,184		410,604
Capital contributions		—		—		386,096		386,096
Beneficiary certificates		—		125,720		872,023		997,743
Loans		—		—		21,492		21,492
Derivative assets		13,216		1,972,831		48,941		2,034,988
Sub-total		77,571		2,098,551		1,701,736		3,877,858
Financial assets at FVTOCI
Debt securities		1,757,107		14,457,456		—		16,214,563
Equity securities		482,310		—		303,772		786,082
Securities loaned		—		40,029		—		40,029
Sub-total		2,239,417		14,497,485		303,772		17,040,674
Derivative assets (designated for hedging)		—		35,503		—		35,503
Total		2,316,988		16,631,539		2,005,508		20,954,035
Financial liabilities:
Financial liabilities at FVTPL
Deposit due to customers		27,058		—		—		27,058
Derivative liabilities		2,245		2,068,612		16,691		2,087,548
Sub-total		29,303		2,068,612		16,691		2,114,606
Financial liabilities designated as at FVTPL
Equity-linked securities		—		—		164,767		164,767
Derivative liabilities (designated for hedging)		—		17,654		—		17,654
Total		29,303		2,086,266		181,458		2,297,027

(*) There were no transfers between Level 1 and Level 2 of financial assets and liabilities measured at fair value. The Bank recognizes transfers among levels at the end of reporting period in which events have occurred or conditions have changed.

- 46 -

Financial assets and liabilities at FVTPL, financial assets and liabilities designated as at FVTPL, financial assets at FVTOCI, and derivative assets and liabilities are recognized at fair value. Fair value is the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

Financial instruments are measured at fair value using a quoted market price in active markets. If there is no active market for a financial instrument, the Bank determines the fair value using valuation methods.

① Valuation methods and input variables used for the fair value measurement of level 2 financial assets and liabilities are as follows:

	Valuation methods	Input variables
Debt securities	The fair value is measured by discounting the projected cash flows of debt securities by applying the risk-free market rate.	Risk-free market rate
Beneficiary certificates	Beneficiary certificates classified as Level 2 are Money Market Fund(MMF), and are measured with base price.	Base price
Derivatives	The fair value is measure by using Option model(Closed Form), Finite Difference Method(FDM), Monte Carlo Simulation.	Discount rate, foreign exchange rate, stock prices, price and volatility of underlying asset and etc.

② Valuation methods and input variables used for the fair value measurement of level 3 financial assets and liabilities 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 fair value is measure by using Option model(Closed Form), DCF model, Finite Difference Method(FDM), Monte Carlo Simulation.	Discount rate, foreign exchange rate, stock prices, price and volatility of underlying asset and etc.
Equity-linked securities	The fair value is measure by using Option model(Closed Form), DCF model, Finite Difference Method(FDM), Monte Carlo Simulation.	Values of underlying assets, discount rate, dividend, volatility, correlation coefficient and foreign exchange rate

- 47 -

The valuation technique for level 3 financial assets and financial liabilities measured at fair value and the details of significant but unobservable inputs are as follows:

	Valuation techniques	Type	Input variable	Range	Impact of changes in significant unobservable inputs on fair value measurement
Loans	Binomial Tree		Stock price and volatility of underlying asset	14.51% ~ 46.06%	Fair value increases as volatility of underlying asset increases.
Derivative assets	Option valuation model and others	Interest rate	Correlation coefficient	0.9 ~ 0.98	Variation of fair value increases as correlation coefficient increases.
			Volatility of underlying asset	16.3% ~ 41.2%	Variation of fair value increases as volatility increases.
		Securities	Correlation coefficient	0.237 ~ 0.675	Variation of fair value increases as correlation coefficient increases.
	DCF model	Currency	Credit risk adjustment ratio	7.7% ~ 100.0%	Variation of fair value increases as the ratio increases
Derivative liabilities	Option valuation model and others	Interest rate	Correlation coefficient	0.9 ~ 0.98	Variation of fair value increases as correlation coefficient increases.
			Volatility of underlying asset	16.3% ~ 41.2%	Variation of fair value increases as volatility increases.
		Securities	Correlation coefficient	0.237 ~ 0.675	Variation of fair value increases as correlation coefficient increases.
			Volatility of underlying asset	21.4% ~ 22.4%	Variation of fair value increases as volatility increases.
Equity linked securities	Monte Carlo Simulation and others	Securities	Correlation coefficient	0.294 ~0.675	Equity linked securities’ variation of fair value increases if both volatility and correlation coefficient increase. However when correlation coefficient decreases, despite the increase in volatility, the variation of fair value of equity linked securities may decrease.
			Volatility of underlying asset	19.1% ~ 25.3%
Equity securities, capital contributions and beneficiary certificates	External appraisal value and others		Terminal growth rate	0	Fair value increases as terminal growth rate increases .
			Discount rate	0.35% ~ 19.21%	Fair value increases as discount rate decreases.
			Volatility of real estate sale price	0	Fair value increases as volatility of real estate sale price increases.
			Volatility of underlying assets	13.21% ~ 34.72%	Fair value increases as volatility of underlying assets increases.

Fair value of financial assets and liabilities classified into Level 3 is measured by the Bank 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 Bank and the appropriateness of inputs is reviewed regularly.

- 48 -

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

	For the year ended December 31, 2019
	January 1, 2019		Net Income (loss) (*1)			Other comprehensive income		Purchases/ issuances			Disposals/ settlements			Transfer to or out of Level 3 (*2)			December 31, 2019
Financial assets:
Financial assets at FVTPL
Equity securities		373,184		57,675			—		60,942			(27,902	)		—			463,899
Capital contributions		386,096		(13,244	)		—		148,960			(51,233	)		—			470,579
Beneficiary certificates		872,023		22,177			—		600,524			(154,652	)		8,441			1,348,513
Loans		21,492		1,536			—		500			(14,491	)		—			9,037
Derivative assets		48,941		16,935			—		1,115			(40,344	)		(1,599	)		25,048
Subtotal		1,701,736		85,079			—		812,041			(288,622	)		6,842			2,317,076
Financial assets at FVTOCI
Equity securities		303,772		—			26,936		431			(105	)		—			331,034
Total		2,005,508		85,079			26,936		812,472			(288,727	)		6,842			2,648,110
Financial liabilities:
Financial liabilities at FVTPL
Derivative liabilities		16,691		84,034			—		(11,140	)		(14,817	)		(2,729	)		72,039
Financial liabilities designated at FVTPL
Equity-linked securities		164,767		33,237			—		1,810			(112,188	)		—			87,626
Total		181,458		117,271			—		(9,330	)		(127,005	)		(2,729	)		159,665

(*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 25,834 million Won for the years ended December 31, 2019, which is from financial assets and liabilities that the Bank holds as at the end of the periods, has been recognized in net gain (loss) on financial instruments at FVTPL and net gain (loss) on financial assets at FVTOCI in the separate statement of comprehensive income.

(*2) The Bank recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed.

	For the year ended December 31, 2018
	January 1, 2018		Net Income (loss) (*1)			Other comprehensive income		Purchases/ issuances		Disposals/ settlements			Transfer to or out of Level 3 (*2)			December 31, 2018
Financial assets:
Financial assets at FVTPL
Equity securities		260,085		55,759			—		57,953		(613	)		—			373,184
Capital contributions		273,789		15,888			—		121,577		(25,158	)		—			386,096
Beneficiary certificates		655,507		17,006			—		311,672		(115,472	)		3,310			872,023
Loans		52,854		(1,118	)		—		24,830		(55,074	)		—			21,492
Derivative assets		19,243		75,839			—		4,722		(50,863	)		—			48,941
Subtotal		1,261,478		163,374			—		520,754		(247,180	)		3,310			1,701,736
Financial assets at FVTOCI
Equity securities		285,397		—			20,714		220		(2,559	)		—			303,772
Total		1,546,875		163,374			20,714		520,974		(249,739	)		3,310			2,005,508
Financial liabilities:
Financial liabilities at FVTPL
Derivative liabilities		20,941		46,409			—		255		(50,911	)		(3	)		16,691
Financial liabilities designated at FVTPL
Equity-linked securities		160,057		(16,243	)		—		183,039		(162,086	)		—			164,767
Total		180,998		30,166			—		183,294		(212,997	)		(3	)		181,458

(*1) The losses that increase financial liabilities are presented as positive amounts, and the gains that decrease financial liabilities are presented as negative amounts. The gain amounting to 138,718 million Won for the years ended December 31, 2018, which is from financial assets and liabilities that the Bank holds as at the end of the periods, has been recognized in net gain (loss) on financial instruments at FVTPL and net gain (loss) on financial assets at FVTOCI in the separate statement of comprehensive income.

(*2) The Bank recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed.

- 49 -

(4) The results of a sensitivity analysis on the rational fluctuation in the unobservable inputs used for measuring Level 3 financial instruments are as follows.

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

Meanwhile, among the financial instruments that are classified as Level 3 amounting to 2,807,775 million Won and 2,186,966 million Won as of December 31, 2019 and December 31, 2018 respectively, equity investments of 2,021,513 million Won and 1,392,874 million Won that are considered to provide the best estimate of fair value are excluded from the sensitivity analysis respectively.

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

	As of December 31, 2019
	Net income (loss)					Other comprehensive income (loss)
	Favorable		Unfavorable			Favorable		Unfavorable
Financial assets:
Financial assets at FVTPL
Derivative assets (*1)		640		(935	)		—		—
Loans (*2)		152		(128	)		—		—
Equity securities (*3)		15,317		(10,361	)		—		—
Beneficiary certificates (*4)		1,125		(1,125	)		—		—
Financial assets at FVTOCI
Equity securities (*3)		—		—			19,547		(9,399	)
Total		17,234		(12,549	)		19,547		(9,399	)
Financial liabilities:
Financial liabilities at FVTPL
Derivative liabilities (*1)		1,054		(816	)		—		—
Financial liabilities designated as at FVTPL
Equity-linked securities (*1)		136		(142	)		—		—
Total		1,190		(958	)		—		—

	As of December 31, 2018
	Net income (loss)					Other comprehensive income (loss)
	Favorable		Unfavorable			Favorable		Unfavorable
Financial assets:
Financial assets at FVTPL
Derivative assets (*1)		4,579		(4,352	)		—		—
Loans (*2)		146		(127	)		—		—
Equity securities (*3)		11,854		(8,420	)		—		—
Beneficiary certificates (*4)		1,441		(1,440	)		—		—
Financial assets at FVTOCI
Equity securities (*3)		—		—			14,517		(7,128	)
Total		18,020		(14,339	)		14,517		(7,128	)
Financial liabilities:
Financial liabilities at FVTPL
Derivative liabilities (*1)		2,433		(2,751	)		—		—
Financial liabilities designated as at FVTPL
Equity-linked securities (*1)		1,561		(1,669	)		—		—
Total		3,994		(4,420	)		—		—

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

(*2) Fair value changes of equity securities are calculated by increasing or decreasing stock price (-10~10%) and fluctuation rate (-10~10%) and discount rate. The growth rate, discount rate, and liquidation value are major unobservable variables.

- 50 -

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

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

(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):

	December 31, 2019
	Fair value								Book value
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities at amortized cost		3,123,898		17,205,518		—		20,329,416		20,147,137
Loans and other financial assets at amortized cost		—		—		257,019,589		257,019,589		267,911,339
Financial liabilities:
Deposits due to customers		—		252,857,819		—		252,857,819		252,625,294
Borrowings		—		15,245,919		—		15,245,919		15,325,821
Debentures		—		23,058,735		—		23,058,735		22,830,252
Other financial liabilities		—		15,888,244		—		15,888,244		15,889,160

	December 31, 2018
	Fair value								Book value
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities at amortized cost		3,604,176		19,300,641		—		22,904,817		22,802,050
Loans and other financial assets at amortized cost		—		—		263,712,018		263,712,018		260,350,949
Financial liabilities:
Deposits due to customers		—		237,496,448		—		237,496,448		237,426,765
Borrowings		—		14,081,175		—		14,081,175		14,081,092
Debentures		—		21,689,756		—		21,689,756		21,666,331
Other financial liabilities		—		20,097,664		—		20,097,664		20,097,011

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 Bank determines the fair value using valuation methods. Valuation techniques 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	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 financial assets at amortized cost	The fair value is measured by discounting the projected cash flows of loan products by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the debtor.	Risk-free market rate, credit spread and prepayment rate
Deposits due to customers, borrowings, debentures and other financial liabilities	The fair value is measured by discounting the projected cash flows of debt products by applying the market discount rate that is reflecting credit rating of the Bank.	Risk-free market rate and forward rate

- 51 -

(6) Financial instruments by category

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

	December 31, 2019
	Financial assets at FVTPL		Financial assets at FVTOCI		Financial assets at amortized cost		Derivative assets (designated for hedging)		Total
Financial assets:
Due from banks		27,901		—		12,554,759		—		12,582,660
Securities		2,447,190		26,548,853		20,147,137		—		49,143,180
Loans		9,037		—		247,799,726		—		247,808,763
Derivative assets		2,945,273		—		—		111,764		3,057,037
Other financial assets at amortized cost		—		—		7,556,854		—		7,556,854
Total		5,429,401		26,548,853		288,058,476		111,764		320,148,494

	December 31, 2019
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivative assets (designated for hedging)		Total
Financial liabilities:
Deposits due to customers		27,530		252,625,294		—		252,652,824
Borrowings		87,626		15,325,821		—		15,413,447
Debentures		—		22,830,252		—		22,830,252
Derivative liabilities		2,841,176		—		—		2,841,176
Other financial liabilities (*)		—		15,955,782		—		15,955,782
Total		2,956,332		306,737,149		—		309,693,481

(*) Other financial liabilities include 66,622 million Won of financial guarantee liabilities measured at amortized cost included in provisions.

	December 31, 2018
	Financial assets at FVTPL		Financial assets at FVTOCI		Financial assets at amortized cost		Derivative assets (designated for hedging)		Total
Financial assets:
Due from banks		26,935		—		12,268,372		—		12,295,307
Securities		1,794,443		17,040,674		22,802,050		—		41,637,167
Loans		21,492		—		241,285,766		—		241,307,258
Derivative assets		2,034,988		—		—		35,503		2,070,491
Other financial assets at amortized cost		—		—		6,796,811		—		6,796,811
Total		3,877,858		17,040,674		283,152,999		35,503		304,107,034

	December 31, 2018
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivative assets (designated for hedging)		Total
Financial liabilities:
Deposits due to customers		27,058		237,426,765		—		237,453,823
Borrowings		164,767		14,081,092		—		14,245,859
Debentures		—		21,666,331		—		21,666,331
Derivative liabilities		2,087,548		—		17,654		2,105,202
Other financial liabilities (*)		—		20,148,283		—		20,148,283
Total		2,279,373		293,322,471		17,654		295,619,498

(*) Other financial liabilities include 51,272 million Won of financial guarantee liabilities measured at amortized cost included in provisions.

- 52 -

(7) Income or expense from financial assets and liabilities by each category are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Interest income(expense)			Fees and commissions income(expense)		Reversal of (provision for) credit losses			Others		Total
Financial assets at FVTPL		359			90,188		—			112,322		202,869
Financial assets at FVTOCI		437,104			—		(3,111	)		23,229		457,222
Securities at amortized cost		430,440			—		1,413			—		431,853
Loans and other financial assets at amortized cost		8,147,798			150,754		(105,919	)		84,240		8,276,873
Financial liabilities at FVTPL		—			—		—			135		135
Financial liabilities at amortized cost		(4,155,366	)		—		—			—		(4,155,366	)
Derivative assets (designated for hedging)		—			—		—			4,261		4,261
Off-balance provisions		—			56,635		16,162			—		72,797
Total		4,860,335			297,577		(91,455	)		224,187		5,290,644

	December 31, 2018
	Interest income(expense)			Fees and commissions income(expense)		Reversal of (provision for) credit losses			Others			Total
Financial assets at FVTPL		6,047			88,149		—			250,854			345,050
Financial assets at FVTOCI		256,995			66		(1,704	)		13,630			268,987
Securities at amortized cost		372,006			—		(1,921	)		431			370,516
Loans and other financial assets at amortized cost		7,696,919			144,479		(144,372	)		43,735			7,740,761
Financial liabilities at FVTPL		(3,164	)		—		—			17,484			14,320
Financial liabilities at amortized cost		(3,601,085	)		27,138		—			25,498			(3,548,449	)
Derivative assets (designated for hedging)		—			—		—			(27,362	)		(27,362	)
Off-balance provisions		—			—		89,174			—			89,174
Total		4,727,718			259,832		(58,823	)		324,270			5,252,997

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.

a) Bonds sold under repurchase agreements

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

		December 31, 2019		December 31, 2018
Asset transferred	Securities at amortized cost		5,570		5,552
Related liabilities	Bonds sold under repurchase agreements		6,008		2,129

- 53 -

b) Securities loaned

When the Bank 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 Bank does not derecognize them from the financial statements as it owns the 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):

		December 31, 2019		December 31, 2018		Loaned to
Financial assets at FVTOCI	Korean corporate bonds and others		80,737		40,029	Korea Securities Finance Corporation

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

(2) The offset of financial assets and liabilities

The Bank possesses both the uncollected domestic exchange receivables and the unpaid domestic exchange payable, which satisfy offsetting criteria of K-IFRS 1032. Therefore, the total number of uncollected domestic exchange receivables or unpaid domestic exchange payable has been countervailed with part of unpaid domestic exchange payable or uncollected domestic exchange receivables and has been disclosed in loans and other financial assets at amortized cost or other financial liabilities of the Bank’s statements of financial position.

The Bank possesses the derivative assets, derivative liabilities, receivable spot exchange and payable spot exchange that do not satisfy the offsetting criteria of K-IFRS 1032, but provide the Bank under the circumstances of the trading party’s defaults, insolvency or bankruptcy, the right of offsetting. Items such as cash collateral cannot satisfy the offsetting criteria of K-IFRS 1032, but in accordance with the collateral arrangements and under the circumstances of the trading party’s default, insolvency or bankruptcy, the derivative assets, derivative liabilities, receivable spot exchange and net amount of payable spot exchange can be offset.

The Bank has entered into a sale and repurchase agreement and accounted it as a collateralized borrowing. The Bank has also entered into a purchase and resale agreement and accounted it as a secured loan. The Bank 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 K-IFRS 1032. The Bank disclosed bonds sold (purchased) under repurchase agreements as borrowings, loans and other financial assets at amortized cost.

- 54 -

As of December 31, 2019, and 2018, the financial instruments to be offset and covered by master netting agreements and similar agreements are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Gross amounts of recognized financial assets		Gross amounts of recognized financial assets setoff		Net amounts of financial assets presented		Related amounts not setoff in the statement of financial position				Net amounts
							Netting agreements and others		Cash collateral received
Financial assets:
Derivative assets (*1)		3,056,782		—		3,056,782		6,954,531		111,122		970,177
Receivable spot exchange (*2)		4,979,048		—		4,979,048
Bonds purchased under repurchase agreements (*2)		8,670,352		—		8,670,352		8,670,352		—		—
Domestic exchanges receivable (*2) (*6)		31,639,302		31,269,258		370,044		—		—		370,044
Total		48,345,484		31,269,258		17,076,226		15,624,883		111,122		1,340,221

	December 31, 2019
	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 statement of financial position				Net amounts
							Netting agreements and others		Cash collateral pledged
Financial liabilities:
Derivative liabilities (*1)		2,822,441		—		2,822,441		6,967,194		172,488		748,596
Equity-linked securities index in short position (*3)		87,626		—		87,626
Payable spot exchange (*4)		4,978,211		—		4,978,211
Bonds sold under repurchase agreements (*5)		6,008		—		6,008		6,008		—		—
Domestic exchanges payable (*4) (*6)		32,526,538		31,269,258		1,257,280		1,257,280		—		—
Total		40,420,824		31,269,258		9,151,566		8,230,482		172,488		748,596

	December 31, 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 statement of financial position				Net amounts
							Netting agreements and others		Cash collateral received
Financial assets:
Derivative assets (*1)		1,905,771		—		1,905,771		5,439,720		66,857		485,781
Receivable spot exchange (*2)		4,086,587		—		4,086,587
Bonds purchased under repurchase agreements (*2)		11,605,383		—		11,605,383		11,605,383		—		—
Domestic exchanges receivable (*2) (*6)		30,084,899		29,699,412		385,487		—		—		385,487
Total		47,682,640		29,699,412		17,983,228		17,045,103		66,857		871,268

	December 31, 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 statement of financial position				Net amounts
							Netting agreements and others		Cash collateral pledged
Financial liabilities:
Derivative liabilities (*1)		1,859,865		—		1,859,865		5,452,751		115,615		548,321
Equity-linked securities index in short position (*3)		164,767		—		164,767
Payable spot exchange (*4)		4,092,055		—		4,092,055
Bonds sold under repurchase agreements (*5)		2,129		—		2,129		2,129		—		—
Domestic exchanges payable (*4) (*6)		36,825,514		29,699,412		7,126,102		6,231,538		—		894,564
Total		42,944,330		29,699,412		13,244,918		11,686,418		115,615		1,442,885

(*1) The items include derivatives held for trading and derivatives designated for hedging.

- 55 -

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

(*3) The items are equity linked securities related to derivatives and are included in financial liabilities at FVTPL.

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

(*5) The items are included in borrowings.

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

13. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES

(1) The Bank has the following subsidiaries (Unit: Korean Won in 100 million, USD in 10 thousand, CNY in 100 million, RUB in 100 million, IDR in 100 million, BRL in 10 thousand, MMK in 100 million, PHP in 100 million, VND in trillion):

Subsidiaries	Location	Capital stock		Main business
Woori FIS Co., Ltd. (*1)	Korea		—	System software development and maintenance
Woori Private Equity Asset Management Co., Ltd.(*1)	Korea		—	Finance
Woori Finance Research Institute Co., Ltd. (*1)	Korea		—	Other service business
Woori Card Co., Ltd. (*1)	Korea		—	Finance
Woori Investment Bank Co., Ltd.(*1)	Korea		—	Other credit finance business
Woori Credit Information Co., Ltd. (*1)	Korea		—	Credit information
Woori America Bank	America	USD	19,250	Finance
PT Bank Woori Saudara Indonesia 1906 Tbk	Indonesia	IDR	6,581	Finance
Woori Global Markets Asia Limited	Hong Kong	USD	10,000	Finance
Woori Bank China Limited	China	CNY	21.6	Finance
AO Woori Bank	Russia	RUB	14.5	Finance
Banco Woori Bank do Brasil S.A.	Brazil	BRL	7,709	Finance
Korea BTL Infrastructure Fund(*2)	Korea	KRW	8,118	Finance
Woori Fund Service Co., Ltd.(*1)	Korea		—	Finance
Woori Finance Cambodia PLC.	Cambodia	USD	1,300	Finance
Woori Finance Myanmar Co., Ltd.	Myanmar	MMK	162	Finance
Wealth Development Bank	Philippine	PHP	7.7	Finance
Woori Bank Vietnam Limited	Vietnam	VND	4.6	Finance
WB Finance Co., Ltd.(*2)	Cambodia	USD	5,939	Finance
Woori Bank Europe	Germany	EUR	5,000	Finance

(*1) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

(*2) The number of capital and investment shares increased during the current term due to paid-in capital increase by subsidiary.

	December 31, 2019					December 31, 2018
Subsidiaries	Number of shares owned		Percentage of ownership (%)		Financial statements as of	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Woori FIS Co., Ltd. (*1)		—		—	—		4,900,000		100.0	Dec. 31, 2018
Woori Private Equity Asset Management Co., Ltd.(*1)		—		—	—		6,000,000		100.0	Dec. 31, 2018
Woori Finance Research Institute Co., Ltd. (*1)		—		—	—		600,000		100.0	Dec. 31, 2018
Woori Card Co., Ltd. (*1)		—		—	—		179,266,200		100.0	Dec. 31, 2018
Woori Investment Bank Co., Ltd.(*1)		—		—	—		403,404,538		59.8	Dec. 31, 2018
Woori Credit Information Co., Ltd. (*1)		—		—	—		1,008,000		100.0	Dec. 31, 2018
Woori America Bank		38,500,000		100.0	Dec. 31, 2019		38,500,000		100.0	Dec. 31, 2018
PT Bank Woori Saudara Indonesia 1906 Tbk		5,256,690,211		79.9	Dec. 31, 2019		5,256,690,211		79.9	Dec. 31, 2018
Woori Global Markets Asia Limited		78,000,000		100.0	Dec. 31, 2019		78,000,000		100.0	Dec. 31, 2018
Woori Bank China Limited		—		100.0	Dec. 31, 2019		—		100.0	Dec. 31, 2018
AO Woori Bank		57,999,999		100.0	Dec. 31, 2019		57,999,999		100.0	Dec. 31,2018
Banco Woori Bank do Brasil S.A.		77,093,999		100.0	Dec. 31, 2019		77,093,999		100.0	Dec. 31, 2018
Korea BTL Infrastructure Fund(*2)		162,167,420		99.9	Dec. 31, 2019		154,910,839		99.9	Dec. 31, 2018

- 56 -

	December 31, 2019					December 31, 2018
Subsidiaries	Number of shares owned		Percentage of ownership (%)		Financial statements as of	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Woori Fund Service Co., Ltd.(*1)		—		—	—		2,000,000		100.0	Dec. 31, 2018
Woori Finance Cambodia PLC.		13,000,000		100.0	Dec. 31, 2019		13,000,000		100.0	Dec. 31, 2018
Woori Finance Myanmar Co., Ltd.		1,200,000		100.0	Dec. 31, 2019		1,200,000		100.0	Dec. 31, 2018
Wealth Development Bank		3,931,365		51.0	Dec. 31, 2019		3,931,365		51.0	Dec. 31, 2018
Woori Bank Vietnam Limited		—		100.0	Dec. 31, 2019		—		100.0	Dec. 31, 2018
WB Finance Co., Ltd.(*2)		2,400,000		100.0	Dec. 31, 2019		1,200,000		100.0	Dec. 31, 2018
Woori Bank Europe		50,000,000		100.0	Dec. 31, 2019		50,000,000		100.0	Dec. 31, 2018

(*1) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

(*2) Capital stock and the number of investment shares increased due to the capital increase of subsidiaries.

(2) As for the structured entities in accordance with K-IFRS 1110 and K-IFRS 1112, it is determined that the Bank controls the entity after considering facts and circumstances, such as the Bank’s power over the entity’s related business activities, the Bank’s exposure to variable returns from the its involvement with the entity and the Bank’s ability to affect the returns through its power over the entity.

1) Details of structured entities that the Bank controls are as follows:

	As of December 31, 2019
Structured entities	Location	Main business	Percentage of ownership (%)		Financial statements as of
Structured entities established for securitization of financial assets (*1)
Kumho Trust First Co., Ltd. and 46 structured entities	Korea	Asset securitization		—		Dec. 31, 2019
KAMCO Value Recreation First Securitization Specialty Co., Ltd.	Korea	Asset securitization		15.0		Dec. 31, 2019
Money trust under the FISCM Act (*2)
Principal Guaranteed Trust and Principal and Interest Guaranteed Trust	Korea	Trust		—		Dec. 31, 2019
Structured entity for the investments in securities
G5 Pro Short-term Bond Investment Fund 13	Korea	Securities investment and others		100.0		Dec. 31, 2019
Igis Australia Investment Trust No. 209-1	Korea	Securities investment and others		99.4		Dec. 31, 2019
Multi Asset Global Real Estate Investment Trust No. 5-2	Korea	Securities investment and others		99.0		Dec. 31, 2019
HeungkukWoori Tech Company Private Placement Investment Trust No. 1	Korea	Securities investment and others		98.0		Dec. 31, 2019
AI Partners Water Supply Private Placement Investment Trust No. 2	U.K	Securities investment and others		97.3		Dec. 31, 2019
Heungkuk Global Private Placement Investment Trust No. 1	Korea	Securities investment and others		98.5		Dec. 31, 2019
Consus Sakhalin Real Estate Investment Trust 1st	Korea	Securities investment and others		75.0		Dec. 31, 2019
Woori Global Development Infrastructure Synergy Company Private Placement Investment Trust No. 1	Korea	Securities investment and others		99.9		Dec. 31, 2019
IGIS Global Private Placement Real Estate Fund No. 316-1	Korea	Securities investment and others		99.3		Dec. 31, 2019

(*1) It is determined that the Bank controls the entity after considering all the facts and circumstances, such as the Bank’s power over the entity’s related business activities, the Bank’s exposure to variable returns from its involvement with the entity and the Bank’s ability to affect the returns through its power over the entity, even though the Bank holds less than 50% ownership interest of the entity.

(*2) The Bank controls the trust because it has power that determines the management performance over the trust and is exposed to variable returns to absorb losses through the guarantees of payment of principal and fixed rate of return.

- 57 -

	As of December 31, 2018
Structured entities	Location	Main business	Percentage of ownership (%)		Financial statements as of
Structured entities established for securitization of financial assets (*1)
Kumho Trust First Co., Ltd. and 27 structured entities	Korea	Asset securitization		—	Dec. 31, 2018
KAMCO Value Recreation First Securitization Specialty Co., Ltd.	Korea	Asset securitization		15.0	Dec. 31, 2018
Money trust under the FISCM Act (*2)
Principal Guaranteed Trust and Principal and Interest Guaranteed Trust	Korea	Trust		—	Dec. 31, 2018
Structured entity for the investments in securities G5 Pro Short-term Bond Investment Fund 13	Korea	Securities investment		100.0	Dec. 31, 2018
Heungkuk Global Private Placement Investment Trust No. 1	Korea	Securities investment		98.5	Dec. 31, 2018
HeungkukWoori Tech Company Private Placement Investment Trust No. 1	Korea	Securities investment		98.0	Dec. 31, 2018
AI Partners Water Supply Private Placement Investment Trust No. 2	U.K	Securities investment		97.3	Dec. 31, 2018
Consus Sakhalin Real Estate Investment Trust 1st	Korea	Securities investment		75.0	Dec. 31, 2018

(*1) It is determined that the Bank controls the entity after considering all the facts and circumstances, such as the Bank’s power over the entity’s related business activities, the Bank’s exposure to variable returns from its involvement with the entity and the Bank’s ability to affect the returns through its power over the entity, even though the Bank holds less than 50% ownership interest of the entity.

(*2) The Bank controls the trust because it has power that determines the management performance over the trust and is exposed to variable returns to absorb losses through the guarantees of payment of principal and fixed rate of return.

- 58 -

2) The following companies have been excluded from the consolidation scope despite the Bank’s majority ownership interest:

	December 31, 2019
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
IGIS Europe 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		69.0
IGIS Global Private Placement Real Estate Fund No. 148-2(*)	Korea	Securities investment		69.0
Mirae Asset Seoul Ring Expressway Private Special Asset Fund No. 1 (*)	Korea	Securities investment		66.7
Hangkang Sewage Treatment Plant Fund (*)	Korea	Securities investment		55.6
KIM Pocheon-Hwado Highway Infra Private Placement Special Asset Fund(*)	Korea	Securities investment		55.2
Woori Innovative Growth Professional Investment Trust(*)	Korea	Securities investment		55.0

(*) The Bank owns the majority ownership interest in these structured entities but has no power over the investees’ relevant activities as they are private investment trusts. As a result, it is deemed that the Bank has no power or control over the structured entities.

	December 31, 2018
Subsidiaries	Location	Main business	Percentage of ownership (%)
Golden Bridge NHN Online Private Equity Investment (*)	Korea	Securities investment		60.0
Mirae Asset Seobu Underground Expressway Professional Investment (*)	Korea	Securities investment		65.8
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		77.0
IGIS Europe 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		69.0
IGIS Global Private Placement Real Estate Fund No. 148-2 (*)	Korea	Securities investment		69.0
KB Nongso Sewage Treatment Equipment Private Special Asset (*)	Korea	Securities investment		50.0
Mirae Asset Seoul Ring Expressway Private Special Asset Fund(*)	Korea	Securities investment		66.2
Hangang Sewage Treatment Plant Fund (*)	Korea	Securities investment		55.6
Consus KyungJu Green Private Placement Real Estate Fund 1(*)	Korea	Securities investment		52.4

(*) The Bank owns the majority ownership interest in these structured entities but has no power over the investees’ relevant activities as they are private investment trusts. As a result, it is deemed that the Bank has no power or control over the structured entities.

- 59 -

(3) Investments in associates are as follows (Unit: Korean Won in 100 million):

							December 31, 2019
Investees	Location	Capital		Main Business	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Woori Service Networks Co., Ltd. (*2)	Korea		5	Freight & staffing services		4,704		4.9	2019.11.30.(*5)
Korea Credit Bureau Co., Ltd. (*1)	Korea		100	Credit information		180,000		9.9	2019.12.31.
Korea Finance Security Co., Ltd. (*2)	Korea		60	Security service		180,000		15.0	2019.11.30.(*5)
Chin Hung International Inc. (*4)	Korea		733	Construction		37,059,405		25.3	2019.11.30.(*5)
Saman Corporation (*1)	Korea		7	General construction Technology service		12,542		9.2	2019.9.30.(*5)
Dongwoo C & C Co., Ltd. (*3)	Korea		7	Construction		13,317		23.2	—
SJCO Co., Ltd. (*3)	Korea		26	Aggregate transportation and wholesale		70,529		26.5	—
G2 collection Co., Ltd. (*3)	Korea		2	Wholesale and retail sales		12,574		28.9	—
The Base Enterprise Co., Ltd. (*3)	Korea		7	Manufacturing		68,470		48.4	—
Kyesan Engineering Co., Ltd. (*3)	Korea		13	Construction		60,581		23.2	—
Good Software Lab Co., Ltd. (*3)	Korea		3	Service		17,121		28.9	—
Wongwang Co., Ltd. (*3)	Korea		1	Wholesale and real estate		2,590		29.0	—
Sejin Construction Co., Ltd. (*3)	Korea		4	Construction		12,123		29.6	—
QTS Shipping Co., Ltd. (*3)	Korea		4	Complex transportation brokerage		17,460		49.4	—
Reading Doctors Co., Ltd. (*3)	Korea		1	Other services		7,398		35.4	—
PREXCO Co., Ltd. (*3)	Korea		16	Manufacturing		919,972		28.1	—
Jiwon Plating Co., Ltd. (*3)	Korea		7	Plating		28,705		20.5	—
Cultizm Korea LTD Co., Ltd. (*3)	Korea		0.14	Wholesale and retail sales		858		31.3	—
Gil Co., Ltd. (*9)	Korea		—	Manufacturing		—		—	—
NK Eng Co., Ltd. (*3)	Korea		15	Manufacturing		697,033		23.1	—
Woori Growth Partnerships New Technology (*6)	Korea		968	Other financial services		21,609		23.1	2019.12.31.
DAEA SNC Co., Ltd. (*3)	Korea		1	Wholesale and retail sales		1,253		24.0	—
ARES-TECH Co., Ltd. (*3)	Korea		2	Electronic component manufacturing		7,187		23.4	—
Force TEC Co., Ltd.	Korea		93	Manufacturing		4,780,907		25.8	—
Sinseong Trading Co., Ltd. (*3)	Korea		1	Manufacturing		2,584		27.2	—
2016KIF-IMM Woori Bank Technology (*6)	Korea		650	Other financial services		12,993		20.0	2019.12.31.
K BANK Co., Ltd. (*1)(*7)	Korea		5,051	Finance		14,630,057		14.5	2019.11.30.(*5)
Smart Private Equity Fund No. 2 (*6)	Korea		146	Other financial services		2,915		20.0	2019.12.31.
Woori Bank-Company K Korea Movie Asset	Korea		120	Other financial services		3,000		25.0	2019.12.31.
Well to Sea No. 3 Private Equity Fund (*8)	Korea		2,051	Finance		102,500,000,000		50.0	2019.9.30.(*5)
Youngdong Sea Food Co., Ltd. (*3)	Korea		3	Processed sea food manufacturing		12,106		24.0	—
Partner One Value Up I Private Equity Fund	Korea		430	Other financial services		10,000,000,000		23.3	2019.12.31.
IBK KIP Seongjang Dideemdol 1st Private (*7)	Korea		229	Other financial services		4,576,000,000		20.0	2019.12.31.
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund (*7)	Korea		175	Other financial services		4,375,000,000		25.0	2019.12.31.
Woori-Shinyoung Growth-Cap Private Equity Fund I (*10)	Korea		397	Other financial services		9,742,331,288		24.5	2019.12.31.
Lotte Card Co., Ltd. (*10)	Korea		3,737	Credit card and installment financial business		14,948,013		20.0	2019.9.30.(*5)
Woori-Q Corporate Restructuring Private Equity Fund (*10)	Korea		160	Trust and collective investment		4,532,000,000		28.4	2019.12.31.
PCC-Woori LP Secondary Fund (*10)	Korea		65	Other financial investment businesses		1,750		26.9	2019.12.31.

- 60 -

					December 31, 2018
Investees	Location	Capital		Main business	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Woori Service Networks Co., Ltd. (*2)	Korea		5	Freight & staffing services		4,704		4.9	2018.11.30.(*5)
Korea Credit Bureau Co., Ltd. (*1)	Korea		100	Credit information		180,000		9.9	2018.12.31.
Korea Finance Security Co., Ltd. (*2)	Korea		60	Security service		180,000		15.0	2018.11.30.(*5)
Chin Hung International Inc. (*4)	Korea		733	Construction		37,059,405		25.3	2018.11.30.(*5)
Saman Corporation (*1)	Korea		7	General construction Technology service		12,542		9.2	2018.09.30.(*5)
Dongwoo C & C Co., Ltd. (*3)	Korea		7	Construction		13,317		23.2	—
SJCO Co., Ltd. (*3)	Korea		26	Aggregate transportation and wholesale		70,529		26.5	—
G2 collection Co., Ltd. (*3)	Korea		2	Wholesale and retail sales		12,574		28.9	—
The Base Enterprise Co., Ltd. (*3)	Korea		7	Manufacturing		68,470		48.4	—
Kyesan Engineering Co., Ltd. (*3)	Korea		13	Construction		60,581		23.2	—
Good Software Lab Co., Ltd. (*3)	Korea		3	Service		17,121		28.9	—
Wongwang Co., Ltd. (*3)	Korea		1	Wholesale and real estate		2,590		29.0	—
Sejin Construction Co., Ltd. (*3)	Korea		4	Construction		12,123		29.6	—
QTS Shipping Co., Ltd. (*3)	Korea		4	Complex transportation brokerage		17,460		49.4	—
Reading Doctors Co., Ltd. (*3)	Korea		1	Other services		7,398		35.4	—
PREXCO Co., Ltd. (*3)	Korea		16	Manufacturing		919,972		28.1	—
Jiwon Plating Co., Ltd. (*3)	Korea		7	Plating		28,705		20.5	—
Cultizm Korea LTD Co., Ltd. (*3)	Korea		0.14	Wholesale and retail sales		858		31.3	—
Gil Co., Ltd. (*9)	Korea		—	Manufacturing		44,662		26.1	—
NK Eng Co., Ltd. (*3)	Korea		15	Manufacturing		697,033		23.1	—
Woori Growth Partnerships New Technology (*6)	Korea		968	Other financial services		27,282		23.1	2018.12.31.
DAEA SNC Co., Ltd. (*3)	Korea		1	Wholesale and retail sales		1,253		24.0	—
ARES-TECH Co., Ltd. (*3)	Korea		2	Electronic component manufacturing		7,187		23.4	—
Force TEC Co., Ltd.	Korea		93	Manufacturing		4,780,907		25.8	—
Sinseong Trading Co., Ltd. (*3)	Korea		1	Manufacturing		2,584		27.2	—
2016KIF-IMM Woori Bank Technology (*6)	Korea		663	Other financial services		15,000		20.0	2018.12.31.
K BANK Co., Ltd. (*1)(*7)	Korea		5,051	Finance		13,468,600		14.1	2018.11.30.(*5)
Smart Private Equity Fund No. 2	Korea		146	Other financial services		3,000		20.0	2018.12.31.
Woori Bank-Company K Korea Movie Asset	Korea		120	Other financial services		3,000		25.0	2018.12.31.
Well to Sea No. 3 Private Equity Fund (*8)	Korea		2,051	Finance		102,500,000,000		50.0	2018.09.30.(*5)
Youngdong Sea Food Co., Ltd. (*3)	Korea		3	Processed sea food manufacturing		12,106		24.0	—
Partner One Value Up I Private Equity Fund	Korea		430	Other financial services		10,000,000,000		23.3	2018.12.31.
IBK KIP Seongjang Dideemdol 1st Private (*7)	Korea		229	Other financial services		4,426,000,000		20.0	2018.12.31.
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund (*7)	Korea		166	Other financial services		3,025,000,000		25.0	2018.12.31.
Woori-Shinyoung Growth-Cap Private Equity Fund I (*10)	Korea		—	Other financial services		—		—	—
Lotte Card Co., Ltd. (*10)	Korea		—	Credit card and installment financial business		—		—	—
Woori-Q Corporate Restructuring Private Equity Fund (*10)	Korea		—	Trust and collective investment		—		—	—
PCC-Woori LP Secondary Fund (*10)	Korea		—	Other financial investment businesses		—		—	—

(*1) The Bank has significant influence over the creditors’ council, which makes the financial and operating policy decisions.

- 61 -

(*2) Most of the significant business transactions are with the associates as of December 31, 2019 and December 31, 2018.

(*3) There is no investment amount as of December 31, 2019 and December 31, 2018.

(*4) Equity securities with quoted market prices in the investment assets of the associates are the common stock of the Chin Hung International Inc. The share price of Chin Hung International Inc. as quoted in the market as of December 31, 2019 and December 31, 2018 are 2,310 Won and 2,065 Won, respectively.

(*5) Significant transactions or events that occurred between the end of the reporting period of the associates and the end of the reporting period of the Bank were properly reflected.

(*6) Due to the consolidation of stocks and debt-equity swap of the associates, the Bank’s number of holding shares and ownership ratio decreased during the year ended December 31, 2019.

(*7) Due to paid capital increase of associates, the Bank’s capital stock and number of holding shares increased during the nine months ended December 31, 2019.

(*8) The Bank has entered into an agreement as the Bank (or a third party designated by the Bank) may exercise the right of purchase upon the disposal of the underlying asset (Aju Capital Co., Ltd.).

(*9) Due to the sale of the entire shares, it was excluded from the associates as of December 31, 2019.

(*10) Included in associates due to the Bank’s investment during the reporting period.

(4) The entities excluded from associates, although the Bank’s ownership interest in them is higher than 20% as of December 31, 2019 and 2018, are as follows:

	As of December 31, 2019
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
CL Tech Co., Ltd.		13,759		38.6

	As of December 31, 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
CL Tech Co., Ltd.		13,759		38.6

(*) Even though the Bank’s ownership interest in the entity is more than 20%, it is determined that the Bank does not have significant influence over the entity since it is going through workout process under receivership; thus, it is excluded from the investment in associates.

- 62 -

(5) Changes in carrying value of investments in subsidiaries and associates are as follows (Korean won in millions). As the investments associated with structured entities were classified as financial assets at FVTPL for the current and previous quarter, they were excluded from the carrying value of investments in subsidiaries and associates.

	For the year ended December 31, 2019
Investees	January 1, 2019		Acquisitions		Disposals and others (*1)			Impairment (*2)			December 31, 2019
Woori Card Co., Ltd.		1,274,260		—		(1,274,260	)		—			—
Woori Investment Bank		143,814		—		(143,814	)		—			—
Woori America Bank		281,471		—		—			—			281,471
PT Bank Woori Saudara Indonesia 1906 Tbk		328,012		—		—			—			328,012
Woori Global Markets Asia Limited		113,858		—		—			—			113,858
Woori Bank China Limited		427,802		—		—			—			427,802
AO Woori Bank		51,780		—		—			—			51,780
Banco Woori Bank do Brasil S.A		44,045		—		—			—			44,045
Korea BTL Infrastructure Fund		778,620		63,500		(27,299	)		—			814,821
Woori Finance Cambodia PLC.		15,850		—		—			—			15,850
Woori Finance Myanmar Co., Ltd.		13,649		—		—			—			13,649
Wealth Development Bank		24,355		—		—			—			24,355
Woori Bank Vietnam Limited		232,840		—		—			—			232,840
WB Finance Co., Ltd.		87,562		33,480		—			—			121,042
Woori Bank Europe		64,062		—		—			—			64,062
Woori Service Networks Co., Ltd.		108		—		—			—			108
Korea Credit Bureau Co., Ltd.		3,313		—		—			—			3,313
Korea Finance Security Co., Ltd.		3,267		—		—			—			3,267
Chin Hung International Inc.		70,969		—		—			(1,112	)		69,857
Saman Corporation		1,014		—		—			(95	)		919
Woori Growth Partnerships New Technology Private Equity Fund		25,847		309		(7,490	)		—			18,666
2016KIF-IMM Woori Bank Technology Venture Fund		15,000		—		(2,615	)		—			12,385
K BANK Co., Ltd.		67,343		5,807		—			(41,896	)		31,254
Smart Private Equity Fund No. 2		3,000		—		(85	)		—			2,915
Woori Bank-Company K Korea Movie Asset Fund		3,000		—		—			—			3,000
Well to Sea No. 3 Private Equity Fund		101,483		—		—			—			101,483
Partner One Value Up 1 Private Equity Fund		10,000		—		—			—			10,000
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		4,426		150		—			—			4,576
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		3,025		1,350		—			—			4,375
Woori-Shinyoung Growth-Cap Private Equity Fund I		—		9,742		—			—			9,742
Lotte Card Co., Ltd.		—		346,000		—			—			346,000
Woori-Q Corporate Restructuring Private Equity Fund		—		4,532		—			—			4,532
PCC-Woori LP Secondary Fund		—		1,750		—			—			1,750
Total		4,193,775		466,620		(1,455,563	)		(43,103	)		3,161,729

(*1) The amount of 1,418,074 million Won among the investments in subsidiaries and associates, was sold to Woori Financial Group Inc., the holding company.

(*2) The Bank recognized the impairment because carrying amount of the investments in subsidiaries and associates exceeds the estimated recoverable amount.

- 63 -

	For the year ended December 31, 2018
Investees	January 1, 2018		Acquisitions		Disposals and others(*)			Impairment			December 31, 2018
Woori FIS Co., Ltd.		35,362		—		(35,362	)		—			—
Woori Private Equity Asset Management Co., Ltd.		43,227		—		(43,227	)		—			—
Woori Finance Research Institute Co., Ltd.		3,364		—		(3,364	)		—			—
Woori Card Co., Ltd.		1,274,260		—		—			—			1,274,260
Woori Investment Bank		143,814		—		—			—			143,814
Woori Credit Information Co., Ltd.		24,666		—		(24,666	)		—			—
Woori America Bank		281,471		—		—			—			281,471
PT Bank Woori Saudara Indonesia 1906 Tbk		328,012		—		—			—			328,012
Woori Global Markets Asia Limited		113,858		—		—			—			113,858
Woori Bank China Limited		427,802		—		—			—			427,802
AO Woori Bank		51,780		—		—			—			51,780
Banco Woori Bank do Brasil S.A.		44,045		—		—			—			44,045
Korea BTL Infrastructure Fund		783,164		7,500		(12,044	)		—			778,620
Woori Fund Service Co., Ltd.		10,000		—		(10,000	)		—			—
Woori Finance Cambodia PLC.		15,850		—		—			—			15,850
Woori Finance Myanmar Co., Ltd.		13,649		—		—			—			13,649
Wealth Development Bank		24,355		—		—			—			24,355
Woori Bank Vietnam Limited		155,400		77,440		—			—			232,840
WB Finance Co., Ltd.		—		88,216		(654	)		—			87,562
Woori Bank Europe		—		64,062		—			—			64,062
Kumho Tire Co., Inc.		98,932		—		(98,932	)		—			—
Woori Service Networks Co., Ltd.		108		—		—			—			108
Korea Credit Bureau Co., Ltd.		3,313		—		—			—			3,313
Korea Finance Security Co., Ltd.		3,267		—		—			—			3,267
Chin Hung International Inc.		70,969		—		—			—			70,969
Poonglim Industrial Co., Ltd.		6		—		(6	)		—			—
STX Corporation		7,809		—		(7,809	)		—			—
Saman Corporation		1,255		—		—			(241	)		1,014
Woori Growth Partnerships New Technology Private Equity Fund		28,833		360		(3,346	)		—			25,847
2016KIF-IMM Woori Bank Technology Venture Fund		6,840		8,160		—			—			15,000
K BANK Co., Ltd.		45,392		21,951		—			—			67,343
Smart Private Equity Fund No. 2		3,000		—		—			—			3,000
Woori Bank-Company K Korea Movie Asset Fund		3,000		—		—			—			3,000
Well to Sea No. 3 Private Equity Fund		101,992		—		(509	)		—			101,483
Partner One Value Up 1st Private Equity Fund		—		10,000		—			—			10,000
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		—		4,426		—			—			4,426
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		—		3,025		—			—			3,025
Total		4,148,795		285,140		(239,919	)		(241	)		4,193,775

(*) The amounts replaced in subsidiaries to assets held for sales is 116,619 million Won. Also, the amounts replaced from investments in associates to financial assets at FVTPL is 6 million Won and the amount replaced from investments in associates to financial assets at FVTOCI) is 98,932 million Won.

- 64 -

14. INVESTMENT PROPERTIES

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

	December 31, 2019			December 31, 2018
Acquisition cost		588,246			399,805
Accumulated depreciation		(37,561	)		(32,688	)
Net carrying value		550,685			367,117

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

	For the year ended December 31
	2019			2018
Beginning net carrying value		367,117			350,235
Acquisition		185,173			12,957
Depreciation		(4,901	)		(3,723	)
Transfers		3,273			7,623
Foreign currencies translation adjustments		23			25
Ending net carrying value		550,685			367,117

(3) Fair value of investment properties amounted to 647,899 million won and 427,329 million won as of December 31, 2019 and 2018, respectively. The fair value of investment properties has been assessed on the basis of recent similar real estate market price and officially assessed land price in the area of the investment properties, is classified as Level 3 on the fair value hierarchy.

(4) Rental fee earned from investment properties amounted to 20,386 million Won and 14,402 million Won for the years ended December 31, 2019 and 2018, respectively. The operating expenses directly related to the investment property in which the rent income occurred are 5,638 million won and 3,723 million won, respectively.

(5) The minimum lease payments expected to be received in the future under non-refundable lease contracts for the year ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	For the year ended December 31
	2019		2018
Lease payments
Within 1 year		10,641		3,622
After 1 year but within 2 years		4,500		1,485
After 2 years but within 3 years		2,157		787
After 3 years but within 4 years		1,418		397
After 4 years but within 5 years		904		—
After 5 years		241		—
Total		19,861		6,291

- 65 -

15. PREMISES AND EQUIPMENT

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

	December 31, 2019
	Land		Building		Properties for business use		Structures in leased office		Construction in progress		Total
Premises and equipment(owned)		1,516,297		674,522		188,849		35,872		399		2,415,939
Right-of-use asset		—		314,477		12,528		—		—		327,005
Total		1,516,297		988,999		201,377		35,872		399		2,742,944

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

	December 31, 2019
	Land		Building			Properties for business use			Leasehold improvement			Construction in progress		Total
Acquisition cost		1,516,297		902,392			665,303			406,209			399		3,490,600
Accumulated depreciation		—		(227,870	)		(476,454	)		(370,337	)		—		(1,074,661	)
Net carrying value		1,516,297		674,522			188,849			35,872			399		2,415,939

	December 31, 2018
	Land		Building			Properties for business use			Leasehold improvement			Construction in progress		Total
Acquisition cost		1,466,639		852,662			609,709			396,751			7,720		3,333,481
Accumulated depreciation		—		(202,213	)		(424,871	)		(356,055	)		—		(983,139	)
Net carrying value		1,466,639		650,449			184,838			40,696			7,720		2,350,342

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

	For the year ended December 31, 2019
	Land			Building			Properties for business use			Structures in leased office			Construction in progress			Total
Beginning net carrying value		1,466,639			650,449			184,838			40,696			7,720			2,350,342
Acquisitions		51,684			45,555			67,058			21,309			5,070			190,676
Disposals		(3,284	)		(2,245	)		(22	)		(2,151	)		—			(7,702	)
Depreciation		—			(26,878	)		(64,411	)		(22,035	)		—			(113,324	)
Classified to assets held for sale		(21	)		(74	)		—			—			—			(95	)
Transfer		991			6,040			1,101			987			(12,393	)		(3,274	)
Foreign currencies translation adjustments		19			5			253			86			2			365
Others		269			1,670			32			(3,020	)		—			(1,049	)
Ending net carrying value		1,516,297			674,522			188,849			35,872			399			2,415,939

	For the year ended December 31, 2018
	Land			Building			Properties for business use			Structures in leased office			Construction in progress			Total
Beginning net carring value		1,472,170			669,823			119,066			49,290			64,241			2,374,590
Acquisitions		990			13,088			55,710			12,567			7,059			89,414
Disposals		(29	)		—			(24	)		(731	)		(187	)		(971	)
Depreciation		—			(25,103	)		(52,431	)		(27,852	)		—			(105,386	)
Classification to held for sale		(3,651	)		(2,592	)		(920	)		—			—			(7,163	)
Transfer		(2,863	)		(4,760	)		63,283			—			(63,283	)		(7,623	)
Foreign currencies translation adjustments		22			5			122			82			(110	)		121
Others		—			(12	)		32			7,340			—			7,360
Ending carrying value		1,466,639			650,449			184,838			40,696			7,720			2,350,342

- 66 -

(4) Details of right-of-use assets are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Building			Properties for business use			Total
Acquisition cost		449,060			19,869			468,929
Accumulated depreciation		(134,583	)		(7,341	)		(141,924	)
Net carrying value		314,477			12,528			327,005

(5) Details of changes in right-of-use assets are as follows (Unit: Korean Won in millions)

	December 31, 2019
	Building			Properties for business use			Total
Beginning net carrying value		304,930			18,056			322,986
New contracts		200,626			3,505			204,131
Change of contracts		(47	)		—			(47	)
Cancelled contracts		(3,740	)		(69	)		(3,809	)
Depreciation		(187,010	)		(8,976	)		(195,986	)
Others		(282	)		12			(270	)
Ending net carrying value		314,477			12,528			327,005

16. INTANGIBLE ASSETS

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

	December 31, 2019
	Industrial property rights			Development cost			Others			Membership deposit			Construction in progress		Total
Acquisition cost		1,429			321,716			757,835			16,174			4,066		1,101,220
Accumulated amortization		(787	)		(120,182	)		(604,327	)		—			—		(725,296	)
Accumulated impairment losses		—			—			(25,848	)		(803	)		—		(26,651	)
Net carrying value		642			201,534			127,660			15,371			4,066		349,273

	December 31, 2018
	Industrial property rights			Development cost			Others			Membership deposit			Construction in progress		Total
Acquisition cost		1,143			284,898			667,262			12,438			10,415		976,156
Accumulated amortization		(623	)		(64,330	)		(557,329	)		—			—		(622,282	)
Accumulated impairment losses		—			—			—			(707	)		—		(707	)
Net carrying value		520			220,568			109,933			11,731			10,415		353,167

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

	December 31, 2019
	Industrial property rights			Development cost			Others			Membership deposit			Construction in progress			Total
Beginning balance		520			220,568			109,933			11,731			10,415			353,167
Acquisitions		287			28,878			83,310			3,806			8,754			125,035
Disposal		—			—			—			(75	)		—			(75	)
Amortization (*1)		(165	)		(55,840	)		(46,953	)		—			—			(102,958	)
Impairment loss (*2)		—			—			(25,848	)		(105	)		—			(25,953	)
Transfer		—			7,928			7,175			—			(15,103	)		—
Foreign currencies translation adjustments		—			—			67			14			—			81
Others		—			—			(24	)		—			—			(24	)
Ending balance		642			201,534			127,660			15,371			4,066			349,273

(*1) Amortization of other intangible assets amounting to 22,317 million Won is included in other operating expenses.

(*2) Membership is an intangible asset with an indefinite useful life that recognizes an impairment loss if recoverable value is lower than its carrying amount, while the reversal of an impairment loss should be recognized when the recoverable value is higher than its carrying amount. The bank also recognized impairment loss from other intangible assets as recoverable value of them is lower than its carrying amount.

- 67 -

	December 31, 2018
	Industrial property rights			Development cost			Others			Membership deposit			Construction in progress			Total
Beginning balance		480			54,397			85,715			9,524			153,209			303,325
Acquisitions		192			18,594			42,382			2,811			97,067			161,046
Disposal		—			—			(196	)		(1,021	)		—			(1,217	)
Amortization (*1)		(152	)		(38,790	)		(69,023	)		—			—			(107,965	)
Reversal of impairment loss(*2)		—			—			—			403			—			403
Transfer		—			188,189			51,672			—			(239,861	)		—
Classified to assets held for distribution (sale)		—			(1,822	)		(630	)		—			—			(2,452	)
Foreign currencies translation adjustments		—			—			32			14			—			46
Others		—			—			(19	)		—			—			(19	)
Ending balance		520			220,568			109,933			11,731			10,415			353,167

(*1) Amortization of other intangible assets amounting to 51,770 million Won is included in other operating expenses.

(*2) Membership is an intangible asset with an indefinite useful life that recognizes an impairment loss if recoverable value is lower than its carrying amount, while the reversal of an impairment loss should be recognized when the recoverable value is higher than its carrying amount.

- 68 -

17. ASSETS HELD FOR DISTRIBUTION (SALE)

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

	December 31, 2019		December 31, 2018
Disposal group as held for distribution		—		141,143
Premises and equipment, etc. (*)		95		2,145
Total		95		143,288

(*) The Bank classified premises and equipment and others that are highly likely to be sold within one year as assets held for sale.

(2) Details of disposal group as held for distribution and liabilities related to assets held for sale are as follows (Unit: Korean Won in millions)

In accordance with the establishment of financial holding company and plans on share transfer, the Bank classified assets, liabilities and equity of each subsidiary as of the end of the reporting period. The details of disposal group held for distribution as of December 31, 2018 as follows (Unit: KRW Won in millions)

		December 31, 2018
Disposal group as held for distribution
Investment in subsidiaries	Woori FIS Co., Ltd.		35,362
	Woori Private Equity Asset Management Co., Ltd.		43,227
	Woori Finance Research Institute Co., Ltd.		3,364
	Woori Credit Information Co., Ltd.		24,666
	Woori Fund Service Co., Ltd.		10,000
Other assets	Wibee Members		30,370
impairment losses			(5,846	)
Total			141,143
Liabilities related to assets held for sale
Other liabilities	Wibee Members		72,361

The Bank calculated net fair value of each subsidiary subject to future distribution as of December 31, 2018 based on the value of net asset and net income. The computed value 110,773 million Won is classified as Level 3 in the fair value, hierarchy.

The Bank estimates the assets held for distribution (sale) the lower of net fair value and book value, and thus 5,846 million won is recognized as impairment loss as the end of December 2018.

- 69 -

18. ASSETS SUBJECT TO LIEN AND ASSETS ACQUIRED THROUGH FORECLOSURES

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

		December 31, 2019
		Collateral given to	Amount		Reason for collateral
Loans and other financial assets at amortized cost	Due from banks in local currency	Samsung Securities Co., Ltd. and others		17,345	Margin deposit for futures or option
	Due from banks in foreign currencies	Korea Investment & Securities Co., Ltd. and others		180,919	Foreign margin deposit for future or option and others
Financial assets at FVTOCI	Korean debt securities corporate bonds and others	The BOK and others		5,127,379	Settlement risk and others
Securities at amortized cost	Korean treasury and government agencies bonds	Korea Securities Depository		5,570	Related to bonds sold under repurchase agreements (*)
	Korean treasury and government agencies bonds and others	The BOK and others		6,190,626	Settlement risk and others
		Total		11,521,839

		December 31, 2018
		Collateral given to	Amount		Reason for collateral
Loans and other financial assets at amortized cost	Due from banks in local currency	Samsung Securities Co., Ltd. and others		38,112	Margin deposit for futures or option
	Due from banks in foreign currencies	Korea Investment & Securities Co., Ltd. and others		202,156	Foreign margin deposit for future or option and others
Financial assets at FVTOCI	Korean financial institutions’ debt securities and others	The BOK and others		2,887,218	Settlement risk and others
Securities at amortized cost	Korean treasury and government bonds	Korea Securities Depository		5,552	Related to bonds sold under repurchase agreements (*)
	Korean treasury government bonds and others	The BOK and others		6,378,398	Settlement risk and others
		Total		9,511,436

(*) The Bank entered into the repurchase agreements at predetermined price or original sale price added with certain rate of return after the disposal of securities. In this regard, the securities are provided as collateral, and the purchasers are eligible to dispose or provide them as collateral. The Bank has not derecognized the securities after transferring them, and therefore has recognized the relevant amount as liabilities (bonds sold under repurchase agreements).

(2) As of December 31, 2019 and December 31, 2018 there is no asset acquired through foreclosures.

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

		December 31, 2019		December 31, 2018		Loaned to
Financial assets at FVTOCI	Korean financial institutions’ debt securities and others		80,737		40,029	Korea Securities Finance Corporation

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 Bank 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 December 31, 2019 and 2018, are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Fair values of collaterals		Fair values of collaterals were disposed or re-subjected to lien
Securities		9,029,117		—

- 70 -

	December 31, 2018
	Fair values of collaterals		Fair values of collaterals were disposed or re-subjected to lien
Securities		12,165,473		—

19. OTHER ASSETS

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

	December 31, 2019		December 31, 2018
Prepaid expenses		108,664		140,843
Advance payments		—		3,007
Others		5,086		3,145
Total		113,750		146,995

20. FINANCIAL LIABILITIES AT FVTPL

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

	December 31, 2019		December 31, 2018
Financial liabilities at fair value through profit or loss mandatorily measured at fair value		2,868,706		2,114,606
Financial liabilities at fair value through profit or loss designated as upon initial recognition		87,626		164,767
Total		2,956,332		2,279,373

(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):

	December 31, 2019		December 31, 2018
Deposits
Gold banking liabilities		27,530		27,058
Derivative liabilities		2,841,176		2,087,548
Total		2,868,706		2,114,606

(3) Financial liabilities designated as at FVTPL are as follows (Unit: Korean won in millions):

	December 31, 2019		December 31, 2018
Equity-linked securities index
Equity-linked securities index in short position		87,626		164,767

Financial liabilities at fair value through profit or loss designated as upon initial recognition are designated in order to eliminate or significantly reduce accounting mismatch arising from recognition or measurement.

(4) There are no accumulated changes in credit risk adjustments to financial liabilities at fair value through profit or loss designated as upon initial recognition.

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

(5) The difference between financial liabilities at fair value through profit or loss designated as upon initial recognition carrying amount and nominal amount at maturity is as follows (Unit: Korean won in millions):

	December 31, 2019			December 31,2018
Carrying amount		87,626			164,767
Nominal amount at maturity		97,503			217,280
Difference		(9,877	)		(52,513	)

- 71 -

21. DEPOSITS DUE TO CUSTOMERS

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

	December 31, 2019			December 31, 2018
Deposits in local currency:
Deposits on demand		8,680,363			11,081,708
Deposits at termination		225,438,122			204,215,703
Mutual installment		28,574			30,783
Certificate of deposits		973,625			6,510,571
Sub-total		235,120,684			221,838,765
Deposits in foreign currency:
Deposits in foreign currencies		17,510,592			15,657,683
Present value discount		(5,982	)		(69,683	)
Total		252,625,294			237,426,765

22. BORROWINGS AND DEBENTURES

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

	December 31, 2019
	Lenders	Interest rate (%)		Amount
Borrowings in local currency:
Borrowings from the BOK	The BOK		0.5 ~ 0.8		1,770,726
Borrowings from government funds	Small Enterprise And Market Service and others		0.0 ~ 2.8		1,844,798
Others	The Korea Development Bank and others		0.0 ~ 2.8		3,804,072
Sub-total					7,419,596
Borrowings in foreign currencies:
Borrowings in foreign currencies	The Export-Import BOK and others		(0.3) ~ 3.6		7,716,113
Offshore borrowings in foreign currencies	HSBC, HKG		3.0		34,734
Sub-total					7,750,847
Bills sold	Others		0.0 ~ 1.6		9,367
Call money	Bank and others		0.1 ~ 3.0		140,302
Bonds sold under repurchase agreements	Other financial institutions		4.0 ~ 12.7		6,008
Present value discount					(299	)
Total					15,325,821

	December 31, 2018
	Lender	Interest rate (%)		Amount
Borrowings in local currency:
Borrowings from The BOK	The BOK		0.5 ~ 0.8		1,335,459
Borrowing from government funds	Small Enterprise and Market Service and others		0.0 ~ 3.5		1,771,379
Others	The Korea Development Bank and others		0.0 ~ 3.8		3,359,968
Sub-total					6,466,806
Borrowings in foreign currencies:
Borrowings in foreign currencies	The Export-Import Bank of Korea and others		0.0 ~ 3.7		6,961,717
Offshore borrowings in foreign currencies	JPMORGAN CHASE BANK		2.9		33,543
Sub-total					6,995,260
Bills sold	Others		0.0 ~ 1.8		19,336
Call money	Banks and others		0.0 ~ 7.3		597,645
Bonds sold under repurchase agreements	Other financial institutions		0.8 ~ 12.7		2,129
Present value discount					(84	)
Total					14,081,092

- 72 -

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

	December 31, 2019				December 31, 2018
	Interest rate (%)		Amount		Interest rate (%)			Amount
Face value of bond (*):
Ordinary bonds		0.0 ~ 4.3		17,064,976		1.6 ~ 4.5			16,346,278
Subordinated bonds		2.7 ~ 5.9		5,782,688		3.0 ~ 5.9			5,343,478
Sub-total						22,847,664			21,689,756
Discount on bonds						(17,412	)		(23,425	)
Total						22,830,252			21,666,331

(*) Included debentures under fair value hedge relationships are 3,151,172 million Won and 2,956,565 million Won as of December 31, 2019 and 2018, respectively.

23. PROVISIONS

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

	December 31, 2019		December 31, 2018
Asset retirement obligation		60,477		61,477
Provisions for guarantees (*1)		95,402		92,636
Provisions for unused loan commitments		59,479		71,368
Other provisions (*2)		164,755		58,020
Total		380,113		283,501

(*1) Provisions for guarantees include provision for financial guarantee of 66,622 million Won and 51,272 million Won as of December 31, 2019 and 2018, respectively.

(*2) Other provisions consist of provision for litigation and others.

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

1) Provisions for guarantees

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		47,860			33,698			11,078			92,636
Replaced with 12-month expected credit loss		13,568			(13,568	)		—			—
Replaced with expected credit loss for the entire period		(317	)		532			(215	)		—
Replaced with credit-impaired financial assets		(30	)		(32	)		62			—
Provisions used		(27,711	)		—			—			(27,711	)
Net reversal of unused amount		(14,278	)		5,603			4,437			(4,238	)
Others (*)		34,717			(2	)		—			34,715
Ending balance		53,809			26,231			15,362			95,402

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		49,384			18,102			127,511			194,997
Replaced with 12-month expected credit loss		84			(84	)		—			—
Replaced with expected credit loss for the entire period		(236	)		91,007			(90,771	)		—
Replaced with credit-impaired financial assets		(38	)		(29	)		67			—
Provisions used		(20,429	)		—			—			(20,429	)
Net reversal of unused amount		(4,118	)		(75,298	)		(25,729	)		(105,145	)
Others (*)		23,213			—			—			23,213
Ending balance		47,860			33,698			11,078			92,636

(*) This is the effect of new financial guarantee contracts that are initially measured at fair value.

- 73 -

2) Provisions for unused loan commitments

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		40,813			30,555			—			71,368
Replaced with 12-month expected credit loss		5,401			(5,401	)		—			—
Replaced with expected credit loss for the entire period		(503	)		503			—			—
Replaced with credit-impaired financial assets		(78	)		(35	)		113			—
Net provision(reversal) of unused amount		(16,050	)		4,239			(113	)		(11,924	)
Others		34			1			—			35
Ending balance		29,617			29,862			—			59,479

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		42,106			13,100			167			55,373
Replaced with 12-month expected credit loss		1,708			(1,551	)		(157	)		—
Replaced with expected credit loss for the entire period		(820	)		825			(5	)		—
Replaced with credit-impaired financial assets		(77	)		(1,329	)		1,406			—
Net provision(reversal) of unused amount		(2,128	)		19,510			(1,411	)		15,971
Others		24			—			—			24
Ending balance		40,813			30,555			—			71,368

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

	For years ended December 31
	2019			2018
Beginning balance		61,477			56,243
Provisions provided		3,025			1,361
Provisions used		(1,418	)		(822	)
Reversal of provisions unused		(2,635	)		(989	)
Amortization		431			562
Increase in restoration costs and others		(403	)		5,122
Ending balance		60,477			61,477

The amount of the asset retirement obligation is the present value of the best estimate of future expected expenditure to settle the obligation – arising from leased premises as of December 31, 2019, discounted by appropriate discount rate. The restoration cost is expected to occur by the end of each premise’s lease period, and the Bank 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 Bank used average amount of actual recovery cost for the past 3 years and the inflation rate for the preceding year in order to estimate future recovery cost.

- 74 -

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

	For the nine months ended December 31, 2019
	Other provisions
Beginning balance		58,020
Provisions provided		104,891
Provisions used		(883	)
Transfer		—
Classified as held for sale		—
Others		2,727
Ending balance		164,755

	For year ended December 31, 2018
	Provisions for customer reward credits			Other provisions			Total
Beginning balance		37,256			52,940			90,196
Provisions provided		2,050			7,795			9,845
Provisions used		(80,629	)		(5,015	)		(85,644	)
Transfer (*)		59,924			—			59,924
Classified as held for sale		(46,140	)		(2,055	)		(48,195	)
Others		27,539			4,355			31,894
Ending balance		—			58,020			58,020

(*) Provision for customer reward credits have increased for the Bank due to the point transfer from partners during the year ended in December 31, 2018.

(5) Others

1) As of September 23, 2019, the Bank temporarily suspended the won-payment business due to tightened U.S. sanctions on Iran while it was ongoing to settle trade transactions between Korea and Iran. In connection with these services, the Bank is currently being investigated by US government agencies including US prosecutors (United States Attorney’s Office and New York State Attorney General’s Office) and Office of Foreign Assets Control as to whether the Bank has violated United States laws by participating in prohibited transactions involving the following countries: Iran, Sudan, Syria and Cuba, which have been sanctioned by the US.

2) The Bank recognized the provision of the estimated compensation amount related to the incomplete selling of the Derivative Linked Fund (DLF) incurred during the current term and a fine expected to be imposed by the Financial Supervisory Service as the best estimate for the expenditure required to meet its obligations at the end of the reporting period. On the other hand, the actual amount of compensation of the Bank may change as the global spread of the new coronavirus has caused abnormal interest rate changes since the end of the reporting period

- 75 -

24. NET DEFINED BENEFIT LIABILITIES

The characteristics of the Bank’s defined benefit retirement pension plans are as follows:

Employees and directors with one or more years of service are entitled to receive a payment upon termination of their employment, based on their length of service and rate of pay at the time of termination. The assets of the plans are measured at their fair value at the end of reporting date. The plan liabilities are measured using actuarial assumption that is considered to be the most reasonable estimate of future cash flows (the projected unit method, which takes account of projected earnings increases).

The Bank 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 discount rate.
Decrease in profitability of blue-chip bonds	A decrease in profitability of blue chip bonds will be partially offset by increases in the value of debt securities that the employee benefit plan owns but will bring an increase in the defined benefit obligation.
Risk of inflation	Most defined benefit obligations are related to inflation rate; the higher the inflation rate is, the higher the level of liabilities. Therefore, deficit occurs in the system if an inflation rate increases.

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

	December 31, 2019			December 31, 2018
Present value of defined benefit obligation		1,311,238			1,175,650
Fair value of plan assets		(1,264,412	)		(1,039,487	)
Net defined benefit liabilities		46,826			136,163

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

		For the year ended December 31, 2019			For the year ended December 31, 2018
Beginning balance			1,175,650			990,007
Transfer effect			601			—
Current service cost			144,317			130,006
Interest cost			30,751			30,604
Remeasurements	Financial assumptions		49,554			54,423
	Demographic assumptions		32,566			7,728
	Experience adjustments		(47,481	)		33,697
Foreign currencies translation adjustments			12			29
Retirement benefit paid			(74,732	)		(70,844	)
Ending balance			1,311,238			1,175,650

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

	For the years ended December 31
	2019			2018
Beginning balance		1,039,487			975,723
Interest income		29,046			32,163
Remeasurements		(8,098	)		(13,999	)
Employer’s contributions		279,066			117,000
Retirement benefit paid		(72,930	)		(69,109	)
Others		(2,159	)		(2,291	)
Ending balance		1,264,412			1,039,487

- 76 -

(4) Plan assets consist of regular deposits as of December 31, 2019 and December 31, 2018, and the actual return on plan assets amount to 20,948 million Won and 18,164 million Won for the year ended December 31, 2019 and 2018, respectively.

Meanwhile, the contribution expected to be paid in the current accounting year amounts to 148,124 million Won.

(5) Current service cost, net interest income, loss(gain) on the curtailment or settlement and re-measurements recognized in the separate statements comprehensive income are as follows (Unit: Korean Won in millions):

	For the year ended December 31
	2019		2018
Current service cost		144,317		130,006
Net interest income		1,705		(1,559	)
Cost recognized in net income		146,022		128,447
Remeasurements		42,737		109,847
Cost recognized in total comprehensive income		188,759		238,294

Retirement benefits related to defined contribution plans recognized as expenses are 2,097 million Won and 1,873 million Won for the year ended December 31, 2019 and 2018, respectively.

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

	December 31, 2019	December 31, 2018
Discount rate	2.42%	2.69%
Future wage growth rate	2.64%	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 11.85 years.

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

		December 31, 2019 (*)			December 31, 2018 (*)
Discount rate	Increase by 1% point		(139,312	)		(113,874	)
	Decrease by 1% point		164,744			133,530
Future wage growth rate	Increase by 1% point		162,701			132,324
	Decrease by 1% point		(140,339	)		(115,041	)

(*) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position.

- 77 -

25. OTHER FINANCIAL LIABILITIES AND OTHER LIABILITIES

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

	December 31, 2019			December 31, 2018
Other financial liabilities:
Accounts payable		5,268,280			4,360,077
Accrued expenses		2,259,532			2,018,814
Borrowing from trust accounts		3,440,874			3,850,860
Agency business revenue		362,820			396,735
Foreign exchanges payable		753,819			520,815
Domestic exchanges payable		1,257,280			7,127,706
Lease liabilities		277,655			—
Other miscellaneous financial liabilities		2,269,901			1,822,657
Present value discount		(1,001	)		(653	)
Sub-total		15,889,160			20,097,011
Other liabilities:
Unearned income		40,100			56,502
Other miscellaneous liabilities		111,481			116,999
Sub-total		151,581			173,501
Total		16,040,741			20,270,512

- 78 -

26. DERIVATIVES

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

	December 31, 2019
			Assets				Liabilities
	Notional amount		For fair value hedge		For trading		For fair value hedge		For trading
Interest rate:
Futures		79,021		—		—		—		—
Swaps		152,784,737		111,764		325,542		—		413,568
Purchase options		460,000		—		11,888		—		—
Written options		395,789		—		—		—		9,655
Currency:
Forwards		113,791,702		—		1,447,224		—		1,027,903
Swaps		81,359,428		—		965,346		—		1,106,423
Purchase options		1,588,746		—		18,835		—		—
Written options		2,341,179		—		—		—		9,403
Equity:
Forwards		11		—		—		—		—
Futures		630,562		—		—		—		—
Swaps		1,280,436		—		1,217		—		54,393
Purchase options		8,851,984		—		175,221		—		—
Written options		8,978,953		—		—		—		219,831
Total		372,542,548		111,764		2,945,273		—		2,841,176

	December 31, 2018
			Assets				Liabilities
	Notional amount		For fair value hedge		For trading		For fair value hedge		For trading
Interest rate:
Futures		—		—		—		—		—
Swaps		151,908,990		35,503		229,811		17,654		266,596
Purchase options		530,000		—		10,461		—		—
Written options		525,000		—		—		—		12,438
Currency:
Futures		294,172		—		—		—		—
Forwards		87,625,827		—		840,859		—		774,241
Swaps		66,419,673		—		761,907		—		772,805
Purchase options		1,933,454		—		17,544		—		—
Written options		3,134,774		—		—		—		20,739
Equity:
Futures		186,737		—		—		—		—
Swaps		441,573		—		31,377		—		1,217
Purchase options		4,925,315		—		143,029		—		—
Written options		6,145,935		—		—		—		239,512
Total		324,071,450		35,503		2,034,988		17,654		2,087,548

Derivatives held for trading are classified to financial assets at FVTPL (Note 7) and financial liabilities at FVTPL (Note 20), and derivatives held for hedging are presented as derivative assets and derivative liabilities in the statements of financial position.

- 79 -

(2) Overview of the Bank’s hedge accounting

The hedging relationships the Bank applies fair value hedge accounting and cash flow hedge accounting to are affected by interest rate which is related with Interest Rate Benchmark Reform. The interest rates to which the hedging relationships are exposed are USD 3M LIBOR, USD 6M LIBOR. The nominal amounts of hedging instruments related to 3M LIBOR and 6M LIBOR are USD 2,150,000,000 and USD 500,000,000, respectively. The Bank pays close attention to discussions in the market and industry regarding the applicable alternative benchmark interest rates for the exposed interest rate. The entity judges related uncertainty is expected to be no longer present when the exposed interest rates are replaced by the applicable benchmark interest rates.

As of the year end, the Bank has applied fair value hedge on fixed interest rate foreign currency denominated debentures amounting to 3,151,172 million Won. The purpose of the hedging is to avoid fair value change risk of fixed interest rate foreign currency denominated debentures derived from fluctuations of market interest rate, and as such the Bank 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 difference in the timing of the cash flow of the hedged item, price margin set by the counterparty of hedging instruments, or unilateral 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 Bank 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 Bank receives interest at a fixed interest rate and pays interest at a variable interest rate.

- 80 -

(3) The nominal amounts of the hedging instrument are as follows (Unit: Korean Won in millions, USD, SGD):

	December 31, 2019
	1 year or less		1 year to 5 years		More than 5 years		Total
Fair value hedge
Interest rate risk
Interest rate swap (USD)		350,000,000		2,000,000,000		300,000,000		2,650,000,000

	December 31, 2018
	1 year or less		1 year to 5 years		More than 5 years		Total
Fair value hedge
Interest rate risk
Interest rate swap (USD)		—		1,350,000,000		1,300,000,000		2,650,000,000

(4) The average interest rate and average currency rate of the hedging instrument as of December 31, 2019 and as of December 31, 2018 are as follows:

	December 31, 2019
	Average interest rate
Fair value hedge
Interest rate risk
Interest rate swaps (USD)	Fixed 3.96% receipt and Libor 3M+1.61% floating paid Fixed 5.88% receipt and Libor 6M+2.15% floating paid

	December 31, 2018
	Average interest rate
Fair value hedge
Interest rate risk
Interest rate swaps (USD)	Fixed 3.96% receipt and Libor 3M+1.61% floating paid Fixed 5.88% receipt and Libor 6M+2.15% floating paid

(5) The amounts related to items designated as hedging instruments are as follows (Unit: Korean Won in millions, USD):

	December 31, 2019
	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 (USD)		USD 2,650,000,000		111,764		—		Derivative assets (designated for hedging) Derivative liabilities (designated for hedging		90,244

December 31, 2018

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 (USD)

USD 2,650,000,000

35,503

17,654

Derivative assets (designated for hedging Derivative liabilities (designated for hedging

)  )

(27,362

)

- 81 -

(6) Details of carrying amount to hedged and amount adjusted due to hedge accounting as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

December 31, 2019

Accumulated amount of fair value hedge

Carrying amounts of the hedging item

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

Assets

Liabilities

Assets

Liabilities

Fair value hedge

Interest rate risk

Debenture

—

3,151,172

—

91,368

Debentures

(85,984

)

December 31, 2018

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

Assets

Liabilities

Assets

Liabilities

Fair value hedge

Interest rate risk

Debenture

—

2,956,565

—

5,200

Debentures

25,498

(7) Amounts recognized in profit or loss due to the ineffective portion of fair value hedges for the years ended December 31, 2019 and 2018 are as follows (Unit: Korean won in millions):

		December 31, 2019
		Hedge ineffectiveness recognized in profit or loss		Line item in the profit or loss that includes hedge ineffectiveness
Fair value hedge	Interest rate risk		4,260	Other net operating income

		December 31, 2018
		Hedge ineffectiveness recognized in profit or loss			Line item in the profit or loss that includes hedge ineffectiveness
Fair value hedge	Interest rate risk		(1,864	)	Other net operating income

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 years ended December 31
	2019			2018
Beginning balance		25,515			7,416
New transactions		53,289			23,744
Amounts recognized in losses		(26,545	)		(5,645	)
Ending balance		52,259			25,515

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. These financial instruments are recorded the transaction price as at the time of acquisition, even though there are differences noted between the transaction price and the fair value. The table above presents the differences 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:

	December 31, 2019		December 31, 2018
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		3,381,392 million Won		3,381,392 million Won

- 82 -

(2) There are no changes in the number of shares issued and outstanding for the years ended December 31, 2019 and 2018.

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

	December 31, 2019		December 31, 2018
Paid in capital in excess of par value		269,533		269,533

29. HYBRID SECURITIES

The bond-type hybrid securities classified as equity are as follows (Unit: Korean Won in millions):

	Issue date		Maturity		Interest rates (%)		December 31, 2019			December 31, 2018
Securities in local currency		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
		June 3, 2015		June 3, 2045		4.4		240,000			240,000
		July 26, 2018		—		4.4		400,000			400000
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
		October 4, 2019		—		4.3		662,035			—
Issuance cost								(17,021	)		(13,837	)
Total								3,660,814			3,161,963

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.

- 83 -

30. OTHER EQUITY

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

	December 31, 2019			December 31, 2018
Accumulated other comprehensive loss:
Net loss on valuation of financial assets at FVTOCI		(104,639	)		(116,032	)
Loss on foreign currency translation of foreign operations		(10,366	)		(18,811	)
Remeasurement loss related to defined benefit plan		(248,500	)		(217,516	)
Sub-total		(363,505	)		(352,359	)
Treasury shares		—			(34,113	)
Other capital adjustments		(6,350	)		(368	)
Total		(369,855	)		(386,840	)

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

	For the year ended December 31, 2019
	Beginning balance			Increase (decrease) (*)			Reclassification adjustments			Income tax effect			Ending balance
Net gain (loss) on valuation of financial assets at FVTOCI		(116,032	)		15,767			(53	)		(4,321	)		(104,639	)
Gain (loss) on foreign currency translation of foreign operations		(18,811	)		11,649			—			(3,204	)		(10,366	)
Remeasurement gain (loss) related to defined benefit plan		(217,516	)		(42,737	)		—			11,753			(248,500	)
Total		(352,359	)		(15,321	)		(53	)		4,228			(363,505	)

(*) Net gain (loss) on valuation of financial assets at FVTOCI included the 45,513 million Won transferred to retained earnings due to disposal of equity securities.

	For the year ended December 31, 2018
	Beginning balance			Increase (decrease) (*1)(*2)			Reclassification adjustments		Income tax effect			Ending balance
Net gain (loss) on valuation of financial assets at FVTOCI		(121,818	)		(34	)		8,015		(2,195	)		(116,032	)
Gain (loss) on financial liabilities at FVTPL designated as upon initial recognition due to own credit risk		(96	)		132			—		(36	)		—
Gain (loss) on foreign currency translation of foreign operations		(26,693	)		10,872			—		(2,990	)		(18,811	)
Remeasurement gain (loss) related to defined benefit plan		(137,877	)		(109,847	)		—		30,208			(217,516	)
Total		(286,484	)		(98,877	)		8,015		24,987			(352,359	)

(*1) Net gain (loss) on valuation of financial assets at FVTOCI included the 1,009 million Won transferred to retained earnings due to disposal of equity securities.

(*2) Gain (loss) on financial liabilities at fair value through profit or loss designated as upon initial recognition due to own credit risk included the 4 million Won and is transferred to retained earnings due to redemption.

- 84 -

31. RETAINED EARNINGS AND OTHER RESERVES

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

		December 31, 2019		December 31, 2018
Legal reserve	Earned surplus reserve		2,039,754		1,857,754
	Other legal reserve		46,635		46,384
	Sub-total		2,086,389		1,904,138
Voluntary reserve	Business rationalization reserve		8,000		8,000
	Reserve for financial structure improvement		235,400		235,400
	Additional reserve		8,576,105		7,759,804
	Regulatory reserve for credit loss		1,888,816		2,091,721
	Revaluation reserve		714,018		715,860
	Sub-total		11,422,339		10,810,785
Retained earnings before appropriation			1,611,128		1,908,029
	Total		15,119,856		14,622,952

i. Earned surplus reserve

In accordance with the Article 40, 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 respectively, 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 Bank was previously required to appropriate, as a reserve for business rationalization, amounts equal to tax reductions arising from tax exemptions and tax credits up to December 31, 2001. The requirement was no longer effective from 2002.

iv. Reserve for financial structure improvement

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

v. Additional reserve

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

vi. Regulatory reserve for credit loss

In accordance with Article 29 of the Regulation on Supervision of Banking Business (“RSBB”), if provisions for credit loss under K-IFRS for the accounting purpose are lower than provisions under RSBB, the Bank discloses such short fall amount as regulatory reserve for credit loss.

vii. Revaluation reserve

In accordance with appendix 3 of the Regulation on Supervision of Banking Business Enforcement Rules, revaluation reserve is the amount of limited dividends set by the board of directors to be recognized as complementary capital when the gains or losses occurred in the property revaluation by adopting K-IFRS.

- 85 -

(2) Statements of appropriations of retained earnings (plan) are as follows (Unit: Korean won in millions):

	2019(*)			2018
Unappropriated retained earnings:
Unappropriated retained earnings carried over from prior years		676,231			842
Interim dividend		(676,000	)		—
Adjustment of K-IFRS 1109 implementation effect		—			246,464
Disposal gain or loss in FVOCI financial assets		(45,513	)		1,013
Net income		1,790,831			1,810,904
Dividend on/repayment of hybrid equity securities		(134,421	)		(151,194	)
		1,611,128			1,908,029
Transfer from retained earnings:
Provision of revaluation excess		1,069			1,842
Credit loss		—			202,905
		1,069			204,747
Appropriation of retained earnings:
Legal reserve		180,000			182,000
Regulatory reserve for credit loss		162,779			—
Other reserve		498			251
Amortization of loss of repayment of hybrid equity securities		276			368
Losses on disposal of treasury stock		6,073			—
Cash dividend (dividend per share (%)) 2019: 1,000 won (20.0%), 2018: 650 won (13.0%)		676,000			437,626
Additional reserve		—			816,300
		1,025,626			1,436,545
Unappropriated retained earnings to be carried forward to next year		586,571			676,231

(*) Expected appropriation date is on March 24, 2020.

- 86 -

32. REGULATORY RESERVE FOR CREDIT LOSS

In accordance with paragraphs 1 and 2 of Article 29 of the Regulation on the Supervision of Banking Business (“RSBB”), the Bank discloses the difference as the planned regulatory reserve for credit loss.

(1) Balance of the planned regulatory reserve for credit loss is as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Regulatory reserve for credit loss		1,888,816		2,091,721
Planned provision (reversal) of regulatory reserve for credit loss		162,779		(202,905	)
Ending balance of regulatory reserve for credit loss		2,051,595		1,888,816

(2) Planned reserves provided, adjusted net income after the planned reserves provided and adjusted EPS after the planned reserves provided are as follows (Unit: Korean Won in millions, except for EPS amount):

	For the years ended December 31
	2019		2018
Net income		1,790,831		1,810,904
Provision (reversal) of regulatory reserve for credit loss (*)		162,779		(8,628	)
Adjusted net income after the provision (reversal) of regulatory reserve		1,628,052		1,819,532
Adjusted EPS after the provision (reversal) of regulatory reserve (Unit: Korean Won)		2,210		2,479

(*) The amount of reserve for credit loss for the year ended December 31, 2018 is calculated considering only the change in the reserve for credit loss after the accounting policy change due to adoption of K-IFRS 1109. Therefore, the effect of reducing the reserve for credit losses due to changes in accounting policies was excluded.

33. DIVIDENDS

Dividends for the year ended December 31, 2019 and 2018 are 1,000 Won and 650 Won per share, respectively. The total amount of dividends approved are 676,000 million Won and 437,626 million Won, respectively. Also, the Bank paid interim dividend during the year 2019, and the amount is 1,000 Won for share, 676,000 million Won for total. Dividends for the year ended December 31, 2019 will be brought up as an agenda in the annual shareholder’s meeting scheduled for March 24, 2020.

- 87 -

34. NET INTEREST INCOME

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

	For the years ended December 31
	2019		2018
Financial assets at FVTPL		359		6,047
Financial assets at FVTOCI		437,104		256,995
Securities at amortized cost		430,440		372,006
Financial assets at amortized cost:
Interest on due from banks		120,691		96,901
Interest on loans		8,003,563		7,578,302
Interest of other receivables		23,544		21,716
Sub-total		8,147,798		7,696,919
Total		9,015,701		8,331,967

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

	For the years ended December 31
	2019		2018
Interest on deposits due to customers		3,155,097		2,704,194
Interest on borrowings		305,279		252,140
Interest on debentures		598,295		558,328
Interest on lease liabilities		6,262		—
Other interest expense		90,432		89,587
Total		4,155,365		3,604,249

35. NET FEES AND COMMISSIONS INCOME

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

	For the years ended December 31
	2019		2018
Fees and commission received for brokerage		278,847		301,106
Fees and commission received related to credit		175,316		163,489
Fees and commission received for electronic finance		137,892		121,712
Fees and commission received on foreign exchange handling		51,700		51,977
Fees and commission received on foreign exchange		37,815		25,390
Fees and commission received for guarantee		86,801		73,302
Fees and commission received on securities business		90,188		88,149
Fees and commission from trust management		178,752		185,239
Other fees		130,672		140,837
Total		1,167,983		1,151,201

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

	For the years ended December 31
	2019		2018
Fees and commissions paid		153,262		148,296
Others		228		258
Total		153,490		148,554

- 88 -

36. DIVIDEND INCOME

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

	For the years ended December 31
	2019		2018
Financial assets at FVTPL		85,724		63,690
Financial assets at FVTOCI		14,984		12,296
Total		100,708		75,986

(2) Details of dividends related to Financial assets at FVTOCI for the year ended December 31, 2019 and 2018 are as follows (Unit: Korean won in millions):

	For the years ended December 31
	2019		2018
Dividend income recognized from assets held
Equity securities		14,984		12,022
Dividend income recognized in assets derecognized		—		274
Total		14,984		12,296

- 89 -

37. NET GAIN OR LOSS ON FINANCIAL INSTRUMENTS AT FVTPL

(1) Details of gains or losses related to net gain or loss on financial instruments at FVTPL are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Gains on financial instruments at fair value through profit or loss mandatorily measured at fair value		59,970			187,165
Gains(Losses) on financial instruments at fair value through profit or loss designated as upon initial recognition		(33,237	)		17,484
Total		26,733			204,649

(2) Details of net gain or loss on financial instrument at FVTPL are as follows (Unit: Korean Won in millions):

			For the years ended December 31
			2019			2018
Financial assets at FVTPL	Securities	Gain on valuation		106,452			113,618
(financial assets held for		Gain on disposals		45,230			28,136
trading)		Loss on valuation		(50,420	)		(20,479	)
		Loss on disposals		(9,388	)		(11,745	)
		Sub-total		91,874			109,530
	Loans	Gain on valuation		1,037			1,606
		Gain on disposals		519			4,136
		Loss on valuation		(20	)		(4,805	)
		Loss on disposals		—			(117	)
		Sub-total		1,536			820
	Other financial assets	Gain on valuation		2,062			2,050
		Gain on disposals		1,901			530
		Loss on valuation		(1,755	)		(2,280	)
		Loss on disposals		(1,815	)		(86	)
		Sub-total		393			214
	Sub-total			93,803			110,564
Derivatives (for trading)	Interest rate derivatives	Gain on transactions and valuation		1,511,965			1,269,528
		Loss on transactions and valuation		(1,608,840	)		(1,302,937	)
		Sub-total		(96,875	)		(33,409	)
	Currency derivatives	Gain on transactions and valuation		6,855,592			4,888,508
		Loss on transactions and valuation		(6,836,794	)		(4,780,695	)
		Sub-total		18,798			107,813
	Equity derivatives	Gain on transactions and valuation		832,070			481,123
		Loss on transactions and valuation		(787,827	)		(478,946	)
		Sub-total		44,243			2,177
	Other derivatives	Gain on transactions and valuation		39			2,099
		Loss on transactions and valuation		(38	)		(2,079	)
		Sub-total		1			20
	Sub-total			(33,833	)		76,601
	Total			59,970			187,165

- 90 -

(3) Details of net gain or loss on financial instrument designated as at FVTPL are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Gain (loss) on equity-linked securities:
Loss on disposal of equity-linked securities		(16,006	)		(2,058	)
Gain(loss) on valuation of equity-linked securities		(17,231	)		17,945
Sub-total		(33,237	)		15,887
Gain(loss) on other financial instruments:
Gain on valuation of other financial instruments		—			1,597
Total		(33,237	)		17,484

38. NET GAIN OR LOSS ON FINANCIAL ASSETS AT FVTOCI AND AFS FINANCIAL ASSETS

Details of net gain or loss on financial assets at FVTOCI recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Gains on redemption of securities		(5	)		28
Gains on transactions of securities		8,250			1,305
Total		8,245			1,333

39. REVERSAL OF (PROVISION FOR) IMPAIRMENT LOSSES DUE TO CREDIT LOSS

Reversal of (provision for) impairment losses due to credit loss are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Provision of credit loss on financial assets at financial assets at FVTOCI		(3,111	)		(1,704	)
Reversal of credit loss on (provision for) securities at amortized cost losses		1,413			(1,921	)
Reversal of credit loss on (provision for) loans and other financial assets at amortized cost		(105,919	)		(144,372	)
Reversal of provision on (provision for) guarantee		4,238			105,145
Reversal of provision on (provision for) unused loan commitment		11,924			(15,971	)
Total		(91,455	)		(58,823	)

- 91 -

40. GENERAL AND ADMINISTRATIVE EXPENSES AND OTHER NET OPERATING INCOME (EXPENSES)

(1) Details of general and administrative expenses recognized are as follows (Unit: Korean Won in millions):

			For the years ended December 31
			2019		2018
Salaries	Short-term employee benefits	Salaries		1,271,874		1,229,278
		Employee benefits		404,763		411,175
	Share based payments			5,509		—
	Retirement benefit service costs			148,119		130,320
	Termination			146,620		221,677
	Sub-total			1,976,885		1,992,450
Depreciation and amortization				389,951		161,581
Other general and administrative expenses	Rent			51,380		255,594
	Taxes and public dues			111,542		92,816
	Service charges			208,029		199,221
	Computer and IT related			235,418		262,477
	Telephone and communication			35,357		36,663
	Operating promotion			37,345		36,804
	Advertising			80,151		66,341
	Printing			6,236		7,073
	Traveling			8,435		8,805
	Supplies			5,303		5,154
	Insurance premium			3,158		2,997
	Reimbursement			20,446		21,147
	Maintenance			15,030		14,312
	Water, light and heating			12,497		12,428
	Vehicle maintenance			7,192		7,653
	Others			5,932		5,820
	Sub-total			843,451		1,035,305
	Total			3,210,287		3,189,336

(2) Details of other operating income recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Gains on transactions of foreign exchange		557,082		982,555
Gains related to derivatives (Designated for hedging)		90,244		9,126
Gains on fair value hedged items		231		42,797
Others (*)		7,989		55,016
Total		655,546		1,089,494

(*) For the year ended December 31, 2018, other income includes gains amounting to 29,316 million Won respectively that the Bank recognized in relation to amounts receivable from other creditor financial institutions in accordance with the creditor financial institutions committee agreement.

- 92 -

(3) Details of other operating expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Losses on transactions of foreign exchange		138,542		724,229
KDIC deposit insurance premium		329,198		311,662
Contribution to miscellaneous funds		315,145		295,909
Losses related to derivatives (Designated for hedging)		—		36,488
Losses on fair value hedged items		86,214		17,299
Others (*)		107,907		96,556
Total		977,006		1,482,143

(*) For the years ended December 31, 2019 and 2018, ‘other expense’ includes 22,317 million Won and 51,770 million Won of intangible asset amortization expense. In addition, as for 2018, it includes losses amounting to 1,594 million Won, which is related to the Bank’s expected payments to other creditor financial institutions in accordance with the creditor financial institutions committee agreement.

(4) Share-based Payment

Details of performance condition share-based payment granted to executives as of December 31, 2019 are as follows:

1) Performance condition Share-based Payment

Subject to	Shares granted for the year 2019
Type of payment	Cash-settled
Vesting period	January 1, 2019 ~ December 31, 2022
Date of payment	January 1, 2023
Number of shares measured as of the closing date (*)	524,746 shares

(*) The number of payable stock is granted at the initial contract date and the payment rate is determined based on the achievement of the pre-determined performance targets. Performance is evaluated as long-term performance indication including relative shareholder return, net income, return on equity (ROE), non-performing loan ratio and job performance.

2) The Bank accounts for performance condition share-based payments according to the cash-settled method and the fair value of the liabilities is reflected in the compensation costs by re-measuring every closing period. As of December 31, 2019, the book value of the liabilities related to the performance condition share-based payments recognized by the Bank is 5,509 million Won.

- 93 -

41. OTHER NON-OPERATING INCOME (EXPENSES)

(1) Details of losses on valuation of investments in subsidiaries and associates are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Impairment losses of investments in subsidiaries and associates		43,102		241

(2) Details of other non-operating income and expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Other non-operating income		360,787			149,165
Other non-operating expenses		(424,110	)		(78,984	)
Total		(63,323	)		70,181

(3) Other non-operating income recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Rental fee income		20,386		15,022
Dividends from investments in subsidiaries and associates		52,273		37,481
Gains from disposal of investments in subsidiaries and associates		256,829		35,409
Gains on disposal of premises and equipment, intangible assets and other assets		1,033		25,537
Reversal of impairment loss of premises and equipment, intangible assets and other assets		85		491
Others		30,181		35,225
Total		360,787		149,165

(4) Other non-operating expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Depreciation of investment properties		4,901		3,723
Interest expenses of refundable deposits		738		620
Loss on disposal of investments in subsidiaries and associates		205,046		—
Loss on disposal of premises and equipment, intangible assets and other assets		1,534		933
Impairment loss on premises and equipment, intangible assets and other assets		26,037		5,933
Donation		60,328		47,542
Others		125,526		20,233
Total		424,110		78,984

- 94 -

42. INCOME TAX EXPENSE

(1) Details of income tax expense are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Current tax expense:
Current tax expense with respect to the current period		500,006			355,754
Adjustments recognized in the current period in relation to the tax expense of prior periods		(47,295	)		6,283
Sub-total		452,711			362,037
Deferred tax expense(income):
Changes in deferred tax assets (liabilities) relating to the temporary differences		117,358			312,690
Income tax expense directly reflected in capital, etc.		4,228			—
Sub-total		121,586			312,690
Income tax expense		574,297			674,727

(2) Income tax expense reconciled to net income before income tax expense is as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Net income before income tax expense		2,365,128			2,485,631
Tax calculated at statutory tax rate (*)		640,048			683,086
Adjustments:
Effect of income that is exempt from taxation		(56,899	)		(44,151	)
Effect of expenses not deductible in determining taxable profit		22,345			11,339
Adjustments recognized in the current period in relation to the current tax of prior periods		(47,295	)		6,283
Consolidated taxation effect		(14,452	)		—
Others		30,550			18,170
Sub-total		(65,751	)		(8,359	)
Income tax expense		574,297			674,727
Effective tax rate		24.3	%		27.2	%

(*) The applicable income tax rate: 1) 11% for taxable income below 200 million Won, 2) 22% for above 200 million Won and below 20 billion Won, 3) 24.2% for above 20 billion Won and below 300 billion Won, 4) 27.5% for above 300 billion Won.

- 95 -

(3) Changes in cumulative temporary differences for the years ended December 31, 2019 and 2018, are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Beginning balance			Recognized as income (loss)			Recognized as other comprehensive income (loss)			Ending balance
Gain (loss) on financial assets at FVTPL		287,531			(93,857	)		(4,321	)		189,353
Loss on valuation of derivatives		(27,851	)		(45,563	)		—			(73,414	)
Accrued income		(55,471	)		(9,582	)		—			(65,053	)
Provision for loan losses		1,156			(107	)		—			1,049
Loans and receivables written off		4,565			—			—			4,565
Deferred loan origination costs and fees		(148,354	)		(8,261	)		—			(156,615	)
Defined benefit liability		322,168			28,020			11,753			361,941
Deposits with employee retirement insurance trust		(298,515	)		(64,081	)		—			(362,596	)
Provisions for guarantees		11,375			(3,460	)		—			7,915
Other provision		57,843			12,680			—			70,523
Others		(147,087	)		62,625			(3,204	)		(87,666	)
Net deferred tax assets (liabilities)		7,360			(121,586	)		4,228			(109,998	)

	For the year ended December 31, 2018
				K-IFRS 1109 adoption effect
	Beginning balance			Recognized as retained earnings			Recognized as other comprehensive income		Beginning balance after K-IFRS 1109 adoption			Recognized as income (loss)			Recognized as other comprehensive income (loss)			Ending balance
Gain (loss) on financial assets at FVTPL		494,159			(150,140	)		149,247		493,266			(100,500	)		(2,231	)		390,535
Loss on valuation of derivatives		(9,828	)		(3,990	)		—		(13,818	)		(14,033	)		—			(27,851	)
Accrued income		(60,460	)		—			—		(60,460	)		4,989			—			(55,471	)
Provision for loan losses		572			46,870			—		47,442			(46,286	)		—			1,156
Loans and receivables written off		7,776			—			—		7,776			(3,211	)		—			4,565
Deferred loan origination costs and fees		(134,477	)		36			—		(134,441	)		(13,913	)		—			(148,354	)
Defined benefit liability		266,785			—			—		266,785			25,175			30,208			322,168
Deposits with employee retirement insurance trust		(277,130	)		—			—		(277,130	)		(21,385	)		—			(298,515	)
Provisions for guarantees		30,602			1,370			—		31,972			(20,597	)		—			11,375
Other provision		34,712			7,732			—		42,444			15,399			—			57,843
Others		(114,168	)		5,395			—		(108,773	)		(138,328	)		(2,990	)		(250,091	)
Net deferred tax assets (liabilities)		238,543			(92,727	)		149,247		295,063			(312,690	)		24,987			7,360

- 96 -

(4) Unrealizable temporary differences are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Deductible temporary differences		162,457			264,972
Tax loss carry forward		—			56,513
Taxable temporary differences		(108,055	)		(866,294	)
Total		54,402			(544,809	)

No deferred income tax asset has been recognized for the deductible temporary difference of 162,457 million Won associated with investments in subsidiaries and associates as of December 31, 2019, because it is not probable that the temporary differences will be reversed in the foreseeable future.

No deferred income tax liability has been recognized for the taxable temporary difference of 108,055 million Won associated with investment in subsidiaries and associates as of December 31, 2019, due to the following reasons:

• The Bank can control the timing of the reversal of the temporary differences.

• It is probable that the temporary differences will not be reversed in the foreseeable future.

(5) Details of accumulated deferred tax charged directly to other equity are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Net gain on valuation of financial assets at FVTOCI		39,691		44,012
Gain on foreign currency translation of foreign operations		3,931		7,135
Remeasurement of the net defined benefit liability		94,259		82,506
Total		137,881		133,653

(6) Current tax assets and liabilities are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Current tax assets		27,558		—
Current tax liabilities		115,513		110,127

- 97 -

43. EARNINGS PER SHARE(“EPS”)

(1) Basic EPS is calculated by dividing net income by weighted-average number of common shares outstanding (Unit: Korean Won in millions, except for EPS and number of shares):

	For the years ended December 31
	2019			2018
Net income for the period attributable to Common shareholders		1,790,831			1,810,904
Dividends to hybrid securities		(134,421	)		(151,194	)
Net income attributable to common shareholders		1,656,410			1,659,710
Weighted-average number of common shares outstanding		676 million shares			673 million shares
Basic EPS (Unit: Korean Won)		2,451			2,466

(2) The weighted average number of common shares outstanding is as follows:

	For the year ended December 31, 2019
	Period	Number of shares			Dates		Accumulated number of shares outstanding during period
Common shares issued at the beginning of the period	2019-01-01 ~ 2019-12-31		673,271,226			365		245,743,997,490
Purchase of treasury stock	2019-01-09 ~ 2019-01-10		(11,453,702	)		2		(22,907,404	)
Disposal of treasury stock	2019-01-11 ~ 2019-12-31		2,728,774			355		968,714,770
	Sub-total (①)							246,689,804,856
Weighted average number of common shares outstanding (②=(①/365)								675,862,479

	For the year ended December 31, 2018
	Period	Number of shares		Dates		Accumulated number of shares outstanding during period
Common shares issued at the beginning of the period	2018-01-01 ~ 2018-12-31		673,271,226		365		245,743,997,490
	Sub-total (①)						245,743,997,490
Weighted average number of common shares outstanding (②=(①/365)							673,271,226

Diluted EPS is equal to basic EPS because there is no dilution effect for the years ended December 31, 2019 and 2018.

44. CONTINGENT LIABILITIES AND COMMITMENTS

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

	December 31, 2019		December 31, 2018
Confirmed guarantees:
Guarantees for loans		89,699		125,870
Acceptances		254,231		257,203
Guarantees in acceptance of imported goods		224,746		158,179
Other confirmed guarantees		6,882,899		6,638,359
Sub-total		7,451,575		7,179,611
Unconfirmed guarantees:
Local letters of credit		193,096		305,057
Letters of credit		3,046,201		3,276,807
Other unconfirmed guarantees		742,125		647,968
Sub-total		3,981,422		4,229,832
Commercial paper purchase commitments and others		3,090,771		2,581,007
Total		14,523,768		13,990,450

- 98 -

(2) Details of loan commitments and other commitments are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Loan commitments		69,035,560		65,012,748
Other commitments		3,438,625		2,173,333

(3) Litigation case

The Bank had filed lawsuits as follows (Unit: Korean Won in millions except for number of cases):

	December 31, 2019
	As plaintiff		As defendant
Number of cases		31 cases		132 cases
Amount of litigation		227,071		197,216
Provisions for litigations		21,562

	December 31, 2018
	As plaintiff		As defendant
Number of cases		54 cases		132 cases
Amount of litigation		448,357		245,287
Provisions for litigations		16,770

(4) Recently, the FSS announced ‘Results of interim inspection of Lime Asset Management Co., Ltd and future countermeasures’ regarding the deferment of the redemption of Lime Asset Management Co., Ltd. The status of the sale of the Lime Asset Management Co., Ltd. operation deferral fund of the Bank is 357.7 billion won for 1,640 accounts as of the end of December 2019. Currently, a full-time management team is dispatched to monitor the implementation of the normal repurchase and management plan of lime and proper performance of internal control work.

- 99 -

45. RELATED-PARTY TRANSACTIONS

Related parties of the Bank as of December 31, 2019 and 2018, and assets and liabilities recognized, guarantees and commitments, major transactions with related parties and compensation to key management for the years ended December 31, 2019 and 2018 are as follows:

(1) Related parties

	Related parties
Parent	Woori Financial Group Inc.
Subsidiaries	Woori America Bank, PT Bank Woori Saudara Indonesia 1906 Tbk, Woori Global Markets Asia Limited, Woori Bank China Limited, Banco Woori Bank do Brasil S.A., AO Woori Bank, Korea BTL Infrastructure Fund, Woori Finance Cambodia PLC., Woori Finance Myanmar Co., Ltd., Wealth Development Bank, Woori Bank Vietnam Limited, WB Finance Co., Ltd., Woori Bank Europe, Woori Bank Principal and Interest Guaranteed Trust, Woori Bank Principal Guaranteed Trust, Kumho Trust First Co., Ltd. and 49 SPCs, Heungkuk Woori Tech Company Private Placement Investment Trust No. 1 and 8 beneficiary certificates
Associates	Woori Service Networks Co., Ltd., Korea Credit Bureau Co., Ltd., Korea Finance Security Co., Ltd., Lotte Card Co., Ltd., Chin Hung International Inc, 2016KIF-IMM Woori Bank Technology Venture Fund, K BANK Co., Ltd., Well to Sea No. 3 Private Equity Fund, and others (Dongwoo C & C Co., Ltd. and 28 associates)
Other related parties	Woori Card Co., Ltd. and its subsidiaries, Woori Investment Bank Co., Ltd. and its subsidiaries,, Woori FIS Co., Ltd, Woori Private Equity Asset Management Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Service Co., Ltd.,Woori Asset Management Co., Woori global asset management co.,Ltd., Woori asset trust. Ltd., Godo Kaisha Oceanos 1, Uri Hanhwa Eureka Private Equity Fund, Japanese Hotel Real Estate Private Equity Fund 2, Woori Growth Partnerships New Technology Private Equity Fund 1, Tongyang China Convertible Bond Fund, WOORIG China Value Equity (C/C(F))

- 100 -

(2) Assets and liabilities from transactions with related parties are as follows (Unit: Korean Won in millions):

Related parties		A title of account	December 31, 2019			December 31, 2018
Parent	Woori Financial Group Inc.(*1)	Deposits due to customers		1,173,670			—
		Other liabilities		99,181			—
Subsidiaries	Woori America Bank	Cash and cash equivalents		6,534			12,354
		Loans		15,569			15,350
		Loss allowance		(6	)		(4	)
	PT Bank Woori Saudara Indonesia 1906 Tbk	Cash and cash equivalents		5,969			11,110
		Loans		277,872			368,973
		Loss allowance		(497	)		(791	)
		Other assets		616			1,463
	Woori Global Markets Asia Limited	Loans		452,827			354,364
		Loss allowance		(365	)		(369	)
		Deposits due to customers		6,692			2,613
		Borrowings		3,167			3,041
	Banco Woori Bank do Brasil S.A.	Loans		—			1,006
		Loss allowance		—			(1	)
	Woori Bank China Limited	Cash and cash equivalents		24,006			38,312
		Loans		208,404			325,060
		Loss allowance		(373	)		(697	)
		Other assets		3,379			3,853
		Deposits due to customers		58,403			61,526
		Other liabilities		2,339			2,492
		Derivative liabilities		8			9
	AO Woori Bank	Cash and cash equivalents		7,529			16,699
		Loans		78,521			54,687
		Loss allowance		(140	)		(117	)
		Other assets		327			79
	Korea BTL Infrastructure Fund	Other assets		10			9
	Woori Finance Cambodia PLC.	Loans		99,339			69,099
		Loss allowance		(80	)		(72	)
		Other liabilities		1			6
	Woori Finance Myanmar Co., Ltd.	Loans		6,947			4,472
		Loss allowance		(6	)		(5	)
	Woori Bank Vietnam Limited	Loans		13,508			16,883
		Loss allowance		(51	)		(159	)
		Other assets		180,254			165,560
		Deposits due to customers		4,049			195
		Borrowings		75,338			16,772
	WB Finance Co., Ltd.	Loan		245,454			122,991
		Loss allowance		(198	)		(128	)
		Other liabilities		1			13
	Woori Bank Principal and Interest Guaranteed Trust and Principal Guaranteed Trust	Other assets		479			565
		Other liabilities		163,302			103,367
	Structured entities	Loans		22,509			2,882
		Loss allowance		(175	)		(4	)
		Other assets		146			121
		Derivative assets		24,427			11,671
		Deposits due to customers		11,870			6,485
		Other liabilities		5,215			3,706
		Derivative liabilities		373			126
	Beneficiary certificates	Other assets		20			20

- 101 -

Related parties		A title of account	December 31, 2019			December 31, 2018
Associates	Woori Service Networks Co., Ltd.	Deposits due to customers		1,881			1,967
		Other liabilities		311			312
	Korea Credit Bureau Co., Ltd.	Deposits due to customers		26			6,494
		Other liabilities		—			19
	Korea Finance Security Co., Ltd.	Loan		1,800			—
		Loss allowance		(3	)		—
		Deposits due to customers		1,371			5,040
		Other liabilities		—			6
	Chin Hung International Inc.	Deposits due to customers		5,381			11,605
		Other liabilities		320			2,960
	Lotte Card Co., Ltd.	Loan		7,500			—
		Loss allowance		(30	)		—
		Deposits due to customers		2,726			—
	Well to Sea No. 3 Private Equity Fund	Loans		4,490			1,857
		Loss allowance		(8	)		(9	)
		Deposits due to customers		714			356
		Other liabilities		47			64
	Others (*2)	Loans		84			260
		Loss allowance		(84	)		(234	)
		Deposits due to customers		5,577			8,049
		Other liabilities		172			165

- 102 -

Related parties		A title of account	December 31, 2019			December 31, 2018
Other Related Parties	Woori Card Co., Ltd. and its subsidiaries(*3)	Loans		4,631			—
		Other assets		13,342			14,820
		Derivative assets		420			—
		Deposits due to customers		52,638			78,490
		Other liabilities		18,641			14,656
		Derivative liabilities		—			271
	Woori Investment Bank Co., Ltd. (*3)	Cash and cash equivalents		—			100,000
		Loans		24,000			37,900
		Loss allowance		(43	)		(81	)
		Other assets		13,879			6,712
		Deposits due to customers		6,303			6,050
		Other liabilities		26,470			9,237
	Woori FIS Co., Ltd. (*3)	Other assets		114			61
		Deposits due to customers		42,693			51,057
		Other liabilities		23,415			16,498
	Woori Private Equity Asset Management Co., Ltd. (*3)	Deposits due to customers		1,370			1,323
	Woori Finance Research Institute Co., Ltd. (*3)	Deposits due to customers		2,132			2,741
		Other liabilities		—			588
	Woori Credit Information Co., Ltd. (*3)	Other assets		6			—
		Deposits due to customers		15,765			14,674
		Other liabilities		10,954			10,945
	Woori Fund Service Co., Ltd.(*3)	Deposits due to customers		11,238			8,605
		Other liabilities		1,157			1,128
	Woori Asset Management Co., Ltd.(*3)	Deposits due to customers		11,665			—
	Woori Global Asset Management Co., Ltd.(*3)	Deposits due to customers		98			—
	Woori Asset Trust Co., Ltd.(*3)	Deposits due to customers		29,546			—

(*1) Woori Financial Group Inc. was established during the current period and the Bank was transferred as a wholly-owned subsidiary.

(*2) Saman Co., Ltd., Kyesan Industry Corporation, Daea S&C Co., Ltd., and etc. are included during the year ended December 31, 2019 and 2018.

(*3) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

- 103 -

(3) Gain or loss from transactions with related parties is as follows (Unit: Korean Won in millions):

			For the years ended December 31
Related party		Title of account	2019			2018
Parent company	Woori Financial Group (*1)	Fees income		264			—
		Other income		1,823			—
		Interest expenses’		7,741			—
Subsidiaries	Woori America Bank	Interest income		21			—
		Fees income		280			343
		Other income		180			13
		Impairment losses due to credit loss		2			—
	PT Bank Woori Saudara Indonesia 1906 Tbk	Interest income		11,650			1,463
		Fees income		121			121
		Dividends income		6,300			6,127
		Impairment losses due to credit loss (reversal of provision for credit loss)		(294	)		625
	Woori Global Markets Asia Limited	Interest income		12,739			7,162
		Fee income		39			19
		Interest expenses		390			3
		Impairment losses due to credit loss (reversal of provision for credit loss)		(3	)		299
	Woori Bank China Limited	Interest income		9,257			7,589
		Fees income		476			438
		Other income		64			—
		Gains related to derivatives		26			7
		Interest expenses		708			612
		Fee expenses		2			1
		Other expenses		55			1
		Impairment losses due to credit loss (reversal of provision for credit loss)		(325	)		467
	AO Woori Bank	Interest income		2,394			965
		Fees income		41			—
		Impairment losses due to credit loss		23			62
	Banco Woori Bank do Brasil S. A	Interest income		27			45
		Reversal of provision for credit loss		(1	)		—
	Korea BTL Infrastructure Fund	Dividends income		26,835			30,185
		Fees income		82			77
	Woori Finance Cambodia PLC.	Interest income		3,514			2,126
		Fees income		23			12
		Impairment losses due to credit loss		8			59
	Woori Finance Myanmar Co., Ltd	Interest income		218			158
		Fees income		9			5
		Impairment losses due to credit loss		1			3
	Woori Bank Vietnam Limited	Interest income		778			618
		Fees income		205			62
		Interest expenses		1,861			2,186
		Impairment losses due to credit loss (reversal of provision for credit loss)		(108	)		16

- 104 -

			For the years ended December 31
Related party		Title of account	2019		2018
	WB Finance Co., Ltd	Interest income		6,648		1,453
		Impairment losses due to credit loss		70		128
	Consolidated trusts	Other income		7,815		8,282
		Interest expenses		2,030		1,626
		Other expenses		35		33
	Consolidated SPC	Interest income		912		106
		Fees income		19,158		10,150
		Gains related to derivatives		14,134		13,187
		Interest expenses		9		9
		Impairment losses due to credit loss (reversal of provision for credit loss)		171		(298	)
		Losses related to derivatives		401		—
	Consolidated beneficiary certificates	Dividend income		—		852
		Fees income		73		774

- 105 -

			For the years ended December 31
Related party		Title of account	2019			2018
Associates	Kumho Tire Co., Inc. (*2)	Interest income		—			1,098
		Reversal of provision for credit loss		—			(156,621	)
	Woori Service Networks Co., Ltd.	Dividend income		2			2
		Other income		32			30
		Interest expenses		20			14
	Korea Credit Bureau Co., Ltd.	Dividend income		135			113
		Interest expenses		29			62
	Korea Finance Security Co., Ltd.	Dividends income		—			54
		Interest expenses		9			12
		Impairment losses due to credit loss		3			—
	Chin Hung International Inc.	Interest expenses		35			43
	STX Engine Co., Ltd.(*3)	Interest income		—			333
		Interest expenses		—			86
		Reversal of provision for credit loss		—			(88,603	)
	STX Corporation (*3)	Interest expenses		—			2
		Reversal of provision for credit loss		—			(31,164	)
	Well to Sea No. 3 Private Equity Fund	Interest income		1,774			2,179
		Dividends income		18,836			517
		Interest expenses		11			9
		Reversal of provision for credit loss		(18	)		(30	)
	Lotte Card Co., Ltd.	Interest income		213			—
		Fees income		593			—
		Interest expenses		53			—
		Impairment losses due to credit loss		30			—
	Others (*4)	Other income		17			14
		Dividends income		164			484
		Interest expenses		55			40
		Reversal of provision for credit loss		(5	)		(237	)

- 106 -

			For the years ended December 31
Related party		Title of account	2019			2018
Other related parties	Woori Card Co., Ltd and its subsidiaries(*5)	Interest income		775			689
		Fees income		125,183			142,552
		Gains related to derivatives		691			961
		Other income		696			798
		Interest expenses		185			39
		Fees expenses		83			76
	Woori Investment Bank Co., Ltd. and its subsidiaries(*5)	Interest income		648			1,853
		Fees income		851			669
		Other income		543			538
		Interest expenses		21			20
		Impairment losses due to credit loss (reversal of provision for credit loss)		(38	)		58
	Woori FIS Co., Ltd.(*5)(*6)	Fees income		578			537
		Other income		7,675			7,507
		Interest expenses		4			16
		Other expenses		208,145			238,312
	Woori Private Equity Asset Management Co., Ltd.(*5)	Fees income		7			20
		Interest expenses		17			8
	Woori Finance Research Institute Co., Ltd.(*5)	Fees income		12			10
		Interest expenses		43			51
		Fees expenses		—			4,650
	Woori Credit Information Co., Ltd.(*5)	Fees income		83			69
		Other income		698			408
		Interest expenses		250			232
		Fees expenses		15,009			12,668
	Woori Fund Service Co., Ltd.(*5)	Fees income		25			21
		Other income		288			192
		Interest expenses		252			140
	Woori Asset Management Co., Ltd.(*5)	Fees income		21			—
		Interest expenses		36			—
	Woori Global Asset Management Co., Ltd.(*5)	Fees income		1			—

(*1) Woori Financial Group Inc. was established during the current period and the Bank was transferred as a wholly-owned subsidiary.

(*2) The Bank lost significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution during the prior term, and thus the entity was excluded from the list of associates.

(*3) During the prior term, the account was replaced by assets held for sale and disposed of and excluded from the associate.

(*4) Saman Co., Ltd., Kyesan industry Corporation, Daea S&C Co., Ltd., and etc are included during the term and prior term.

(*5) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current year.

(*6) Total amount of 3,445 million Won of lease liability repayment is included in other expenses.

- 107 -

(4) Major loan transactions with related parties for the years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019
Related parties		Beginning balance		Loan		Collection		Others			Ending balance(*1)
Subsidiaries	PT Bank Woori Saudara Indonesia 1906 Tbk		368,973		510,407		614,424		12,916			277,872
	Woori Global Markets Asia Limited		354,364		1,032,745		939,915		5,633			452,827
	Woori Bank China Limited		325,060		453,440		580,291		10,195			208,404
	AO Woori Bank		54,687		290,225		266,835		444			78,521
	Banco Woori Bank do Brasil S.A.		1,006		1,907		2,913		—			—
	Woori Finance Cambodia PLC.		69,099		30,624		2,883		2,499			99,339
	Woori Finance Myanmar Co., Ltd.		4,472		2,403		—		72			6,947
	Woori Bank Vietnam Limited		16,883		650		4,805		773			13,501
	WB Finance Co., Ltd.(*2)		122,991		122,328		2,892		3,027			245,454
	Woori America Bank		15,350		15,569		15,350		—			15,569
	Consolidated SPC		2,882		20,790		613		(550	)		22,509
Associates	Well to Sea No.3 Private Equity Fund		1,857		2,633		—		—			4,490
	Lotte Card Co., Ltd.		—		7,500		—		—			7,500
	Korea Finance Security Co., Ltd		—		1,800		—		—			1,800
Other related parties	Woori Investment Bank Co., Ltd. and its subsidiaries		37,900		21,300		35,200		—			24,000
	Woori Card Co., Ltd and its subsidiaries		—		4,551		—		80			4,631
		For the year ended December 31, 2018
Related parties		Beginning balance		Loan		Collection		Others			Ending balance(*1)
Subsidiaries	PT Bank Woori Saudara Indonesia 1906 Tbk		160,710		346,809		142,341		3,795			368,973
	Woori Global Markets Asia Limited		172,184		732,518		553,559		3,221			354,364
	Woori Bank China Limited		246,422		713,980		647,078		11,736			325,060
	AO Woori Bank		53,426		208,783		207,522		—			54,687
	Banco Woori Bank do Brasil S.A.		1,607		2,230		2,682		(149	)		1,006
	Woori Finance Cambodia PLC.		32,142		34,963		—		1,994			69,099
	Woori Finance Myanmar Co., Ltd.		4,286		—		—		186			4,472
	Woori Bank Vietnam Limited		17,410		—		1,283		756			16,883
	WB Finance Co., Ltd. (*2)		—		122,602		—		389			122,991
	Woori America Bank		—		15,350		—		—			15,350
	Woori Investment Bank Co., Ltd.		22,600		44,900		29,600		—			37,900
	Structured entities		2,102		1,026		463		217			2,882
Associates	Kumho Tire Co., Inc.(*3)		57,470		—		7,057		(50,413	)		—
	Well to Sea No. 3 Private Equity Fund		73,810		16,857		88,810		—			1,857
	STX Engine Co., Ltd. (*4)		39,886		—		2,177		(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 or decrease.

(*2) With more than half of capital contribution, companies were included in subsidiaries during the prior term.

(*3) The Bank lost significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution during the prior term, and thus the entity was excluded from the list of associates.

(*4) During the prior term, the account was replaced by assets held for sale and disposed of and excluded from the associate.

- 108 -

(5) Changes in major deposits due to customers with related parties for years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019
Related parties		Beginning balance		Borrowings		Repayment and others		Ending balance (*)
Parent company	Woori Financial Group		—		2,730,000		1,600,000		1,130,000
Subsidiaries	Woori Global Markets Asia Limited		—		2,316		—		2,316
Associates	Saman Corporation		2,436		86		—		2,522
	Woori Service Networks Co., Ltd		1,180		1,460		1,460		1,180
	Chin Hung International Inc		765		400		765		400
.	Korea Credit Bureau Co., Ltd.		6,000		—		6,000		—
	Partner One Value Up I Private Equity Fund		1,403		1,617		1,870		1,150
	Korea Finance Security Co., Ltd.		535		25		560		—
Other related parties	Woori Investment Bank Co., Ltd. and its subsidiaries		1,000		1,000		—		2,000
	Woori Finance Research Institute Co., Ltd.,		1,800		3,700		5,500		—
	Woori Credit Information Co., Ltd.		13,199		12,000		11,000		14,199
	Woori Fund Service Co., Ltd		7,900		10,000		7,900		10,000
	Woori asset trust. Ltd		—		15,000		—		15,000
		For the year ended December 31, 2018
Related parties		Beginning balance		Borrowings		Repayment and others		Ending balance (*)
Subsidiaries	Woori Global Markets Asia Limited		2,143		—		2,143		—
	Woori Investment Bank Co., Ltd.		1,000		—		—		1,000
	Woori Credit Information Co., Ltd.		12,699		11,500		11,000		13,199
.	Woori Fund Service Co., Ltd		6,100		7,900		6,100		7,900
	Woori asset trust. Ltd		2,100		5,700		6,000		1,800
Associates	Saman Corporation		2,334		102		—		2,436
	Woori Service Networks Co., Ltd		1,135		1,025		980		1,180
	Chin Hung International Inc		765		765		765		765
.	Korea Credit Bureau Co., Ltd.		4,000		12,000		10,000		6,000
	Partner One Value Up I Private Equity Fund		—		1,803		400		1,403
	Korea Finance Security Co., Ltd.		635		560		660		535
	STX Corporation		330		—		330		—
	STX Engine Co., Ltd.		10,256		—		10,256		—
	Kumho Tire Co., Inc.		37		—		37		—
	Hyunwoo International		41		—		41		—

(*) The details of payments made between related parties and the deposits due to customers that can be taken in and out easily are excluded.

- 109 -

(6) Major borrowing transactions with related parties for years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019
Related parties		Beginning balance		Borrowings		Repayment		Others			Ending balance (*)
Subsidiaries	Woori Global Markets Asia Limited		3,041		51,011		51,011		126			3,167
	Woori Bank Vietnam Limited		16,772		255,022		195,751		(705	)		75,338
Other related parties	Woori Investment Bank Co., Ltd. and its subsidiaries		11,428		223,893		217,712		—			17,609
		For the year ended December 31, 2018
Related parties		Beginning balance		Borrowings		Repayment		Others			Ending balance (*)
Subsidiaries	Woori Global Markets Asia Limited		—		3,041		—		—			3,041
	Woori Bank Vietnam Limited		—		146,291		129,520		1			16,772
Other related parties	Woori Investment Bank Co., Ltd. and its subsidiaries		11,088		216,989		216,649		—			11,428

(7) Guarantees provided to the related parties are as follows (Unit: Korean Won in millions):

	Warranty	December 31, 2019		December 31, 2018
Woori Card Co., Ltd.	Unused loan commitment		500,000		500,000
Woori Investment Bank Co., Ltd.	Unused loan commitment		50,000		50,000
PT Bank Woori Saudara Indonesia 1906 Tbk	Confirmed guarantees in foreign currencies and others		109,673		161,758
Woori Bank China Limited	Confirmed guarantees in foreign currencies and others		84,801		92,545
AO Woori Bank	Confirmed guarantees in foreign currencies		29,888		27,826
Banco Woori Bank do Brasil S.A.	Confirmed guarantees in foreign currencies and others		25,686		21,017
Woori Global Markets Asia Limited	Confirmed guarantees in foreign currencies		247,327		47,799
Woori Bank Europe	Loan commitment in foreign currency		1,492		—
Korea BTL Infrastructure Fund	Securities purchase contract		240,078		303,578
Woori Finance Cambodia PLC.	Unused loan commitment		5,789		20,349
			22,230		—
Woori Bank Vietnam Limited	Confirmed guarantees in foreign currencies and others		50,276		40,398
WB Finance Co., Ltd. (*1)	Unused loan commitment		5,210		44,724
	Loan commitment in foreign currency		4,052		—
Structured entities	Loan commitment in local currency		2,206,740		1,320,420
	Unused loan commitment		4,756		1,618
	Securities purchase contract		1,274		1,274
Chin Hung International Inc.	Unused loan commitment		31,749		31,749
Well to Sea No. 3 Private Equity Fund	Unused loan commitment		210,510		208,143
Korea Finance Security Co., Ltd	Unused loan commitment		200		—
Lotte Card Co., Ltd.	Unused loan commitment		150,000		—

- 110 -

For the guarantees provided to the related parties, the Bank recognized provisions for guarantees amounting to 4,034 million Won and 3,510 million Won as of December 31, 2019 and 2018, respectively.

The amount of guarantees and unused loan commitments provided by the related parties to the Bank as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	Warranty		December 31, 2019		December 31, 2018
Woori Card Co., Ltd and its subsidiaries		Loan commitment in local currency		167,880		174,287

(8) Commitments of derivatives to the related parties are as follows (Unit: Korean Won in millions):

	Warranty	December 31, 2019		December 31, 2018
Woori Card Co., Ltd and its subsidiaries	Unsettled commitment		100,000		100,000
Woori Bank China Limited	Unsettled commitment		964		203
Structured entities	Unsettled commitment		2,052,750		1,198,500
Well to Sea No. 3 Private Equity Fund	Unsettled commitment		584,377		439,243

(9) Details of compensation to key management are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Short-term employee salaries		9,744		12,326
Retirement benefit service costs		364		489
Share-based payments		1,965		—
Total		12,073		12,815

Key management includes registered executives and non-registered executives. Outstanding assets and from transactions with key management amount to 2,414 million Won and 2,816 million Won, respectively, as of the years ended December 31, 2019 and 2018, and with respect to the assets, the Bank has not recognized any allowance nor related impairment loss due to credit losses. Also, outstanding liabilities from transactions with key management amount to 6,543 million Won and 6,096 million Won, respectively.

(10) The Bank and Woori Card Co., Ltd. have joint obligation on the liability of the Bank that arose prior to the spin-off of Woori Card Co., Ltd.

- 111 -

46. TRUST ACCOUNTS

(1) Trust accounts of the Bank are as follows (Unit: Korean Won in millions):

	Total assets				Operating income
	December 31, 2019		December 31, 2018		For the years ended December 31
					2019		2018
Trust accounts		60,288,399		53,560,071		1,118,746		1,049,105

(2) Receivables and payables between the Bank and trust accounts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Receivables:
Trust fees receivable		31,533		28,703
Payables:
Deposits due to customers		392,453		574,330
Borrowings from trust accounts		2,730,806		3,020,371
Total		3,123,259		3,594,701

(3) Significant transactions between the Bank and trust accounts are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Revenue:
Trust fees		171,072		177,913
Termination fees		488		5,885
Total		171,560		183,798
Expense:
Interest expenses on deposits due to customers		6,684		7,813
Interest expenses on borrowings from trust accounts		40,489		38,873
Total		47,173		46,686

- 112 -

(4) Principal guaranteed trusts and principal and interest guaranteed trusts

1) The carrying values of principal guaranteed trusts and principal and interest guaranteed trusts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Partial principal guaranteed trusts:
Household money		9,430		9,989
Corporate money		630		633
Installment plan purpose		1,651		1,737
Sub-total		11,711		12,359
Principal guaranteed trusts:
Old-age pension trusts		3,298		3,564
Personal pension trusts		516,913		521,200
Pension trusts		824,735		819,102
Retirement trusts		34,374		42,187
New personal pension trusts		7,807		8,104
New old-age pension trusts		1,742		2,134
Sub-total		1,388,869		1,396,291
Principal and interest guaranteed trusts:
Development trusts		19		19
Unspecified money trusts		871		835
Sub-total		890		854
Total		1,401,470		1,409,504

2) The amounts that the Bank must pay by the operating results of the principal guaranteed trusts or the principal and interest guaranteed trusts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Liabilities for the account (subsidy for trust account adjustment)		35		33

- 113 -

47. LEASES

(1) The future lease payments under lease contracts are as follows (Unit: Korean won in millions):

	For the year ended December 31
	2019
Lease payments
Within one year		123,173
After one year but within five years		147,182
After five years		13,170
Total		283,525

(2) Total cash outflows from leases are as follows (Unit: Korean won in millions):

	For the year ended December 31
	2019
Cash outflows from leases		177,823

(3) There are no lease payments that are not included in the measurement of lease liabilities due to the fact that they are short-term leases or leases for which the underlying asset is of low value.

48. EVENTS AFTER THE REPORTING PERIOD

The Coronavirus disease (COVID-19) outbreak in January 2020 is having a negative impact on the global economy, including Korea. As a result, the macroeconomic environment is unstable overall. The Bank is keeping a close eye on the situation, and credit portfolio is being reviewed to maintain proper capital ratio. Though the Bank is considering various economic conditions in calculating expected credit losses, the effects of coronavirus were not explicitly considered due to the availability of limited information as of the end of the reporting period.

- 114 -