Woori Finance Holdings Co., Ltd. (NYSE: WF) is a financial services company centered in Seoul, South Korea. The firm provides services ranging from Commercial banking, credit cards, capital market activities, retail banking and private equity. Woori was able to hedge its lending and credit risks in the past fiscal year, leading to net income growth despite declining revenue. The firm must also deal with South Korean financial regulations, which may alter its investment and hedging strategies in the current fiscal year.
In the past fiscal year WF achieved a net income gain due to higher non-interest income, despite lower revenue year-over-year. The South Korean government plans to smooth Won (South Korean currency) volatility in the current fiscal year,, which may cut Woori's lending and investment risks and costs.
A number of Woori's products expose it to credit risk, including loans, leases and lending commitments, derivatives, trading account assets and assets held-for-sale. Woori relies heavily on accurately predicting how well its customers will repay their loans. The corporation must constantly weigh ongoing economic factors and should they overestimate its customers' ability to repay loans, the bank's overall performance will suffer.
Similarly to U.S. government regulation on U.S. banks, the South Korean government installs constraints on budget constrains on its banks to avoid a financial crisis. For example, the South Korean government has capped the amount of currency derivatives, securities that Woori invests in to hedge risk and speculate growth, each of its banks can hold.