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Industrial Bank of Korea and SubsidiariesConsolidated Interim Financial StatementsJune 30, 2017 and 2016
Industrial Bank of Korea and SubsidiariesIndexJune 30, 2017 and 2016
Page(s)
Report on Review of Interim Financial Statements......................................................... 1-2
Consolidated Interim Financial Statements
Consolidated Interim Statements of Financial Position ........................................................... 3
Consolidated Interim Statements of Comprehensive Income ................................................. 4
Consolidated Interim Statements of Changes in Equity .......................................................... 5
Consolidated Interim Statements of Cash Flows .................................................................... 6
Notes to the Consolidated Interim Financial Statements.................................................. 7-114
Report on Review of Interim Financial Statements
(English Translation of a Report Originally Issued in Korean)
To the Shareholders and Board of Directors ofIndustrial Bank of Korea
Reviewed Financial StatementsWe have reviewed the accompanying consolidated interim financial statements ofIndustrial Bank of Korea (the Bank) and its subsidiaries (collectively referred to as the“Group”). These financial statements consist of the consolidated interim statement offinancial position of the Group as at June 30, 2016, and the related consolidatedinterim statements of comprehensive income for the three-month and six-monthperiods ended June 30, 2017 and 2016, and consolidated interim statements ofchanges in equity and cash flows for the six-month periods ended June 30, 2017 and2016, and a summary of significant accounting policies and other explanatory notes,expressed in Korean won.
Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of theseconsolidated interim financial statements in accordance with International FinancialReporting Standards as adopted by the Republic of Korea (Korean IFRS) 1034 InterimFinancial Reporting, and for such internal control as management determines isnecessary to enable the preparation of consolidated interim financial statements thatare free from material misstatement, whether due to fraud or error.
Auditor's ResponsibilityOur responsibility is to issue a report on these consolidated interim financialstatements based on our review.
We conducted our review in accordance with quarterly or semi-annual reviewstandards established by the Securities and Futures Commission of the Republic ofKorea. A review of interim financial information consists of making inquiries, primarilyof persons responsible for financial and accounting matters, and applying analyticaland other review procedures. A review is substantially less in scope than an auditconducted in accordance with Korean Standards on Auditing and consequently doesnot enable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express an auditopinion.
2
ConclusionBased on our review, nothing has come to our attention that causes us to believe theaccompanying consolidated interim financial statements are not presented fairly, in allmaterial respects, in accordance with Korean IFRS 1034 Interim Financial Reporting
Other MattersWe have audited the consolidated statement of financial position of the Group as atDecember 31, 2016, and the related consolidated statements of comprehensiveincome, changes in equity and cash flows for the year then ended, in accordance withKorean Standards on Auditing. We expressed an unqualified opinion on those financialstatements, not presented herein, in our audit report dated March 10, 2017. Theconsolidated statement of financial position as at December 31, 2016, presentedherein for comparative purposes, is consistent, in all material respects, with the aboveaudited statement of financial position as at December 31, 2016.
Review standards and their application in practice vary among countries. Theprocedures and practices used in the Republic of Korea to review such financialstatements may differ from those generally accepted and applied in other countries.
Seoul, KoreaAugust 14, 2017
This report is effective as of August 14, 2017, the review report date. Certainsubsequent events or circumstances, which may occur between the review report dateand the time of reading this report, could have a material impact on the accompanyingconsolidated interim financial statements and notes thereto. Accordingly, the readersof the review report should understand that there is a possibility that the above reviewreport may have to be revised to reflect the impact of such subsequent events orcircumstances, if any.
Industrial Bank of Korea and SubsidiariesConsolidated Interim Statements of Financial Position
June 30, 2017 and December 31, 2016
(in millions of Korean won) Notes
Assets
Cash and due from banks 23,43 ₩ 15,072,354 ₩ 11,699,220
Financial assets held for trading 4,23 7,970,600 8,313,556Financial assets designated at fair value through profit
and loss 4,23 511,339 478,908
Available-for-sale financial assets 5,23 14,903,505 16,770,997
Held-to-maturity financial assets 6,23 19,402,846 14,133,675
Loans receivable 7,23 199,140,358 193,037,313
Derivative financial assets for hedge accounting 8,23 152,345 174,147
Investments in associates 9 126,783 98,223
Investment properties 10,21 67,735 88,503
Property and equipment 11,21 1,831,196 1,820,899
Intangible assets 12 240,496 258,427
Deferred tax assets 13 6,534 7,684
Other assets 14,23,36 7,464,192 9,969,828
Total assets ₩ 266,890,283 ₩ 256,851,380
Liabilities
Financial liabilities held for trading 4,23 ₩ 2,074,134 ₩ 2,620,960Financial liabilities designated at fair value through
profit 4,23 1,361,783 1,233,788
Deposit liabilities 15,23 106,979,062 103,984,113
Debts 16,23 28,027,393 26,670,496
Debentures 17,23 93,201,559 90,863,125
Derivative financial liabilities for hedge accounting 8,23 248,097 354,174
Net defined benefit liabilities 18 46,360 25,090
Provisions 19 398,590 390,453
Deferred tax liabilities 13 220,702 158,091
Other liabilities 20,23,36 15,391,884 12,503,682
Total liabilities 247,949,564 238,803,972
Equity
Equity attributable to owners of the Parent Company
Share capital 24 3,289,756 3,289,756
Hybrid capital instruments 24 1,697,760 1,398,240
Reserves 24 558,047 553,889
Accumulated other comprehensive income 24 802,232 666,596
Retained earnings 25 12,492,126 12,041,487
(Regulatory reserve for credit loss
June 30, 2017 : \ 2,219,478 million
December 31, 2016 : \ 1,922,153 million)
(Regulatory reserve for credit loss estimated to be
appropriated
June 30, 2017 : \ 204,575 million
December 31, 2016 : \ 297,325 million)
18,839,921 17,949,968
Non-controlling interest 100,798 97,440
Total equity 18,940,719 18,047,408
Total liabilities and equity ₩ 266,890,283 ₩ 256,851,380
June 30, 2017 December 31, 2016
(Unaudited)
The above consolidated interim statements of financial position should be read in conjunction with the accompanying notes.
3
Industrial Bank of Korea and SubsidiariesConsolidated Interim Statements of Comprehensive IncomeThree-Month and Six-Month Periods Ended June 30, 2017 and 2016
(in millions of Korean won) Notes
Interest income ₩ 1,987,418 ₩ 3,921,288 ₩ 1,947,977 ₩ 3,894,866
Interest expense (696,608) (1,376,996) (748,110) (1,512,359)
Net interest income 26, 41 1,290,810 2,544,292 1,199,867 2,382,507
Fee and commission income 235,321 438,891 195,660 380,430
Fee and commission expense (107,269) (218,615) (99,739) (189,290)
Net fee and commission income 27, 41 128,052 220,276 95,921 191,140
Net gains (losses) on financial assets/liabilities held for trading 28 66,255 (59,335) 90,935 98,678
28 (13,742) (23,914) (12,245) (13,166)
Net gains (losses) on derivative financial instruments for hedge accounting 8 49,065 76,653 (57,601) (29,923)
Other net gains from financial instruments 29 14,507 181,676 76,694 212,363
Insurance loss 36 (12,364) (24,956) (11,042) (21,959)
Net gains (losses) on foreign currency transactions (60,911) 126,157 20,603 23,246
Gross operating profit 1,461,672 3,040,849 1,403,132 2,842,886
Impairment loss on financial assets 5, 7 ,41 (287,028) (643,591) (268,147) (639,624)
Net operating profit 1,174,644 2,397,258 1,134,985 2,203,262
General and administrative expenses 30 (589,475) (1,093,653) (582,639) (1,051,468)
Other operating income 31 76,513 88,667 34,525 69,946
Other operating expenses 32 (186,593) (339,082) (194,870) (348,487)
Operating profit 475,089 1,053,190 392,001 873,253
Non-operating expenses 33 (5,037) (10,887) (6,727) (6,806)
Profit before income tax 470,052 1,042,303 385,274 866,447
Income tax expense 13 (109,917) (242,814) (95,677) (199,127)
Profit for the period 360,135 799,489 289,597 667,320
(Adjusted profit after provision of regulatory reserve for credit losses 25
June 30, 2017 : \ 594,914 million
June 30, 2016 : \ 422,429 million)
Items that will not be reclassified to profit or loss:
Remeasurements of net defined benefit liabilities 18, 24 (1,507) (2,749) (999) (2,091)
Items that may be subsequently reclassified to profit or loss:
Changes in the fair value of available-for-sale financial assets 5, 24 178,969 161,699 224,493 270,247
Shares of other comprehensive income of associates 9, 24 (358) (699) 4,781 4,344
Exchange differences on translation of foreign operations 24 21,193 (34,110) (4,275) (18,237)
Cash flow hedges 24 (23) (2) 6 (21)
8, 24(4,010) 11,479 (463) 6,377
Other comprehensive income for the period, net of tax 194,264 135,618 223,543 260,619
Total comprehensive income for the period ₩ 554,399 ₩ 935,107 ₩ 513,140 ₩ 927,939
Profit is attributable to:
Owners of the Parent Company ₩ 357,643 ₩ 795,907 ₩ 286,593 ₩ 663,281
Non-controlling interest 2,492 3,582 3,004 4,039
₩ 360,135 ₩ 799,489 ₩ 289,597 ₩ 667,320
Total comprehensive income for the period is attributable to:
Owners of the Parent Company ₩ 551,924 ₩ 931,543 ₩ 510,216 ₩ 923,987
Non-controlling interest 2,475 3,564 2,924 3,952
₩ 554,399 ₩ 935,107 ₩ 513,140 ₩ 927,939
Earnings per share (in Korean won) 37
Basic earnings per share ₩ 519 ₩ 1,164 ₩ 408 ₩ 955
Diluted earnings per share ₩ 519 ₩ 1,164 ₩ 408 ₩ 955
Period Ended June 30
Net losses on financial assets/liabilities
designated at fair value through profit and loss
Changes in valuation of hedges of
a net investment in a foreign operation
Three months Six months
2017
(Unaudited)
2016
(Unaudited)
Three months Six months
The above consolidated interim statements of comprehensive income should be read in conjunction with the accompanying notes.
4
Industrial Bank of Korea and SubsidiariesConsolidated Interim Statements of Changes in Equity
Six-Month Periods Ended June 30, 2017 and 2016
Accumulated
Other
(in millions of Korean won) Notes Share Hybrid Capital Comprehensive Retained Non-controlling Total
Capital Instruments Reserves Income Earnings interest Equity
Balance at January 1, 2016 ₩ 3,271,871 1,399,200 530,583 747,676 11,253,700 90,760 17,293,790
Comprehensive income
Profit for the period - - - - 663,281 4,039 667,320
Other comprehensive income for the period
Change in the fair value of available-for-sale financial
assets - - - 270,329 - (82) 270,247
Shares of other comprehensive income of associates - - - 4,344 - - 4,344
Exchange differences on translation of foreign operations - - - (18,237) - - (18,237)
Cash flow hedges - - - (16) - (5) (21)
Changes in valuation of
hedges of a net investment in a foreign operation - - - 6,377 - - 6,377
Remeasurements of net defined benefit liabilities - - - (2,091) - - (2,091)
Total comprehensive income for the period ₩ - ₩ - ₩ - ₩ 260,706 ₩ 663,281 ₩ 3,952 ₩ 927,939
Transactions with owners
Cash dividends 38 - - - - (294,469) (206) (294,675)
Dividends for hybrid capital instruments 38 - - - - (36,372) - (36,372)
Issuance of shares 24 17,885 - 22,018 - - - 39,903
Others - - 631 - 63 - 694
Total transactions with owners 17,885 - 22,649 - (330,778) (206) (290,450)
Balance at June 30, 2016 (Unaudited) 3,289,756 1,399,200 553,232 1,008,382 11,586,203 94,506 17,931,279
Balance at January 1, 2017 ₩ 3,289,756 1,398,240 553,889 666,596 12,041,487 97,440 18,047,408
Comprehensive income
Profit for the period - - - - 795,907 3,582 799,489
Other comprehensive income for the period
Change in the fair value of available-for-sale financial
assets - - - 161,717 - (18) 161,699
Shares of other comprehensive income of associates - - - (699) - - (699)
Exchange differences on translation of foreign operations - - - (34,110) - - (34,110)
Cash flow hedges - - - (2) - - (2)
Changes in valuation of
hedges of a net investment in a foreign operation - - - 11,479 - - 11,479
Remeasurements of net defined benefit liabilities - - - (2,749) - - (2,749)
Total comprehensive income - - - 135,636 795,907 3,564 935,107
Transactions with owners
Cash dividends 38 - - - - (315,817) (206) (316,023)
Dividends for hybrid capital instruments 38 - - - - (30,231) - (30,231)
Issuance of hybrid capital instruments 24 - 299,520 - - - - 299,520
Others - - 4,158 - 780 - 4,938
Total transactions with owners - 299,520 4,158 - (345,268) (206) (41,796)
Balance at June 30, 2017 (Unaudited) ₩ 3,289,756 ₩ 1,697,760 ₩ 558,047 ₩ 802,232 ₩ 12,492,126 ₩ 100,798 ₩ 18,940,719
The above consolidated interim statements of changes in equity should be read in conjunction with the accompanying notes.
Attributable to owners of the Parent Company
5
Industrial Bank of Korea and SubsidiariesConsolidated Interim Statements of Cash Flows
Six-Month Periods Ended June 30, 2017 and 2016
(in millions of Korean won) Notes 2017 2016
(Unaudited) (Unaudited)
Cash flows from operating activities
Profit for the period ₩ 799,489 ₩ 667,320
Adjustments of expenses and revenues 43 (1,726,509) (1,642,505)
Changes in operating assets and liabilities 43 (2,102,970) (7,130,382)
Cash used in operations (3,029,990) (8,105,567)
Interests received 3,865,683 3,779,849
Interests paid (1,448,751) (1,608,989)
Dividends received 90,623 80,784
Income taxes paid (228,083) (95,773)
Net cash outflow from operating activities (750,518) (5,949,696)
Cash flows from investing activities
Net decrease in available-for-sale financial assets 2,165,353 322,118
Net decrease (increase) in held-to-maturity financial assets (5,269,171) 167,340
Disposal of investments in associates 10,699 45,684
Acquisition of investments in associates (43,635) (18,863)
Disposal of property and equipment, and investment properties 416 1,506
Acquisition of property and equipment, and investment properties (31,743) (23,800)
Disposal of intangible assets 377 1,444
Acquisition of intangible assets (23,803) (9,811)
Net cash inflow (outflow) from investing activities (3,191,507) 485,618
Cash flows from financing activities
Net increase in deposit liabilities 1,372,042 764,686
Net increase in debentures 2,354,796 4,538,303
Issuance of shares - 39,903
Issuance of hybrid capital instruments 299,520 -
Dividends for hybrid capital instruments (30,231) (36,372)
Dividends paid (316,023) (294,675)
Net cash inflow from financing activities 3,680,104 5,011,845
Effects of exchange rate changes on cash and cash equivalents (15,712) 37,343
Net decrease in cash and cash equivalents (277,633) (414,890)
Cash and cash equivalents at the beginning of the period 2,863,839 2,689,559
Cash and cash equivalents at the end of the period 43 ₩ 2,586,206 ₩ 2,274,669
Six-Month Period Ended June 30
The above consolidated interim statements of cash flows should be read in conjunction with the accompanying notes.
6
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
7
1. The Bank The Industrial Bank of Korea (the Bank) was established in 1961 under the Industrial Bank of Korea Act to promote independent economic activities of small and medium-sized companies. On May 15, 1992, the Bank converted its equity into shares in accordance with the Industrial Bank of Korea Act, as amended on December 31, 1991. On November 30, 1994, the Bank’s ordinary shares were listed on KOSDAQ. On December 24, 2003, however, the Bank moved to the domestic securities market through a public offering of its ordinary shares. The Bank and its subsidiaries (collectively referred to as the “Group”) are mainly involved in offering banking businesses and related financial services to individuals and corporate customers. The Bank also listed 48.53 million shares of Global Depositary Shares on December 19, 2003, and additionally 26.20 million shares of ordinary shares were issued on April 22, 2014, on the Luxembourg Stock Exchange.
As at June 30, 2017, the Bank’s ordinary shares and preferred shares amounted to ₩ 2,800 billion
and ₩ 490 billion, respectively. The Korean government owns 50.91% of the Bank’s ordinary and
preferred shares. The head office of the Bank is located at 79, Euljiro, Jung-gu, Seoul, Korea. The
Bank has 572 branches, 44 depositary offices in Korea and 11 overseas offices.
2. Scope of Consolidation and Basis of Preparation 2.1 Scope of Consolidation
Subsidiaries of the Group as at June 30, 2017 and December 31, 2016, are as follows:
Name of entity Industry Location
Ownership interest held
by the Group (%) Closing date
June 30,
2017
December
31, 2016
IBK Capital Corporation Financial services Korea 100.00 100.00 December 31
IBK Asset Management Co., Ltd. Asset management Korea 100.00 100.00 December 31
IBK Credit Information Corp. Credit information
services Korea 100.00 100.00 December 31
IBK Securities Co., Ltd. Securities
investments Korea 83.86 83.86 December 31
IBK System Co., Ltd. Financial system
management Korea 55.63 55.63 December 31
Industrial Bank of Korea (China) Limited Financial services China 100.00 100.00 December 31
IBK Insurance Co., Ltd. Life insurance
(Pension) Korea 100.00 100.00 December 31
IBK Savings Bank Co., Ltd. Mutual Savings Bank Korea 100.00 100.00 December 31
IBK Capital Myanmar Co., Ltd. Microfinancing Myanmar 99.99 99.99 March 31
IBK Private Equity Fund No.3 Investment
association Korea 88.89 88.89 December 31
IBK-SKS Private Equity Fund No.4 Investment
association Korea 30.00 30.00 December 31
IBK Recovery Private Equity Fund Investment
association Korea 99.82 99.24 December 31
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
8
IBK-AJU Star Seekers No.1 Private
Equity Fund
Investment
association Korea 35.00 35.00 December 31
IBK SKS Private Equity Fund 2012 Investment
association Korea 44.79 35.26 December 31
IBK POSCO TRUBEN Recovery Private
Equity Fund No.1
Investment
association Korea 49.50 49.50 December 31
IBK NH Small Giant Private Equity Fund Investment
association Korea 50.00 50.00 December 31
No.1 Technology Financing Private
Equity Fund
Investment
association Korea 30.00 30.00 December 31
Value Brand Korea No.1 Private Equity
Fund
Investment
association Korea 50.00 50.00 December 31
IBK-EUM Private Equity Fund No.1 Investment
association Korea 52.63 - December 31
IBK KIP Growth Stepstone Private Equity
Fund
Investment
association Korea 50.00 - December 31
IBKC IBKC-TONGYANG Growth 2013
Private Equity Fund
Investment
association Korea 35.71 35.71 December 31
IBKC-INNOBIZ Material Special
Investment Association
Investment
association Korea 60.00 60.00 December 31
IBK Small Business Coexistence
Investment Association No.1
Investment
association Korea 100.00 100.00 December 31
IBK Small Business Coexistence
Investment Association No.2
Investment
association Korea 100.00 100.00 December 31
IBK Cultural Contents Cooperative
Investment Association
Investment
association Korea 66.67 66.67 December 31
IBKC-STI Pre-IPO Investment
Association No.1
Investment
association Korea 90.00 90.00 December 31
IBK Group Mutual Growth Fund Investment
association Korea 100.00 100.00 December 31
IBK Group Contents IP Investment Fund Investment
association Korea 90.00 90.00 December 31
IBK Group IP Value-up Fund Investment
association Korea 100.00 100.00 December 31
Banks Foundation for young
Entrepreneurs IBKC Pioneer Fund
Investment
association Korea 50.00 50.00 December 31
Gyeonggi-IBKC-STI Job Creation Fund Investment
association Korea 50.00 50.00 December 31
IBK Group KONEX Fund Investment
association Korea 100.00 100.00 December 31
IBKC-Solidus Future Creation Fund Investment
association Korea 50.00 50.00 December 31
IDV-IP Fishery Intellectual Property
Specialty Fund
Investment
association Korea 40.00 40.00 December 31
IBK Group IP Creation Fund Investment
association Korea 66.67 66.67 December 31
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
9
IBKC-STI New Growth Investment Fund
Ⅰ
Investment
association Korea 89.67 89.67 December 31
IBK Finance Group Union Contents
Investment Fund
Investment
association Korea 70.00 70.00 December 31
IBKC-JNT Secondary Fund Investment
association Korea 50.00 50.00 December 31
2015 KIF-IBKC/SBI Secondary IT
Venture Fund
Investment
association Korea 42.86 42.86 December 31
IBKC-SBI Bio Fund No.1 Investment
association Korea 50.00 50.00 December 31
IBKGroup Crowdfunding Matching Fund Investment
association Korea 100.00 100.00 December 31
IBKGroup Future Growth Engine Fund Investment
association Korea 100.00 100.00 December 31
IBK Capital Contents Investment Fund Investment
association Korea 50.00 50.00 December 31
IBKC-Medici Secondary Fund Investment
association Korea 42.86 42.86 December 31
IBKGroup IP Value-up Fund No.2 Investment
association Korea 50.00 50.00 December 31
IBKC-GMB New Growth Industry Investment Fund
Investment
association Korea 50.00 - December 31
IBKC-MGI New Economic Growth Pre-IPO Fund
Investment
association Korea 50.00 - December 31
GMB-IBKC Biotech Investment Fund
Investment
association Korea 49.77 - December 31
IBKC-UNION Secondary Mezzanine Fund
Investment
association Korea 50.00 - December 31
KB Haeorum Private Securities 69 Bond, 8 investment funds
Investment
association Korea 100.00 100.00 December 31
KTB Confidence Investment Trust No. 31 Investment
association Korea 99.64 99.64 December 31
Heungkuk High-class Private Securities
Investment Fund No.6
Investment
association Korea 67.11 67.11 December 31
Mireaasset Deoksong-Naegak
Expressway Private Equity Fund
Investment
association Korea 100.00 - December 31
Trust with repayment guarantees of
principal Trust Korea - - December 31
Trust with repayment guarantees of
principal and interest Trust Korea - - December 31
Myungdong City Maintenance Business
and 1 other
City maintenance
business Korea
55.00 ~
57.26
55.00 ~
57.26
December 31
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
10
2.2 Summary of Subsidiaries (1) IBK Capital Corporation IBK Capital Corporation (IBK Capital) was established on November 1, 1986, to provide services to small start-up companies. On November 6, 1986, the Bank, in accordance with Support for Small and Medium Enterprise Establishment Act, was listed as a small startup business investment organization. However on May 29, 2002, IBK Capital, in accordance with the Specialized Credit Financial Business Act, was engaged in installment financing business and venture capital
business. IBK Capital’s ordinary share as at June 30, 2017, amounts to \ 165,452 million.
(2) IBK Asset Management Co., Ltd. IBK Asset Management Co., Ltd. was established on October 26, 2004, to engage in investment trust asset management and consultation, entrusted investment, and future funds management, in accordance with the Capital Market and Financial Investment Business Act. IBK Asset Management
Co., Ltd.’s ordinary share as at June 30, 2017, is \ 20,000 million.
(3) IBK Credit Information Corp. IBK Credit Information Corp. (IBK Credit Information) was established on January 18, 2000, to engage in services such as loan collection and credit research. IBK Credit Information’s ordinary
share as at June 30, 2017, amounts to \ 3,000 million.
(4) IBK Securities Co., Ltd. IBK Securities Co., Ltd. (IBK Securities) was established on May 29, 2008, to engage in trading of
security and futures. IBK Securities’ ordinary share as at June 30, 2017, amounts to \ 477,000
million.
(5) IBK System Co., Ltd. IBK Systems, Co., Ltd. (IBK System) was established on March 22, 1991, to engage in information system development and its sales, and advisory services including consulting on introduction and implementation of computer system. IBK System’s ordinary share as at June 30, 2017, amounts to
\ 3,100 million.
(6) Industrial Bank of Korea (China) Limited
Industrial Bank of Korea (China) Limited was established on June 22, 2009, with five local branches in China. Industrial Bank of Korea (China) Limited’s ordinary share as at June 30, 2017, amounts to
\ 322,467 million.
(7) IBK Insurance Co., Ltd. IBK Insurance Co., Ltd. was established on July 9, 2010, to engage in retirement insurance and pension contracts, annuity insurance contracts and others, in accordance with the Guarantee of Workers’ Retirement Benefits Act and the Insurance Business Act. IBK Insurance Co., Ltd.’s ordinary
share as at June 30, 2017, is \ 190,000 million.
(8) IBK Savings Bank Co., Ltd. IBK Savings Bank Co., Ltd. was incorporated on October 11, 2011, for important business purposes such as protecting depositors in accordance with Depositor Protection Act, maintaining safety of financial system, working on credit business approved by Financial Services Commission, etc. The Bank has acquired 100% of shares on July 15, 2013, and obtained control. The ordinary share as at
June 30, 2017, amounts to \ 106,610 million.
(9) IBK Capital Myanmar Co., Ltd. IBK Capital Myanmar Co., Ltd. was established on December 23, 2015, to engage in microfinancing.
IBK Capital Myanmar Co., Ltd.’s ordinary share as at June 30, 2017, amounts to \ 9,197 million, and
IBK Capital Corporation holds 99.99% of the shares.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
11
(10) IBK Private Equity Fund No.3 IBK Private Equity Fund No.3 was established in accordance with the Capital Market and Financial Investment Business Act for investment purposes. IBK Private Equity Fund No.3’s ordinary share as
at June 30, 2017, is \ 11,229 million. The Bank is a general manager of these private equity funds.
(11) IBK-SKS Private Equity Fund No.4 IBK-SKS Private Equity Fund No.4 was established in accordance with the Capital Market and Financial Investment Business Act to participate in the investees’ management and others. The Bank is a joint general partner and also the majority of seats in the Investment Committee, granting the
Bank the ability to control the entity. The ordinary share as at June 30, 2017, is \ 2,174 million.
(12) IBK Recovery Private Equity Fund IBK Recovery Private Equity Fund was established in accordance with the Capital Market and Financial Investment Business Act to participate in the investees’ management and others. IBK
recovery private equity fund’s ordinary share as at June 30, 2017, is \ 33,505 million. The Bank and
IBK Securities hold 79.86%, 19.96% of the shares as joint general partners, respectively, and also the majority of seats in the Investment Committee, granting the Bank the ability to control the entity.
(13) IBK-AJU Star Seekers No. 1 Private Equity Fund IBK-AJU Star Seekers No. 1 Private Equity Fund, in accordance with Financial Investment Services and Capital Markets Act, was established on October 25, 2012, as an investment management entity by operating and investing in equity stakes in other companies. The Bank holds 35.00% of the shares as a joint general partner and also the majority of seats in the Investment Committee, granting the
Bank the ability to control the entity. The ordinary share as at June 30, 2017, is \ 47,024 million.
(14) IBK SKS Private Equity Fund 2012 IBK SKS Private Equity Fund 2012, in accordance with Financial Investment Services and Capital Markets Act, was established on January 7, 2013, as an investment management entity by operating and investing in equity stakes in other companies. The Bank holds 44.79% of the shares as a joint general partner and also the majority of seats in the Investment Committee, granting the Bank the
ability to control the entity. The ordinary share as at June 30, 2017, is \ 164,280 million.
(15) IBK POSCO TRUBEN Recovery Private Equity Fund No.1 IBK POSCO TRUBEN Recovery Private Equity Fund No.1, in accordance with Financial Investment Services and Capital Markets Act, was established on May 27, 2013, as an investment management entity by operating and investing in equity stakes in other companies. The Bank holds 49.50% of the shares as a joint general partner and also the majority of seats in the Investment Committee, granting
the Bank the ability to control the entity. The ordinary share as at June 30, 2017, is \ 74,044 million.
(16) IBK NH Small Giant Private Equity Fund IBK NH Small Giant Private Equity Fund, in accordance with Financial Investment Services and Capital Markets Act, was established on August 9, 2013, as an investment management entity by operating and investing in equity stakes in other companies. The Bank holds 50.00% of the shares as a joint general partner and also the majority of seats in the Investment Committee, granting the Bank
the ability to control the entity. The ordinary share as at June 30, 2017, is \ 11,520 million.
(17) No.1 Technology Financing Private Equity Fund No.1 Technology Financing Private Equity Fund was established on January 7, 2015, in accordance with the Capital Market and Financial Investment Business Act for investment purposes. The Bank holds 30.00% of the shares as a joint general partner and also the majority of seats in the Investment Committee, granting the Bank the ability to control the entity. The ordinary share as at June 30, 2017,
is \ 59,756 million.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
12
(18) Value Brand Korea No.1 Private Equity Fund Value Brand Korea No.1 Private Equity Fund, in accordance with Financial Investment Services and Capital Markets Act, was established on August 22, 2016, as an investment management entity by operating and investing in equity stakes in other companies. The Bank holds 50.00% of the shares as a joint general partner and also the majority of seats in the Investment Committee, granting the Bank
the ability to control the entity. The ordinary share as at June 30, 2017, is \ 33,984 million.
(19) IBK-EUM Private Equity Fund No.1 IBK-EUM Private Equity Fund No.1, in accordance with Financial Investment Services and Capital Markets Act, was established on June 5, 2017, as an investment management entity by operating and investing in equity stakes in other companies. There are no ordinary shares issued as at June 30, 2017. The Bank has entered into an agreement to invest into 42.11% of the shares as a joint general partner, while IBK Capital is to invest into 10.52% of the shares as a limited partner.
(20) IBK KIP Growth Stepstone Private Equity Fund IBK KIP Growth Stepstone Private Equity Fund, in accordance with Financial Investment Services and Capital Markets Act, was established on June 30, 2017, as an investment management entity by operating and investing in equity stakes in other companies. There are no ordinary shares issued as at June 30, 2017. The Bank has entered into an agreement to invest into 50.00% of the shares as a joint general partner.
(21) IBKC-TONGYANG Growth 2013 Private Equity Fund IBKC-TONGYANG Growth 2013 Private Equity Fund, in accordance with Financial Investment Services and Capital Markets Act, was established on August 18, 2014, as an investment management entity by operating and investing in equity stakes in other companies. IBK Capital holds
35.71% of the shares as a general partner. The ordinary share as at June 30, 2017, is \ 17,444
million.
(22) IBKC-INNOBIZ Material Special Investment Association
IBKC-INNOBIZ Material Special Investment Association, in accordance with the Specialized Credit Financial Business Act, was established on November 20, 2008, to invest more than 60% of the aggregate capital commitments in material special corporations as defined under the Special Measures Law for the Development of Components Related to the Components & Materials Industry, for the purpose of efficient operation, management and distribution of its properties. IBKC-INNOBIZ Material Special Investment Association’s contributed capital as at June 30, 2017, is
\ 6,300 million. The Bank holds 16.67% of the shares as a limited partner, while IBK Capital holds
43.33% of the shares as a general partner. IBK Capital is obligated to cover for the loss up to 40% of the equity holds.
(23) IBK Small Business Coexistence Investment Association No.1 IBK Small Business Coexistence Investment Association No.1, in accordance with the Specialized Credit Financial Business Act, was established on March 17, 2009, for the purpose of efficient operation, management and distribution of its capital. As at June 30, 2017, the Bank holds 50.00% of the shares as a limited partner, while IBK Capital holds 50.00% of the shares as a general
partner. The Association’s contributed capital as at June 30, 2017, is \ 1,200 million. IBK Capital is
obligated to cover for the loss up to total management fees received upon liquidation.
(24) IBK Small Business Coexistence Investment Association No.2 IBK Small Business Coexistence Investment Association No.2, in accordance with the Specialized Credit Financial Business Act, was established on April 16, 2012, for the purpose of efficient operation, management and distribution of its capital. As at June 30, 2017, the Bank holds 50.00% of the shares as a limited partner, while IBK Capital holds 50.00% of the shares as a general
partner. The Association’s contributed capital June 30, 2017, is \ 5,400 million.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
13
(25) IBK Cultural Contents Cooperative Investment Association IBK Cultural Contents Cooperative Investment Association was established on April 19, 2012, in accordance with the Specialized Credit Financial Business Act, for the purpose of efficient operation, management and asset allocation as a new technology venture capital firm. As at June 30, 2017, total
contributed capital is \ 1,200 million; the Bank holds 33.33% of the shares as a limited partner, and
IBK Capital, a subsidiary of the Bank, holds 33.34% of the shares as a general partner.
(26) IBKC-STI Pre-IPO Investment Association No.1 IBKC-STI Pre-IPO Investment Association No.1, in accordance with the Specialized Credit Financial Business Act, was established on February 21, 2012, as a technology venture capital investment association that allocates and manages investment in order to promote small businesses. Total
contributed capital as at June 30, 2017, is \ 5,450 million and IBK Capital and Seoul Venture
Investment Corporation act as joint general partners and IBK Capital holds 90.00% of the entity.
(27) IBK Group Mutual Growth Fund IBK Group Mutual Growth Fund, in accordance with the Specialized Credit Financial Business Act, was established on February 7, 2013, for the purpose of efficient operation, management and asset allocation as a new technology venture capital firm. As at June 30, 2017, total contributed capital is
\ 10,400 million; the Bank holds 50.00% of the shares as a limited partner, and IBK Capital, a
subsidiary of the Bank, holds 50.00% of the shares as a general partner. IBK Capital is obligated to cover for the loss up to total management fees received upon liquidation.
(28) IBK Group Contents IP Investment Fund IBK Group Contents IP Investment Fund, in accordance with the Specialized Credit Financial Business Act, was established on April 5, 2013, for the purpose of efficient operation, management and asset allocation as a new technology venture capital firm. As at June 30, 2017, total contributed
capital is \ 5,000 million; the Bank holds 45.00% of the shares as a limited partner, and IBK Capital,
a subsidiary of the Bank, holds 45.00% of the shares as a general partner. IBK Capital is obligated to cover for the loss up to total management fees received upon liquidation.
(29) IBK Group IP Value-up Fund IBK Group IP Value-up Fund, in accordance with the Specialized Credit Financial Business Act, was established on April 4, 2013, for the purpose of efficient operation, management and asset allocation
as a new technology venture capital firm. As at June 30, 2017, total contributed capital is \ 21,400
million; the Bank holds 50.00% of the shares as a limited partner, and IBK Capital, a subsidiary of the Bank, holds 50.00% of the shares as a general partner. IBK Capital is obligated to cover for the loss up to total management fees received upon liquidation.
(30) Banks Foundation for young Entrepreneurs IBKC Pioneer Fund Banks Foundation for young Entrepreneurs IBKC Pioneer Fund, a subsidiary, was founded on September 6, 2013, for the effective management and capital distribution of new technology investment association under the Credit Finance Business Act. Total contributed capital amounts to
\ 16,500 million as at June 30, 2017, and IBK Capital owns 50.00% of shares as a general partner.
Meanwhile, IBK Capital is obligated to cover for the loss up to total management fees received upon liquidation.
(31) Gyeonggi-IBKC-STI Job Creation Fund Gyeonggi-IBKC-STI Job Creation Fund, a subsidiary, was established on September 30, 2013, for the effective management and capital distribution of venture investment under the Support for Small and
Medium Enterprise Establishment Act. Total contributed capital amounts to \ 30,000 million as at
June 30, 2017, and IBK Capital owns 50.00% of shares as a general partner. Meanwhile, IBK Capital is obligated to cover for the loss up to total stated fee in the agreement.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
14
(32) IBK Group KONEX Fund IBK Group KONEX Fund, a subsidiary, was founded on October 30, 2013, for the effective management and capital distribution of the new technology investment association under the Credit
Finance Business Act. Total contributed capital amounts to \ 20,100 million as at June 30, 2017. The
Bank and IBK Securities own 50.00%, 11.67% of shares as joint limited partners and IBK Capital owns 38.33% of shares as a general partner. Meanwhile, IBK Capital is obligated to cover for the loss up to total management fees received upon liquidation.
(33) IBKC-Solidus Future Creation Fund IBKC-Solidus Future Creation Fund, as a subsidiary, was founded on December 27, 2013, for the effective management and capital distribution of Korean Venture Investment Association under the Act on Special Measures for the Promotion of Venture Businesses. IBKC-Solidus Future Creation Fund invests its capital to improve the value of superior venture businesses, and ultimately to
maximize the value of its investees. Total contributed capital amounts to \ 18,000 million as at June
30, 2017, and IBK Capital owns 50.00% of shares as a general partner.
(34) IDV-IP Fishery Intellectual Property Specialty Fund IDV-IP Fishery Intellectual Property Specialty Fund, as a subsidiary was founded on July 9, 2013, for
the effective management and capital distribution of Agricultural, Fisheries and Food Investment
Funds under the Act on Formation and Operation of Agricultural, Fisheries and Food Investment
Funds. Total contributed capital amounts to \ 13,500 million as at June 30, 2017, and IBK Capital
owns 40.00% of shares as a joint general partner. IBK Capital is obligated to cover for the loss up to 5%
of the equity held.
(35) IBK Group IP Creation Fund IBK Group IP Creation Fund, a subsidiary, was founded on July 11, 2014, for the effective
management and capital distribution of new technology investment association under the Credit
Finance Business Act. Total contributed capital amounts to \ 30,000 million as at June 30, 2017. The
Bank owns 33.33% of shares as joint limited partner and IBK Capital owns 33.34% of shares as a
general partner. Meanwhile, IBK Capital is obligated to cover for the loss up to total management fees
received upon liquidation.
(36) IBKC-STI New Growth Investment Fund I IBKC-STI New Growth Fund No.1, a subsidiary, was founded on April 17, 2015, for the effective management and capital distribution of new technology investment association under the Credit
Finance Business Act. Total contributed capital amounts to \ 9,000 million as at June 30, 2017. IBK
Capital owns 89.67% of shares as a general partner.
(37) IBK Finance Group Union Contents Investment Fund IBK Finance Group Union Contents Investment Fund, a subsidiary, was established on July 24, 2015, for the effective management and capital distribution of venture investment under the Support for
Small and Medium Enterprise Establishment Act. Total contributed capital amounts to \ 10,000
million as at June 30, 2017, and the Bank owns 30.00% of shares as a limited partner. Meanwhile, IBK Capital owns 40.00% of shares as a general partner.
(38) IBKC-JNT Secondary Fund IBKC-JNT Secondary Fund, as a subsidiary, was founded on January 11, 2016, for the effective management and capital distribution of Korean Venture Investment Association under the Act on Special Measures for the Promotion of Venture Businesses. IBKC-JNT Secondary Fund invests its capital to improve the value of superior venture businesses, and ultimately to maximize the value of
its investees. Total contributed capital amounts to \ 5,000 million as at June 30, 2017, and IBK
Capital owns 50.00% of shares as a general partner.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
15
(39) 2015 KIF-IBKC/SBI Secondary IT Venture Fund 2015 KIF-IBKC/SBI Secondary IT Venture Fund, as a subsidiary, was founded on February 2, 2016, for the effective management and capital distribution of Korean Venture Investment Association under the Act on Special Measures for the Promotion of Venture Businesses. 2015 KIF-IBKC/SBI Secondary IT Venture Fund invests its capital to improve the value of superior venture businesses,
and ultimately to maximize the value of its investees. Total contributed capital amounts to \ 17,000
million as at June 30, 2017, and IBK Capital owns 42.86% of shares as a general partner.
(40) IBKC-SBI Bio Fund No.1 IBKC-SBI Bio Fund No.1, a subsidiary, was established on March 8, 2016, for the effective management and capital distribution of venture investment under the Support for Small and Medium
Enterprise Establishment Act. Total contributed capital amounts to \ 27,150 million as at June 30,
2017, and IBK Capital owns 50.00% of shares as a general partner.
(41) IBKGroup Crowdfunding Matching Fund IBKGroup Crowdfunding Matching Fund, a subsidiary, was founded on March 31, 2016, for the
effective management and capital distribution of new technology investment association under the
Credit Finance Business Act. Total contributed capital amounts to \ 6,000 million as at June 30,
2017. The Bank own 50.00% of shares as joint limited partner and IBK Capital owns 50.00% of
shares as a general partner.
(42) IBKGroup Future Growth Engine Fund IBKGroup Future Growth Engine Fund, a subsidiary, was founded on April 7, 2016, for the effective
management and capital distribution of new technology investment association under the Credit
Finance Business Act. Total contributed capital amounts to \ 9,000 million as at June 30, 2017. The
Bank own 50.00% of shares as joint limited partner and IBK Capital owns 50.00% of shares as a
general partner.
(43) IBK Capital Contents Investment Fund IBK Capital Contents Investment Fund, a subsidiary, was founded on June 14, 2016, for the effective
management and capital distribution of new technology investment association under the Credit
Finance Business Act. Total contributed capital amounts to \ 6,000 million as at June 30, 2017, and
IBK Capital owns 50.00% of shares as a general partner.
(44) IBKC-Medici Secondary Fund IBKC-Medici Secondary Fund, as a subsidiary, was founded on July 20, 2016, for the effective management and capital distribution of Korean Venture Investment Association under the Act on Special Measures for the Promotion of Venture Businesses. IBKC-Medici Secondary Fund invests its capital to improve the value of superior venture businesses, and ultimately to maximize the value of
its investees. Total contributed capital amounts to \ 12,810 million as at June 30, 2017, and IBK
Capital owns 42.86% of shares as a general partner.
(45) IBKGroup IP Value-up Fund No.2 IBKGroup IP Value-up Fund No.2, a subsidiary, was founded on October 27, 2016, for the effective
management and capital distribution of new technology investment association under the Credit
Finance Business Act. Total contributed capital amounts to \ 4,000 million as at June 30, 2017. The
Bank own 25.00% of shares as joint limited partner and IBK Capital owns 25.00% of shares as a
general partner.
(46) IBKC-GMB New Growth Industry Investment Fund IBKC-GMB New Growth Industry Investment Fund, a subsidiary, was founded on January 5, 2017, for
the effective management and capital distribution of new technology investment association under the
Credit Finance Business Act. Total contributed capital amounts to \ 9,900 million as at June 30,
2017, and IBK Capital owns 50.00% of shares as a general partner.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
16
(47) IBKC-MGI New Economic Growth Pre-IPO Fund IBKC-MGI New Economic Growth Pre-IPO Fund, a subsidiary, was established on March 17, 2017, for the effective management and capital distribution of venture investment under the Support for
Small and Medium Enterprise Establishment Act. Total contributed capital amounts to \ 10,000
million as at June 30, 2017, and IBK Capital owns 50.00% of shares as a general partner.
(48) GMB-IBKC Biotech Investment Fund GMB-IBKC Biotech Investment Fund, a subsidiary, was founded on June 23, 2017, for the effective management and capital distribution of new technology investment association under the Credit
Finance Business Act. Total contributed capital amounts to \ 22,100 million as at June 30, 2017, and
IBK Capital owns 49.77% of shares as a general partner.
(49) IBKC-UNION Secondary Mezzanine Fund IBKC-UNION Secondary Mezzanine Fund, a subsidiary, was founded on June 2, 2017, for the effective management and capital distribution of Korean Venture Investment Association under the Act on Special Measures for the Promotion of Venture Businesses. Total contributed capital amounts
to \ 3,000 million as at June 30, 2017, and IBK Capital owns 50.00% of shares as a general partner.
(50) Other subsidiaries These consist of private equity funds, whose shares the Bank holds more than 50% of, special purpose companies and trust with repayment guarantees of principal and interest. There are seven subsidiaries, including IBKC-GMB New Growth Industry Investment Fund, that were consolidated during the six-month period ended June 30, 2017. In addition, there are two subsidiaries, including Samsung Plus Alpha Private Bond Balanced 2, that were liquidated during the six-month period ended June 30, 2017. The financial information of subsidiaries as at and for the six-month period ended June 30, 2017, and as at December 31, 2016 and for the six-month period ended June 30, 2016, follows:
(In millions of Korean won) June 30, 2017
Total
assets
Total
liabilities
Total
equity
Operating
income
Profit (loss)
for the
period
IBK Capital Corporation 5,130,465 4,479,820 650,645 131,618 40,069
IBK Asset Management Co., Ltd. 51,990 2,493 49,497 8,272 2,977
IBK Credit Information Corp. 23,411 2,951 20,460 12,952 867
IBK Securities Co., Ltd 5,072,134 4,497,739 574,395 526,963 21,824
IBK System Co., Ltd. 54,678 23,310 31,368 56,257 708
Industrial Bank of Korea (China) Limited 3,866,135 3,480,113 386,022 119,238 7,446
IBK Insurance Co., Ltd. 4,617,739 4,307,149 310,590 648,319 22,984
IBK Savings Bank Co., Ltd. 878,669 779,701 98,968 27,415 3,486
IBK Capital Myanmar Co., Ltd. 8,626 194 8,432 253 (212)
IBK Private Equity Fund No.3 583 - 583 41 35
IBK-SKS Private Equity Fund No.4 29,148 - 29,148 10,090 2,582
IBK Recovery Private Equity Fund 26,053 957 25,096 823 (5,093)
IBK-AJU Star Seekers No.1 Private Equity
Fund 42,874 179 42,695 168 (22)
IBK SKS Private Equity Fund 2012 232,989 984 232,005 10,468 9,392
IBK POSCO TRUBEN Recovery Private
Equity Fund No.1 57,334 476 56,858 200 (829)
IBK NH Small Giant Private Equity Fund 9,946 297 9,649 - (309)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
17
(In millions of Korean won) June 30, 2017
Total
assets
Total
liabilities
Total
equity
Operating
income
Profit (loss)
for the
period
No.1 Technology Financing Private Equity
Fund
56,281 763 55,518 54 (790)
Value Brand Korea No.1 Private Equity Fund 32,975 457 32,518 33 (1,129)
IBK-EUM Private Equity Fund No.1 - 94 (94) - (94)
IBK KIP Growth Stepstone Private Equity
Fund - 4 (4) - (4)
IBKC IBKC-TONGYANG Growth 2013
Private Equity Fund
16,548 286 16,262 1,909 1,294
IBKC-INNOBIZ Material Special Investment
Association
2,977 194 2,783 27 (593)
IBK Small Business Coexistence
Investment Association No.1
1,571 - 1,571 - (4)
IBK Small Business Coexistence
Investment Association No.2
9,537 257 9,280 58 (318)
IBK Cultural Contents Cooperative
Investment Association
1,343 - 1,343 48 (36)
IBKC-STI Pre-IPO Investment Association
No.1
5,795 - 5,795 111 40
IBK Group Mutual Growth Fund 11,436 229 11,207 288 (664)
IBK Group Contents IP Investment Fund 4,898 29 4,869 20 (331)
IBK Group IP Value-up Fund 24,004 1,072 22,932 681 -
Banks Foundation for young Entrepreneurs
IBKC Pioneer Fund 17,715 170 17,545 75 246
Gyeonggi-IBKC-STI Job Creation Fund 28,315 155 28,160 1,549 (627)
IBK Group KONEX Fund 19,882 697 19,185 71 (1,285)
IBKC-Solidus Future Creation Fund 19,157 156 19,001 58 (107)
IDV-IP Fishery Intellectual Property Specialty
Fund 12,727 - 12,727 94 (52)
IBK Group IP Creation Fund 29,404 - 29,404 61 (587)
IBKC-STI New Growth Investment Fund Ⅰ 7,585 - 7,585 19 (362)
IBK Finance Group Union Contents
Investment Fund 10,531 - 10,531 935 829
IBKC-JNT Secondary Fund 4,235 - 4,235 4 (124)
2015 KIF-IBKC/SBI Secondary IT Venture
Fund 15,823 338 15,485 2,662 (264)
IBKC-SBI Bio Fund No.1 29,124 209 28,915 398 179
IBKGroup Crowdfunding Matching Fund 5,610 99 5,511 1 (111)
IBKGroup Future Growth Engine Fund 8,662 298 8,364 56 (244)
IBK Capital Contents Investment Fund 5,895 149 5,746 5 (146)
IBKC-Medici Secondary Fund 12,508 - 12,508 4 (353)
IBKGroup IP Value-up Fund No.2 3,790 124 3,666 4 (245)
IBKC-GMB New Growth Industry Investment
Fund 9,901 210 9,691 6 (209)
IBKC-MGI New Economic Growth Pre-IPO
Fund 9,916 - 9,916 6 (84)
GMB-IBKC Biotech Investment Fund 22,364 - 22,364 266 264
IBKC-UNION Secondary Mezzanine Fund 2,989 - 2,989 - (11)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
18
(In millions of Korean won) June 30, 2017
Total
assets
Total
liabilities
Total
equity
Operating
income
Profit (loss)
for the
period
KB Haeorum Private Securities 69 Bond,
8 investment funds
803,933 55,760 748,173 21,832 11,455
KTB Confidence Investment Trust No. 31 4,478 5 4,473 13 12
Heungkuk High-class Private Securities
Investment Fund No.6 306 - 306 - -
Mireaasset Deoksong-Naegak Expressway Private Equity Fund 67,879 17 67,862 362 362
Trust with repayment guarantees of principal
and interest
556,730 530,884 25,846 5,280 89
Trust with repayment guarantees of principal 1,269 1,265 4 19 -
Myungdong City Maintenance Business
and 1 other
33,298 67,341 (34,043) 22,254 315
(In millions of Korean won) December 31, 2016 and June 30, 2016
Total
assets
Total
liabilities
Total
equity
Operating
income
Profit (loss)
for the
period
IBK Capital Corporation 4,635,471 4,019,513 615,958 141,191 51,843
IBK Asset Management Co., Ltd. 50,362 2,893 47,469 7,279 2,192
IBK Credit Information Corp. 23,069 2,756 20,313 12,088 1,138
IBK Securities Co., Ltd 3,927,654 3,374,970 552,684 389,582 20,462
IBK System Co., Ltd. 47,975 16,850 31,125 53,856 2,212
Industrial Bank of Korea (China) Limited 3,508,242 3,117,455 390,787 109,869 10,191
IBK Insurance Co., Ltd. 4,053,879 3,769,397 284,482 423,946 17,233
IBK Savings Bank Co., Ltd. 791,088 695,657 95,431 25,467 9,174
IBK Capital Myanmar Co., Ltd. 3,137 26 3,111 - -
IBK Private Equity Fund No.3 567 - 567 2,129 2,118
IBK-SKS Private Equity Fund No.4 34,875 - 34,875 54,961 56,594
IBK Recovery Private Equity Fund 29,092 916 28,176 3,182 65
IBK-AJU Star Seekers No.1 Private Equity
Fund 54,361 358 54,003 880 408
IBK SKS Private Equity Fund 2012 231,767 1,022 230,745 1,969 842
IBK POSCO TRUBEN Recovery Private
Equity Fund No.1 45,175 566 44,609 143 (12,167)
IBK NH Small Giant Private Equity Fund - 1,252 (1,252) - (249)
No.1 Technology Financing Private Equity
Fund 58,719 - 58,719 158 (703)
Value Brand Korea No.1 Private Equity Fund 3,030 318 2,712 - -
IBKC IBKC-TONGYANG Growth 2013
Private Equity Fund 20,286 1,818 18,468 100 (508)
IBKC-INNOBIZ Material Special Investment
Association 3,498 167 3,331 4 (949)
IBK Small Business Coexistence
Investment Association No.1 1,540 9 1,531 778 260
IBK Small Business Coexistence
Investment Association No.2 9,841 445 9,396 6,203 4,805
IBK Cultural Contents Cooperative
Investment Association 1,649 270 1,379 994 (85)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
19
(In millions of Korean won) December 31, 2016 and June 30, 2016
Total
assets
Total
liabilities
Total
equity
Operating
income
Profit (loss)
for the
period
IBKC-STI Pre-IPO Investment Association
No.1 5,797 42 5,755 1,619 1,024
IBK Group Mutual Growth Fund 12,878 310 12,568 1,197 1,089
IBK Group Contents IP Investment Fund 5,273 72 5,201 31 (143)
IBK Group IP Value-up Fund 29,129 1,461 27,668 1,134 875
Banks Foundation for young Entrepreneurs
IBKC Pioneer Fund 19,397 98 19,299 46 (750)
Gyeonggi-IBKC-STI Job Creation Fund 28,869 81 28,788 80 (242)
IBK Group KONEX Fund 23,577 564 23,013 946 779
IBKC-Solidus Future Creation Fund 19,110 3 19,107 1,304 914
IDV-IP Fishery Intellectual Property Specialty
Fund 12,779 - 12,779 111 (81)
IBK Group IP Creation Fund 23,461 140 23,321 270 (122)
IBKC-STI New Growth Investment Fund Ⅰ 8,136 189 7,947 10 (367)
IBK Finance Group Union Contents
Investment Fund 9,753 52 9,701 9 (94)
IBKC-JNT Secondary Fund 4,422 63 4,359 2 (105)
2015 KIF-IBKC/SBI Secondary IT Venture
Fund 13,103 354 12,749 14 (555)
IBKC-SBI Bio Fund No.1 28,844 108 28,736 22 (157)
IBKGroup Crowdfunding Matching Fund 6,002 151 5,851 2 (49)
IBKGroup Future Growth Engine Fund 2,997 443 2,554 4 (136)
IBK Capital Contents Investment Fund 2,002 110 1,892 - (9)
IBKC-Medici Secondary Fund 6,036 176 5,860 - -
IBKGroup IP Value-up Fund No.2 2,001 90 1,911 - -
IBK Panorama Balanced No. 52, 9
investment funds 804,058 26,955 777,103 21,201 5,305
KTB Confidence Investment Trust No. 31 4,466 - 4,466 15 7
Heungkuk High-class Private Securities
Investment Fund No.6 306 - 306 - (490)
IBK Davos Global High-Dividends Master
Fund [Equity] 6,240 125 6,115 - 79
Trust with repayment guarantees of principal
and interest 549,456 523,699 25,757 8,015 82
Trust with repayment guarantees of principal 1,218 1,214 4 29 -
Myungdong City Maintenance Business
and 1 other 34,219 68,841 (34,622) 29,075 (1,666)
Total assets, liabilities and equity represent the amount as at December 31, 2016. Operating income
and profit (loss) for the period are for the six-month period ended June 30, 2016.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
20
2.3 Basis of Preparation 2.3.1 Application of Korean IFRS The Group maintains its accounting records in Korean won and prepares statutory financial
statements in the Korean language (Hangul) in accordance with the International Financial Reporting
Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying consolidated
interim financial statements have been condensed, restructured and translated into English from the
Korean language financial statements.
The Group’s condensed consolidated interim financial statements for the six-month period ended June 30, 2017, have been prepared in accordance with Korean IFRS 1034 Interim Financial Reporting. These condensed consolidated interim financial statements have been prepared in accordance with Korean IFRS which is effective or early adopted as at June 30, 2017.
2.3.2 Changes in Accounting Policies and Disclosures
(a) New and amended standards adopted by the Group The Group has applied the following standards and amendments for the first time for their annual
reporting period commencing January 1, 2017. The adoption of these amendments did not have any
impact on the current period or any prior period and is not likely to affect future periods.
- Amendments to Korean IFRS 1007 Statement of Cash Flows
Amendments to Korean IFRS 1007 Statement of Cash flows require to provide disclosures that
enable users of interim financial statements to evaluate changes in liabilities arising from financing
activities, including both changes arising from cash flows and non-cash flows.
- Amendments to Korean IFRS 1012 Income Tax
Amendments to Korean IFRS 1012 clarify how to account for deferred tax assets related to debt
instruments measured at fair value. Korean IFRS 1012 provides requirements on the recognition and
measurement of current or deferred tax liabilities or assets. The amendments issued clarify the
requirements on recognition of deferred tax assets for unrealized losses, to address diversity in
practice.
- Amendments to Korean IFRS 1112 Disclosures of Interests in Other Entities
Amendments to Korean IFRS 1112 clarify when an entity’s interest in a subsidiary, a joint venture or an associate is classified as held for sales in accordance with Korean IFRS 1105, the entity is required to disclose other information except for summarized financial information in accordance with Korean IFRS 1112. (b) New standards and interpretations not yet adopted by the Group Certain new accounting standards and interpretations that have been published that are not mandatory for annual reporting period commencing January 1, 2017 and have not been early adopted by the Group are set out below.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
21
- Korean IFRS 1109 Financial Instruments The new standard for financial instruments issued on September 25, 2015 are effective for annual periods beginning on or after January 1, 2018 with early application permitted. This standard will replace Korean IFRS 1039 Financial Instruments: Recognition and Measurement. The Group will apply the standards for annual periods beginning on or after January 1, 2018. The standard requires retrospective application with some exceptions. For example, an entity is not required to restate prior period in relation to classification and measurement (including impairment) of financial instruments. The standard requires prospective application of its hedge accounting requirements for all hedging relationships except the accounting for time value of options and other exceptions. Korean IFRS 1109 Financial Instruments requires all financial assets to be classified and measured on the basis of the entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. A new impairment model, an expected credit loss model, is introduced and any subsequent changes in expected credit losses will be recognized in profit or loss. Also, hedge accounting rules amended to extend the hedging relationship, which consists only of eligible hedging instruments and hedged items, qualifies for hedge accounting. An effective implementation of Korean IFRS 1109 requires preparation processes including financial impact assessment, accounting policy establishment, accounting system development and the system stabilization. The impact on the Group’s interim financial statements due to the application of the standard is dependent on judgements made in applying the standard, financial instruments held by the Group and macroeconomic variables.
With the implementation of Korean IFRS 1109, the Group is preparing for internal management process and is beginning to adjust accounting system for financial instruments reporting. Also, the Group is analyzing the financial effects of applying the standard. The Group performed an impact assessment to identify potential financial effects of applying Korean IFRS 1109. The assessment was performed based on retainable information as at December 31, 2016. The Group plans to perform more detailed analysis on financial effects base on additional information in the future; therefore, the results of the assessment may change due to additional information that the Group may obtain after the assessment. Meanwhile, the following areas are likely to be affected in general. (a) Classification and Measurement of Financial Assets When implementing Korean IFRS 1109, the classification of financial assets will be driven by the Group’s business model for managing the financial assets and contractual terms of cash flow. The following table shows the classification of financial assets measured subsequently at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss. If a hybrid contract contains a host that is a financial asset, the classification of the hybrid contract shall be determined for the entire contract without separating the embedded derivative.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
22
Business model for the contractual cash flows
characteristics
Solely represent payments of principal and interest
All other
Hold the financial asset for the collection of the contractual cash flows
Measured at amortized cost1
Recognized at fair value through profit or loss2
Hold the financial asset for the collection of the contractual cash flows and trading
Recognized at fair value through other comprehensive income1
Hold for trading Recognized at fair value through profit or loss
1 A designation at fair value through profit or loss is allowed only if such designation mitigates an accounting mismatch (irrevocable). 2 Equity investments not held for trading can be recorded in other comprehensive income (irrevocable). With the implementation of Korean IFRS 1109, the criteria to classify the financial assets at amortized cost or at fair value through other comprehensive income are more strictly applied than the criteria applied with Korean IFRS 1039. Accordingly, the financial assets at fair value through profit or loss may increase by implementing Korean IFRS 1109 and may result an extended fluctuation in profit or loss. According to Korean IFRS 1109, debt instruments those contractual cash flows do not represent solely payments of principal and interest and held for trading, and equity instruments that are not designated as instruments measured at fair value through other comprehensive income are measured at fair value through profit or loss. As at December 31, 2016, the Group holds debt and equity instruments classified as financial assets at fair value through profit or loss that amount to
\ 5,444,274 million and \ 303,504 million, respectively.
Based on results from the impact assessment, if the Group applies Korean IFRS 1109 to the financial assets held for trading as at December 31, 2016, the application will not have a material impact on the financial statements because the majority of the financial assets will still be classified as at fair value through profit or loss.
According to Korean IFRS 1109, a debt instrument is measured at fair value through other comprehensive income if the objective of the business model is achieved both by collecting contractual cash flows and selling financial assets; and the contractual cash flows represents solely payments of principal and interest on a specific date under contract terms. Also, equity instruments that are not held for trading, the Group can make an irrevocable election at initial recognition to classify the instruments as assets measured at fair value through other comprehensive income, which all subsequent changes in fair value being recognized in other comprehensive income and not recycled to profit or loss. As at December 31, 2016, the Group holds debt instruments of
\ 11,800,977 million and equity instruments of \ 4,970,020 million classified as financial assets
available-for-sale. Based on results from the impact assessment of Korean IFRS 1109, if Korean IFRS 1109 is applied for the above debt instruments classified as financial assets available-for-sale, the Group expects the majority of the financial assets to be measured at fair value through other comprehensive income. In addition, the Group plans to designate the majority of the equity instruments that are not held for trading as assets measured at fair through other comprehensive income and therefore, the application of the new standard does not have a material impact on the Group’s financial statements. Meanwhile,
the financial assets contain beneficiary securities amounting \ 1,938,944 million and equity
investments amounting to \ 324,248 million, and these assets do not meet the criteria of the
contractual cash flows under the instrument solely represent payments of principal and interest on the
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
23
principal amount. The financial assets that do not meet the criteria are measured at fair value through profit or loss and as a result volatility in profit or loss may increase.
According to Korean IFRS 1109, a debt instrument is measured at amortized cost if: a) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows, and b) the contractual cash flows under the instrument solely represent payments of principal and interest.
As at December 31, 2016, the Group measured loans receivable of \ 195,236,300 million and
financial assets held-to-maturity of \ 14,133,675 million at amortized costs.
Based on results from the impact assessment of Korean IFRS 1109, the application of the new standard as at December 31, 2016, does not have a material impact on the Group’s financial statements. This is because the Group holds the majority of financial assets measured at amortized cost that meets the both criteria: a) the contractual terms of the financial assets that the Group holds give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on a specified date, and b) the Group holds the financial assets in order to collect contractual cash flow.
(b) Classification and Measurement of Financial Liabilities Korean IFRS 1109 requires the amount of the change in the liability’s fair value attributable to changes in the credit risk to be recognized in other comprehensive income, unless this treatment of the credit risk component creates or enlarges a measurement mismatch. Amounts presented in other comprehensive income are not subsequently transferred to profit or loss. Under Korean IFRS 1039, all financial liabilities designated at fair value through profit or loss recognized their fair value movements in profit or loss. However, under Korean IFRS 1109, certain fair value movements will be recognized in other comprehensive income and as a result profit or loss from fair value movements may change.
As at December 31, 2016, total financial liabilities, \ 233,942,819 million of which \ 1,233,788
million are designated at fair value through profit or loss, and during 2016, the Group recognized
changes in credit risk of \ 37 million as loss for the period for the financial liabilities measured at fair
value through profit or loss. Based on results from the impact assessment, the financial liabilities in applying Korean IFRS 1109 may not be expected to have a material impact on the financial statements because the majority of financial liabilities designated as at fair value through profit or loss as at December 31, 2016 have short maturities and insignificant fluctuations in their credit risks. (c) Impairment: Financial Assets and Contract Assets Korean IFRS 1109 sets out a new forward looking ‘expected loss’ impairment model which replaces the incurred loss model under Korean IFRS 1039 that impaired assets if there is an objective evidence and applies to:
Financial assets measured at amortized cost
Debt investments measured at fair value through other comprehensive income, and
Certain loan commitments and financial guaranteed contracts.
Under Korean IFRS 1109 ‘expected loss’ model, a credit event (or impairment ‘trigger’) no longer has to occur before credit losses are recognized. The Group will always recognize (at a minimum) 12-month expected credit losses in profit or loss. Lifetime expected losses will be recognized on assets for which there is a significant increase in credit risk after initial recognition.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
24
Stage Loss allowance
1 No significant increase in credit
risk after initial recognition1
12-month expected credit losses (expected credit losses that result from those default events on the financial
instrument that are possible within 12 months after the reporting date)
2 Significant increase in credit risk
after initial recognition Lifetime expected credit losses (expected credit losses that result from all possible default events over the life of
the financial instrument) 3 Credit-impaired
1 If the financial instrument has low credit risk at the reporting date, the Group may assume that the credit risk has not increased significantly since initial recognition.
Under Korean IFRS 1109, the asset that is credit-impaired at initial recognition would recognize all changes in lifetime expected credit losses since the initial recognition as a loss allowance with any changes recognized in profit or loss. For loans receivable, the Group measures the loss allowance at an amount equal to lifetime expected credit losses at initial recognition. The Group performed an impact assessment using the simplified approach with an assumption that the credit risk has not increased significantly since initial recognition because the financial instrument has a low credit risk at the end of the reporting period. As
a result of the impact assessment, the Group expected the loss allowance to be \ 2,929 billion as at
December 31, 2016 that is a \ 260 billion increase comparing to applying the current standard. BIS
capital ratio of 13.13% in applying the current standard will not materially change after applying the new standard. (d) Hedge Accounting Hedge accounting mechanics (fair value hedges, cash flow hedges and hedge of net investments in a foreign operation) required by Korean IFRS 1039 remains unchanged in Korean IFRS 1109, however, the new hedge accounting rules will align the accounting for hedging instruments more closely with the Group’s risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. Korean IFRS 1109 allows more hedging instruments and hedged items to qualify for hedge accounting, and relaxes the hedge accounting requirement by removing two hedge effectiveness tests that are a prospective test to ensure that the hedging relationship is expected to be highly effective and a quantitative retrospective test (within range of 80-125%) to ensure that the hedging relationship has been highly effective throughout the reporting period. With implementation of Korean IFRS 1109, volatility in profit or loss may be reduced as some items that were not eligible as hedged items or hedging instruments under Korean IFRS 1039 are now eligible under Korean IFRS 1109. Furthermore, when the Group first applies Korean IFRS 1109, it may choose as its accounting policy choice to continue to apply all of the hedge accounting requirements of Korean IFRS 1039 instead of the requirements of Korean IFRS 1109. As at December 31, 2016, the Group applies the hedge
accounting to financial statement items that amount to \ 5,257,319 million. With applying the hedge
accounting, the Group recognized the fair value changes of fair value hedging instruments for
\ 54,628 million in profit or loss.
- Korean IFRS 1115 Revenue from Contracts with Customers The new standard for the recognition of revenue issued in December 2015 will replace Korean IFRS
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
25
1018 Revenue, Korean IFRS 1011 Construction Contracts, and related Interpretations. Korean IFRS 1115 Revenue from Contracts with Customers will replace the risk-and-reward model under the current standards and is based on the principle that revenue is recognized when control of goods or services transfer to the customer by applying the five-step process. Key changes to current practices include guidance on separate recognition of distinct goods or services in any bundled arrangement, constraint on recognizing variable consideration, criteria on recognizing revenue over time, and increased disclosures. The new standard is effective for annual reporting beginning on or after January 1, 2018, but early application is permitted. The Group is in the process of determining the effects resulting from the adoption of the new standard.
- Amendments to Korean IFRS 1102 Share-based Payment
Amendments to Korean IFRS 1102 clarify accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. Amendments also clarify that the measurement approach should treat the terms and conditions of a cash-settled award in the same way as for an equity-settled award. This amendment will be effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements. 2.3.3 Accounting Policies
Significant accounting policies and method of computation used in the preparation of the condensed
consolidated interim financial statements are consistent with those of the consolidated financial
statements for the year ended December 31, 2016, except for the changes due to the application of
amendment and enactments of standards described in Note 2.3.2 New and amended standards
adopted by the Group, and the one described below.
2.3.4 Income tax expense
Income tax expense for the interim period is recognized based on management’s best estimate of the
weighted average annual income tax rate expected for the full financial year. The estimated average
annual tax rate is applied to the pre-tax income.
3. Critical accounting estimates and assumptions The preparation of financial statements requires the Group to make estimates and assumptions concerning the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. Significant accounting estimates and assumptions applied in the preparation of these condensed consolidated interim financial statements are the same as those that applied to the consolidated financial statements for the year ended December 31, 2016, except for the estimates used to determine income tax expense.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
26
4. Financial Assets and Liabilities Held for Trading Details of financial assets held for trading as at June 30, 2017 and December 31, 2016, are as follows: (In millions of Korean won)
June 30,
2017 December 31,
2016
Equity securities 313,463 303,504
Government and public bonds 2,621,997 1,945,179
Bank bonds 1,805,303 1,829,640
Corporate bonds in Korean won 1,251,772 1,198,959
Corporate bonds in foreign currencies 567,357 470,496
Foreign government bonds in foreign currencies 5,092 -
Derivatives 1,405,616 2,565,778
7,970,600 8,313,556
Details of securities included in financial assets held for trading as at June 30, 2017 and December 31, 2016, are as follows:
June 30, 2017
(In millions of Korean won) Par value Acquisition cost Amortized cost
Fair value
(Book amount)
Equity securities - 308,090 - 313,463
Government and public
bonds 2,649,452 2,633,256 2,626,780 2,621,997
Bank bonds 1,882,473 1,881,532 1,881,260 1,805,303
Corporate bonds in Korean
won 1,251,699 1,252,630 1,251,967 1,251,772
Corporate bonds in foreign
currencies 565,489 576,479 576,472 567,357
Foreign government bonds
in foreign currencies 5,088 5,088 5,088 5,092
6,354,201 6,657,075 6,341,567 6,564,984
December 31, 2016
(In millions of Korean won) Par value Acquisition cost Amortized cost
Fair value
(Book amount)
Equity securities - 302,239 - 303,504
Government and public
bonds 1,971,843 1,967,448 1,962,228 1,945,179
Bank bonds 1,890,008 1,887,778 1,887,308 1,829,640
Corporate bonds in Korean
won 1,198,806 1,202,214 1,191,419 1,198,959
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
27
Corporate bonds in foreign
currencies 473,946 467,078 466,648 470,496
5,534,603 5,826,757 5,507,603 5,747,778
Details of financial liabilities held for trading as at June 30, 2017 and December 31, 2016, are as follows:
June 30, 2017
(In millions of Korean won) Maturity Interest rate
(%) Par value Acquisition
cost
Fair value (Book
amount)
Securities sold 2019.06.10 ~
2047.03.10 1.25 ~ 4.25
568,000 559,946 560,092
Derivatives - - 68,752,938 - 1,514,042
69,320,938 559,946 2,074,134
December 31, 2016
(In millions of Korean won) Maturity Interest rate
(%) Par value Acquisition
cost
Fair value (Book
amount)
Securities sold 2019.12.10 ~
2046.03.10 1.25 ~ 4.25
118,007 110,596 110,107
Derivatives - - 66,078,552 - 2,510,853
66,196,559 110,596 2,620,960
Details of derivative transactions classified as financial assets and liabilities held for trading as at June 30, 2017 and December 31, 2016, are as follows: June 30, 2017
(In millions of
Korean won)
Assets
Liabilities
Nominal1
Valuation gains
Valuation losses
Interest rate forwards 5,195 - 50,000 1,248 -
Interest rate futures - - 1,159,861 2,785 3,180
Interest rate swaps
481,178 517,432 78,448,013 190,670 180,819
Interest rate options
(buy) 15,265 - 567,280 927 1,395
Interest rate options
(sell) - 36,658 600,000 2,819 169
501,638 554,090 80,825,154 198,449 185,563
Currency forwards 465,923 453,705 62,745,093 757,190 768,079
Currency futures - - 5,366 39 102
Currency swaps
308,656 276,178 19,160,614 485,516 459,728
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
28
774,579 729,883 81,911,073 1,242,745 1,227,909
Stock price index
futures - - 1,275,519 54,578 2,559
Stock swap
628 9,022 173,131 3,053 6,242
Stock options (buy)
73,609 - 1,275,462 3,745 10,222
Stock options (sell)
- 66,218 945,392 1,843 -
Stock price index
options (buy) 31,067 - 1,912,513 17,441 21,530
Stock price index
options (sell) - 142,899 2,258,125 11,358 97,306
105,304 218,139 7,840,142 92,018 137,859
Credit swaps
21,750 1,571 1,551,655 10,378 7,090
Others 2,881 430 134,174 3,087 7,600
Day 1 P&L
-536 9,929 - - -
1,405,616 1,514,042 172,262,198 1,546,677 1,566,021
December 31, 2016
(In millions of
Korean won)
Assets
Liabilities
Nominal1
Valuation gains
Valuation losses
Interest rate forwards 3,947 - 50,000 3,947 -
Interest rate futures - - 1,136,354 - -
Interest rate swaps
554,706 615,022 74,764,899 266,924 274,386
Interest rate options
(buy) 26,969 - 657,000 4,745 1,588
Interest rate options
(sell) - 50,545 860,000 1,834 4,188
585,622 665,567 77,468,253 277,450 280,162
Currency forwards 1,197,107 1,146,968 60,707,237 1,168,078 1,139,652
Currency futures - - 3,617 - -
Currency swaps
634,378 587,056 20,334,849 323,459 298,343
Currency options
(buy)
343 - 69,342 - 1,647
Currency options
(sell) - 343 69,342 1,708 -
1,831,828 1,734,367 81,184,387 1,493,245 1,439,642
Stock price index
futures - - 222,147 14,730 15,178
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
29
Stock swap
1,197 3,672 188,263 5,605 305
Stock options (buy)
77,054 - 363,595 25,542 10,231
Stock options (sell)
- 54,486 113,373 2,374 2,714
Stock price index
options (buy) 42,014 - 1,020,284 15,509 21,073
Stock price index
options (sell) - 37,938 1,351,165 21,450 8,346
120,265 96,096 3,258,827 85,210 57,847
Credit swaps
17,315 517 1,192,773 9,356 5,356
Others 3,530 256 173,036 15,902 5,248
Day 1 P&L
7,218 14,050 - - -
2,565,778 2,510,853 163,277,276 1,881,163 1,788,255
1 Nominal amount that is shown as the gross amount is the standard which the value change of derivatives is measured upon. Nominal amounts as at June 30, 2017 and December 31, 2016, do not indicate any market risk or credit risk. In the case that the Group values derivative financial instruments using inputs not based on observable market data, and the fair value calculated by the said valuation technique differs from the transaction price, then the fair value of the financial instruments is recognized as the transaction price. The difference between the fair value at initial recognition and the transaction price is deferred and amortized using a straight-line method by maturity of the financial instrument. However, in the case where inputs of the valuation techniques become observable in markets, the remaining deferred difference is immediately recognized in full as profit or loss for the period. Details and changes in total deferred difference for the six-month periods ended June 30, 2017 and 2016, are as follows: (In millions of Korean won) June 30, 2017 June 30, 2016
Balance at the beginning of the period (6,832) (6,617)
New transactions 1,134 (1,136) The amount reflected in the consolidated interim
statements of comprehensive income (4,767) 1,935
Balance at the end of the period (10,465) (5,818)
In the fair value measurement of the derivatives, the bid/ask price adjustment amounted to \ 638
million (December 31, 2016: \ 775 million) and the credit risk adjustment amounted to \ 1,226
million (December 31, 2016: \ 1,450 million) as at June 30, 2017 are recognized to reflect the
bid/ask price effect and the credit risk of the counterparty.
Details of loaned securities out of financial assets held for trading as at June 30, 2017 and December
31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Government and public
bonds
Korea Securities Finance
Corporation 10,014 -
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
30
Details of financial assets designated at fair value through profit or loss as at June 30, 2017 and December 31, 2016, are as follows:
June 30, 2017 December 31, 2016
(In millions of Korean won) Acquisition
cost Book amount Acquisition
cost Book amount
Equity securities1 22,252 19,949 28,829 29,152
Debt securities1 487,776 491,390 439,701 449,756
510,028 511,339 468,530 478,908
1 Book amount reflects its Day 1 P&L.
Above equity securities designated at fair value through profit or loss include compound derivatives of
\ 311,406 million (December 31, 2016: \ 314,285 million) and financial assets managed and
valuated under fair value standards. Other financial assets at fair value through profit and loss were
designated as they were carried at fair value as at the reporting period and their performances are
monitored and internally circulated. Details of financial liabilities designated at fair value through profit or loss as at June 30, 2017 and December 31, 2016, are as follows:
June 30, 2017 December 31, 2016
(In millions of Korean won) Acquisition
cost Book amount
Acquisition
cost Book amount
Equity linked securities (sell)1 1,340,835 1,361,783 1,209,257 1,233,788
1 Book amount reflects its Day 1 P&L.
Above financial liabilities designated at fair value through profit or loss are structured contracts
including embedded derivatives that are designated as fair value through profit or loss.
5. Available-for-Sale Financial Assets Details of available-for-sale financial assets as at June 30, 2017 and December 31, 2016, are as follows: June 30, 2017
(In millions of Korean won) Par value
Acquisition
cost
Amortized
cost
Fair value
(Book amount)
Equity securities - 3,558,071 - 4,696,698
Government and public bonds 2,341,316 2,411,411 2,392,222 2,403,202
Bank bonds 2,530,000 2,536,259 2,532,917 2,531,317 Corporate bonds in Korean
won 2,027,500 2,059,099 2,047,704 2,039,465 Corporate bonds in foreign
currencies 1,254,543 1,266,213 1,260,224 1,265,117
Asset-backed securities 1,954,400 1,957,114 1,955,823 1,954,895
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
31
Government bonds in foreign currencies 13,038 12,704 12,814 12,811
10,120,797 13,800,871 10,201,704 14,903,505
December 31, 2016
(In millions of Korean won) Par value
Acquisition
cost
Amortized
cost
Fair value
(Book amount)
Equity securities - 4,105,307 - 4,970,020
Government and public bonds 2,993,296 3,081,020 3,059,865 3,048,892
Bank bonds 2,520,000 2,528,349 2,525,390 2,520,395 Corporate bonds in Korean
won 2,900,785 2,954,847 2,935,996 2,931,935 Corporate bonds in foreign
currencies 1,151,480 1,171,430 1,159,822 1,160,472
Asset-backed securities 2,133,300 2,135,996 2,135,366 2,132,721 Government bonds in foreign
currencies 6,804 6,485 6,558 6,562
11,705,665 15,983,434 11,822,997 16,770,997
Impairment loss and reversal of impairment loss on available-for-sale financial assets for the six-month periods ended June 30, 2017 and 2016, are as follows:
June 30, 2017 June 30, 2016
(In millions of Korean won)
Impairment
loss Reversal
Impairment
loss Reversal
Available-for-sale financial assets 19,977 - 24,952 -
Details of equity securities as at June 30, 2017 and December 31, 2016, are as follows:
June 30, 2017
(In millions of Korean won) Acquisition cost
Book amount
Securities Marketable securities 467,803 1,420,256
Nonmarketable securities1 1,211,866 1,382,310
1,679,669 2,802,566
Equity investments Equity investments2 375,098 367,335
Beneficiary securities Beneficiary securities 1,503,304 1,526,797
3,558,071 4,696,698
December 31, 2016
(In millions of Korean won) Acquisition cost
Book amount
Securities Marketable securities 705,905 1,403,561
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
32
Nonmarketable securities1 1,126,987 1,303,267
1,832,892 2,706,828
Equity investments Equity investments2 345,391 324,248
Beneficiary securities Beneficiary securities 1,927,024 1,938,944
4,105,307 4,970,020
1 Securities amounting to \ 110,874 million as at June 30, 2017 (December 31, 2016: \ 104,197
million), were valued at acquisition costs due to unavailability of reliable valuation sources. These equity securities are carried at cost because it is practically difficult to quantify the intrinsic values of the equity securities issued by unlisted public and non-profit entities. In addition, probabilities and range of estimated cash flows of the unlisted equity securities, which are issued by project financing companies, are cannot be reasonably assessed. Therefore, these equity securities are carried at cost. The Group has no plan to sell these instruments in the near future, and is expected to measure their fair value upon the privatization of invested companies or upon further progress of the projects. 2 The \ 41,721 million of equity investments as at June 30, 2017 (December 31, 2016: \ 32,845
million), were valued at cost due to unavailability of reliable valuation sources. Changes in the fair value of available-for-sale financial assets recognized as accumulated other comprehensive income for the six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017
Beginning
Recognized
in other
comprehen-
sive income
Reclassified
to profit or
loss Tax effect Ending
Equity securities 773,927 238,868 (39,128) (48,337) 925,330
Debt securities in Korean
won (12,967) 13,091 (5,056) (1,945) (6,877)
Debt securities in foreign
currencies (4,902) 7,006 (1,434) (1,348) (678)
756,058 258,965 (45,618) (51,630) 917,775
(In millions of Korean won) June 30, 2016
Beginning
Recognized
in other
comprehen-
sive income
Reclassified
to profit or
loss Tax effect Ending
Equity securities 773,472 373,913 (53,546) (77,529) 1,016,310
Debt securities in Korean
won 42,005 50,294 (31,293) (4,598) 56,408
Debt securities in foreign
currencies (5,951) 11,075 6,191 (4,178) 7,137
809,526 435,282 (78,648) (86,305) 1,079,855
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
33
Details of loaned securities from available-for-sale financial assets as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won)
June 30,
2017
December 31,
2016
Government and public
bonds
Korea Securities Finance
Corporation 10,229 100,233
6. Held-to-Maturity Financial Assets Details of held-to-maturity financial assets as at June 30, 2017 and December 31, 2016, are as follows:
June 30, 2017
(In millions of Korean won) Par value
Acquisition
cost
Amortized cost
(Book amount) Fair value
Government and public bonds 9,196,542 9,203,580 9,187,967 9,297,000
Bank bonds 4,610,000 4,607,512 4,607,124 4,609,958 Corporate bonds in Korean
won 3,628,400 3,674,026 3,653,755 3,668,172 Corporate bonds in foreign
currencies 814,516 816,322 815,474 796,898
Asset-backed securities 1,138,480 1,138,611 1,138,526 1,151,311
19,387,938 19,440,051 19,402,846 19,523,339
December 31, 2016
(In millions of Korean won) Par value
Acquisition
cost
Amortized cost
(Book amount) Fair value
Government and public bonds 5,765,951 5,779,444 5,768,716 5,897,013
Bank bonds 2,920,000 2,916,418 2,916,264 2,918,339 Corporate bonds in Korean
won 3,684,400 3,741,904 3,701,424 3,727,237 Corporate bonds in foreign
currencies 557,595 560,615 581,494 556,374
Asset-backed securities 1,165,680 1,165,900 1,165,777 1,180,915
14,093,626 14,164,281 14,133,675 14,279,878
Details of loaned securities from held-to-maturity financial assets as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30,
2017 December 31,
2016 Government and public bonds
Korea Securities Finance Corporation 85,018 131,416
Bank bonds Korea Securities Finance
Corporation 10,000 -
95,018 131,416
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
34
7. Loans Receivable Details of loans receivable as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Loans in Korean won 183,277,042 177,564,256
Loans in foreign currencies 3,771,926 3,795,033
Bills bought in Korean won 124,595 65,223
Bills bought in foreign currencies 1,727,385 1,734,050
Bonds purchased under repurchase agreements 1,982,445 2,056,629
Interbank loans 1,959,134 787,470
Domestic import usance bills 2,941,241 3,104,821
Payment on guarantees 33,283 38,005
Credit card receivables 2,662,129 2,569,484
Call loan 1,708,387 2,661,416
Privately placed bonds 484,528 509,909
Others 371,880 350,004
201,043,975 195,236,300
Deferred loan origination fees and costs 324,943 300,726
Less : Present value discount (16,194) (9,454)
Less : Provision for impairment (2,212,366) (2,490,259)
Book amount 199,140,358 193,037,313
Details of individually assessed provision for impairment and collectively assessed provision for impairment for loans receivable for the six-month periods ended June 30, 2017 and 2016, are as follows:
June 30, 2017
(In millions of Korean won)
Individually
assessed
provision for
impairment
Collectively
assessed
provision for
impairment Total
Beginning 654,271 1,835,988 2,490,259
Impairment loss 233,461 404,609 638,070
Sale (60,524) (96,735) (157,259)
Collection of previously written-
off loans 1,738 44,881 46,619
Loans written-off (201,643) (575,105) (776,748)
Unwinding effect (10,966) (6,046) (17,012)
Foreign exchange translation 1,343 (12,906) (11,563)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
35
Ending 617,680 1,594,686 2,212,366
June 30, 2016
(In millions of Korean won)
Individually
assessed
provision for
impairment
Collectively
assessed
provision for
impairment Total
Beginning 649,449 1,859,643 2,509,092
Impairment loss 192,634 422,408 615,042
Sale (88,185) (76,377) (164,562)
Collection of previously written-
off loans 9,063 44,427 53,490
Loans written-off (52,748) (434,718) (487,466)
Unwinding effect (11,467) (7,447) (18,914)
Foreign exchange translation 314 1,013 1,327
Ending 699,060 1,808,949 2,508,009
Changes in deferred loan origination fees and costs for the six-month periods ended June 30, 2017 and 2016, are as follows: June 30, 2017
(In millions of Korean won) Beginning Increase Decrease Ending
Deferred loan origination fees (24,330) (11,131) 11,305 (24,156)
Deferred loan origination costs 325,056 113,769 (89,726) 349,099
300,726 102,638 (78,421) 324,943
June 30, 2016
(In millions of Korean won) Beginning Increase Decrease Ending
Deferred loan origination fees (23,665) (9,109) 8,432 (24,342)
Deferred loan origination costs 283,545 99,549 (75,610) 307,484
259,880 90,440 (67,178) 283,142
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
36
8. Hedge Accounting
Details of derivative financial assets and liabilities for hedge accounting as at June 30, 2017 and
December 31, 2016, are as follows:
(In millions of Korean won)
June 30, 2017 December 31, 2016
Asset Liability Nominal1 Asset Liability Nominal1
Fair value hedge
Interest rate swap 48,763 80,739 3,964,601 58,518 65,723 3,688,502
Currency swap 102,993 134,920 1,471,889 115,629 255,198 1,440,856
Stock option - 32,438 10,000 - 33,253 10,000
151,756 248,097 5,446,490 174,147 354,174 5,139,358
Cash flow hedge
Currency swap 589 - 30,000 - - -
589 - 30,000 - - -
152,345 248,097 5,476,490 174,147 354,174 5,139,358
1 Nominal amount that is shown as the gross amount is the standard which the value change of
derivatives is measured upon. Nominal amounts as at June 30, 2017 and December 31, 2016, do
not indicate any market risk or credit risk. Valuation gain or loss of derivatives as hedging instruments of fair value hedge for the six-month periods ended June 30, 2017 and 2016, are as follows: June 30, 2017
(In millions of
Korean won)
Valuation
gain
Valuation
loss Gain on sale Loss on sale
Net gain
(loss)
Interest rate Swap 4,657 27,164 87 1,475 (23,895)
Currency Swap 86,709 16,362 2,563 - 72,910
Stock Option 815 - - - 815
92,181 43,526 2,650 1,475 49,830
June 30, 2016
(In millions of
Korean won)
Valuation
gain
Valuation
loss Gain on sale Loss on sale
Net gain
(loss)
Interest rate Swap 47,705 13,620 12,513 4,143 42,455
Currency Swap 36,795 41,580 - - (4,785)
Stock Option 1,931 - - - 1,931
86,431 55,200 12,513 4,143 39,601
Fair value hedge is applied for the purpose of hedging fair value changes of financial instruments due to changes in foreign currency, interest rate changes and volatility of stock price. A currency swap is used as a hedging instrument for identified currency risk; an interest rate swap is used as a hedging instrument for interest rate risk; and a stock option is used as a hedging instrument for volatility of
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
37
stock price. Gains and losses from fair value items attributable to the hedge risk for the six-month periods ended June 30, 2017 and 2016, are as follows: June 30, 2017
(In millions of
Korean won)
Valuation
gain
Valuation
loss Gain on sale Loss on sale
Net gain
(loss)
Available-for-sale
financial assets 794 1,338 - - (544)
Debentures in foreign
currencies 8,965 7,963 - 53 949 Debentures in Korean won 24,825 - 968 - 25,793
34,584 9,301 968 53 26,198
June 30, 2016
(In millions of
Korean won)
Valuation
gain
Valuation
loss Gain on sale Loss on sale
Net gain
(loss)
Available-for-sale
financial assets 6,789 4,150 - - 2,639
Debentures in foreign
currencies 4,978 34,851 3 1,451 (31,321) Debentures in Korean won 2,471 27,148 2,387 19,312 (41,602)
14,238 66,149 2,390 20,763 (70,284)
Total gains and losses from hedging instruments and hedged items for the six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Total gains and losses from hedging instruments 49,830 39,601
Total gains and losses from hedged items 26,198 (70,284) Total gains and losses from hedged items related to
exchange rate risk1 (70,619) 14,326
5,409 (16,357)
1 Included in gain (loss) on foreign currency transactions.
Fair value and valuation gain or loss of derivatives as cash flow hedge instruments for the six-month periods ended June 30, 2017 and 2016, are as follows: June 30, 2017
(In millions of Korean won)
Valuation
gain
Valuation
loss
Gain on
sale
Loss on
sale Net gain
Other
comprehen-
sive income
Currency Swap 592 - 33 - 625 (4)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
38
June 30, 2016
(In millions of Korean won)
Valuation
gain
Valuation
loss
Gain on
sale
Loss on
sale Net gain
Other
comprehen-
sive income
Currency Forward - - 760 - 760 (44) Cash flow hedge is applied for the purpose of hedging cash flow changes of financial instruments due to changes in foreign currency. Financial instruments that are to be hedged in relation to foreign currency risks are negotiable certificates of deposit in foreign currencies and bonds purchased under repurchase agreements in foreign currencies. Currency swap and currency forward are used as hedging instrument for identified currency risk. Hedges of a net investment in a Foreign Operation The effective portion of gain (loss) on hedging instruments recognized in other comprehensive income for the six-month periods ended June 30, 2017 and 2016, is as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Other comprehensive income 15,144 8,413
Tax effect (3,665) (2,036)
Other comprehensive income, net of tax 11,479 6,377
Fair value of non-derivative financial instruments designated as hedging instruments as at June 30, 2017 and December 31, 2016, is as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Debentures in foreign currencies 257,469 272,613
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
39
9. Investments in Associates and Non-Consolidated Structured Entities Details of investments in associates as at June 30, 2017 and December 31, 2016, are as follows:
June 30, 2017
(In millions of Korean won,
except for percentage)
Ownership
(%)
Acquisition
value
Net asset
value
Book
amount Primary business Location Closing date
Korea Machinery Auction & Exchange
29.41 5,000 3,436 3,764 Brokerage service of
machinery Korea December 31
Joong-ang Special Industry Co., Ltd.
32.86 2,336 701 700 Manufacturing Korea December 31
Shin Kwang Co., Ltd. 20.00 470 469 745 Manufacturing Korea December 31
Changwoo Textile Co., Ltd. 20.00 500 1,044 1,410 Manufacturing Korea December 31
Mirae Asset AGRO Project Fund
25.00 2,364 3,008 3,008 Investment asset
management Korea December 31
Private Investment Special Company for Global SW Firm Fostering
35.95 1,194 1,187 1,216 Investment asset
management Korea December 31
IBK-OCTUS Green Industry Growth Private Equity Fund
28.93 19,577 337 282 Investment asset
management Korea December 31
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth No.1. PEF
22.00 7,213 6,424 6,441 Investment asset
management Korea December 31
KoFC-QCP-IBKC Frontier Champ 2010- 2 Private Equity Fund1
5.99 1,360 320 320 Investment asset
management Korea December 31
KoFC IBKS KEISTONE Corporate Recovery Private Equity Fund1
- - - 400 Investment asset
management Korea December 31
Korea Global Infra Recovery Private Equity Fund1 2.42 4,000 3,930 -
Investment asset management
Korea December 31
IBK-Daesung Contents Small Giant Fund
36.00 1,152 4,536 4,536 Investment asset
management Korea December 31
IBKC-IDV IP Private Equity Fund No. 1
49.30 1,481 2,380 2,380 Investment asset
management Korea December 31
KT Music contents Fund 1 20.00 1,800 1,724 1,724 Investment asset
management Korea December 31
IBK-KTB Contents IP Fund 22.50 3,025 3,398 3,399 Investment asset
management Korea December 31
IBKC-GNTECH Second Fund2 60.00 4,080 8,043 8,043 Investment asset
management Korea December 31
IBK-DAEKYO Contents Fund 37.50 3,000 3,502 3,502 Investment asset
management Korea December 31
SM New Technology Fund No.1
36.36 1,914 1,929 1,929 Investment asset
management Korea December 31
CCVC Culture-ICT Convergence Fund
20.00 1,000 917 917 Investment asset
management Korea December 31
KDBC-EUM Corporate's Financial Stabilization Private Equity Fund NO.4
24.84 4,808 7,364 7,364 Investment asset
management Korea December 31
KEPS Calista Private Equity Fund
28.89 3,760 10,568 10,568 Investment asset
management Korea December 31
Credian Healthcare Private
Equity Fund Ⅱ 24.44 2,976 2,929 2,929
Investment asset management
Korea December 31
E&F Moorim Birdie New Technology Business Investment Fund
23.90 3,000 2,940 2,940 Investment asset
management Korea December 31
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
40
IBK-Daesung Majestic Contents Small Giant Korea Fund
20.00 2,100 2,032 2,032 Investment asset
management Korea December 31
IBK-ISU Contents Fund 35.00 1,750 1,717 1,717 Investment asset
management Korea December 31
KTBN Media Contents Fund 35.00 1,750 1,704 1,704 Investment asset
management Korea December 31
The Value-up SME Specialized Solution New Technology Business Investment Fund 1
50.00 1,350 1,352 1,350 Investment asset
management Korea December 31
KAI-KSM Crowd Seeding Fund 31.25 656 626 626 Investment asset
management Korea December 31
Presto Private Equity Fund No. 4
24.59 3,000 2,987 2,987 Investment asset management
Korea December 31
Platformpartners Active Mezzanine PEF 7
43.04 3,000 3,397 3,397 Investment asset management
Korea December 31
Deoksong-Naegak Expressway Co.,Ltd.
50.00 17,500 13,502 17,500 Service Korea December 31
IBK Davos Global High-Dividends Master Fund(Equity)
36.60 3,000 3,416 3,416 Investment asset management
Korea December 31
EN Growth Investment No.5 20.27 3,000 2,730 2,730 Investment asset
management Korea December 31
KT-IBKC Future Investment Fund 1
50.00 11,250 10,675 10,675 Investment asset
management Korea December 31
PoscoPlutus Project Fund 20.53 1,000 922 922 Investment asset
management Korea December 31
QCP-IBKC Contents Investment Fund
43.20 1,000 909 909 Investment asset
management Korea December 31
AION ASTER Private Trust Fund For Specialized Investment
23.26 1,000 1,000 1,000 Investment asset
management Korea December 31
Smart Private Equity Fund No.2
20.00 3,000 2,994 2,994 Investment asset
management Korea December 31
Shinyoung Private Equity Fund No.2
20.00 2,000 2,917 2,917 Investment asset
management Korea December 31
The IBKS SSI New Technology Business Investment Fund 11
16.67 250 248 246 Investment asset
management Korea December 31
IBK PSEP Private Equity Fund3 2.38 1,000 1,046 1,044 Investment asset
management Korea December 31
IBKS Special Purpose Acquisition Company No.33 0.22 10 19 19
Corporate acquisition
Korea December 31
IBKS Special Purpose Acquisition Company No.53 0.44 20 37 37
Corporate acquisition
Korea December 31
IBKS Special Purpose Acquisition Company No.63
4.76 15 15 15 Corporate
acquisition Korea December 31
IBKS Special Purpose Acquisition Company GMB3 0.28 15 29 29
Corporate acquisition
Korea December 31
133,676 125,360 126,783
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
41
December 31, 2016
(In millions of Korean won,
except for percentage)
Ownership
(%)
Acquisition
value
Net asset
value
Book
amount Primary business Location Closing date
Korea Machinery Auction & Exchange
29.41 5,000 3,536 3,864 Brokerage service of
machinery Korea December 31
GUMAN Heavy Ind. Co., Ltd. 25.00 176 (269) - Manufacturing Korea December 31
GUMAN Co., LTD. 22.73 73 (324) - Manufacturing Korea December 31
Joong-ang Special Industry Co., Ltd.
32.86 2,336 937 935 Manufacturing Korea December 31
Shin Kwang Co., Ltd. 20.00 470 603 470 Manufacturing Korea December 31
Changwoo Textile Co., Ltd. 20.00 500 1,071 500 Manufacturing Korea December 31
Mirae Asset AGRO Project Fund
25.00 3,164 3,736 3,736 Investment asset
management Korea December 31
Private Investment Special Company for Global SW Firm Fostering
35.95 1,323 1,257 1,285 Investment asset
management Korea December 31
IBK-OCTUS Green Industry Growth Private Equity Fund
28.93 21,850 2,603 2,549 Investment asset
management Korea December 31
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth No.1. PEF
22.00 7,479 7,030 7,047 Investment asset
management Korea December 31
KoFC-QCP-IBKC Frontier Champ 2010- 2 Private Equity Fund1
5.99 2,380 1,684 1,684 Investment asset
management Korea December 31
KoFC IBKS KEISTONE Corporate Recovery Private Equity Fund1
- - - 400 Investment asset
management Korea December 31
Korea Global Infra Recovery Private Equity Fund1 2.40 4,000 3,966 4,288
Investment asset management
Korea December 31
IBK-Daesung Contents Small Giant Fund
36.00 1,800 5,352 5,352 Investment asset
management Korea December 31
IBKC-IDV IP Private Equity Fund No. 1
49.30 1,645 2,421 2,421 Investment asset
management Korea December 31
KT Music contents Fund 1 20.00 2,100 2,009 2,009 Investment asset
management Korea December 31
IBK-KTB Contents IP Fund 22.50 3,025 3,734 3,735 Investment asset
management Korea December 31
IBKC-GNTECH Second Fund2 60.00 5,880 10,047 10,047 Investment asset
management Korea December 31
IBK-DAEKYO Contents Fund 37.50 3,000 3,721 3,721 Investment asset
management Korea December 31
SM New Technology Fund No.1
36.36 1,914 1,954 1,954 Investment asset
management Korea December 31
CCVC Culture-ICT Convergence Fund
20.00 500 457 457 Investment asset
management Korea December 31
KDBC-EUM Corporate's Financial Stabilization Private Equity Fund NO.4
24.84 9,872 10,682 10,685 Investment asset
management Korea December 31
KEPS Calista Private Equity Fund
28.89 3,760 10,737 10,737 Investment asset
management Korea December 31
Credian Healthcare Private
Equity Fund Ⅱ 24.44 2,976 2,922 2,922
Investment asset management
Korea December 31
E&F Moorim Birdie New Technology Business Investment Fund
23.90 3,000 2,959 2,959 Investment asset
management Korea December 31
IBK-Daesung Majestic Contents Small Giant Korea
20.00 1,200 1,174 1,174 Investment asset
management Korea December 31
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
42
Fund
IBK-ISU Contents Fund 35.00 1,750 1,739 1,739 Investment asset
management Korea December 31
KTBN Media Contents Fund 35.00 875 869 869 Investment asset
management Korea December 31
The Value-up SME Specialized Solution New Technology Business Investment Fund 1
50.00 1,350 1,350 1,350 Investment asset
management Korea December 31
KAI-KSM Crowd Seeding Fund 31.25 656 656 656 Investment asset
management Korea December 31
EN Growth Investment No.5 20.27 3,000 2,894 2,894 Investment asset
management Korea December 31
KT-IBKC Future Investment Fund 1
50.00 3,750 3,479 3,479 Investment asset
management Korea December 31
PoscoPlutus Project Fund 20.53 1,000 1,007 1,007 Investment asset
management Korea December 31
The IBKS SSI New Technology Business Investment Fund 11
16.67 250 249 250 Investment asset
management Korea December 31
IBK PSEP Private Equity Fund3 2.38 1,000 993 994 Investment asset
management Korea December 31
IBKS Special Purpose Acquisition Company No.33 2.00 10 169 19
Corporate acquisition
Korea December 31
IBKS Special Purpose Acquisition Company No.53 4.00 20 23 20
Corporate acquisition
Korea December 31
IBKS Special Purpose Acquisition Company GMB3 4.76 15 25 15
Corporate acquisition
Korea December 31
103,099 97,452 98,223
1 Although the Group holds less than 20% of the equity shares, the Group has significant influence over financial policy and operation policy as a joint general partner. 2 The Group does not have control of funds as the joint limited partner with IBK-KTAC that performs asset management. 3 Although the Group holds less than 20% of the equity shares, these entities are classified as associates as the Group has right to appoint or dismiss their Board of Directors.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
43
Changes in investments in associates for the six-month periods ended June 30, 2017 and 2016, are as follows:
June 30, 2017
(In millions of Korean won)
Beginning Acquisition (disposal) Dividends
Share of profit
(loss) of associat-
es
Accumulated other
comprehen-sive income
Impairme-nt loss
Ending
Korea Machinery Auction & Exchange
3,864 - - (100) - - 3,764
Joong-ang Special Industry Co., Ltd.
935 - - (235) - - 700
Shin Kwang Co., Ltd. 470 - - - 275 - 745
Changwoo Textile Co., Ltd. 500 - (25) - 935 - 1,410
Mirae Asset AGRO Project Fund
3,736 (800) - 72 - - 3,008
Private Investment Special Company for Global SW Firm Fostering
1,285 (129) - 60 - - 1,216
IBK-OCTUS Green Industry Growth Private Equity Fund
2,549 - - (2,267) - - 282
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth No.1. PEF
7,047 (266) - 51 (391) - 6,441
KoFC-QCP-IBKC Frontier Champ 2010- 2 Private Equity Fund
1,684 (1,020) - (595) 251 - 320
KoFC IBKS KEISTONE Corporate Recovery Private Equity Fund
400 - - - - - 400
Korea Global Infra Recovery Private Equity Fund
4,288 - - - - (4,288) -
IBK-Daesung Contents Small Giant Fund
5,352 (648) - 107 (275) - 4,536
IBKC-IDV IP Private Equity Fund No. 1
2,421 (165) - 124 - - 2,380
KT Music Contents Fund 1 2,009 (300) - (28) 43 - 1,724
IBK-KTB Contents IP Fund 3,735 - - (423) 87 - 3,399
IBKC-GNTECH Second Fund
10,047 (1,800) - 980 (1,184) - 8,043
IBK-DAEKYO Contents Fund
3,721 - - (219) - - 3,502
SM New Technology Fund No.1
1,954 - - 2 (27) - 1,929
CCVC Culture-ICT Convergence Fund
457 500 - (24) (16) - 917
KDBC-EUM Corporate's Financial Stabilization Private Equity Fund NO.4
10,685 (5,064) (132) 1,875 - - 7,364
KEPS Calista Private Equity Fund
10,737 - - (25) (144) - 10,568
Credian Healthcare Private
Equity Fund Ⅱ 2,922 - - 7 - - 2,929
EN Growth Investment No. 5
2,959 - - (19) - - 2,940
IBK-Daesung Contents Small Giant Fund
1,174 900 - (29) (13) - 2,032
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
44
IBK-ISU Contents Fund 1,739 - - (22) - - 1,717
KTBN Media Contents Fund
869 875 - (40) - - 1,704
The Value-up SME Specialized Solution New Technology Business Investment Fund 1
1,350 - - - - - 1,350
KAI-KSM Crowd Seeding Fund
656 - - (30) - - 626
Presto Private Equity Fund No. 4
- 3,000 - (13) - - 2,987
Platformpartners Active Mezzanine PEF 7
- 3,000 - 10 387 - 3,397
Deoksong-Naegak Expressway Co.,Ltd.
- 17,500 - - - - 17,500
IBK Davos Global High-Dividends Master Fund(Equity)
- 3,314 - 102 - - 3,416
EN Growth Investment No.5 2,894 - - (92) (72) - 2,730
KT-IBKC Future Investment Fund 1
3,479 7,500 - (304) - - 10,675
PoscoPlutus Project Fund 1,007 - - (12) (73) - 922
QCP-IBKC Contents Investment Fund
- 1,000 - (91) - - 909
AION ASTER Private Trust Fund For Specialized Investment
- 1,000 - - - - 1,000
Smart Private Equity Fund No.2
- 3,000 - (47) 41 - 2,994
Shinyoung Private Equity Fund No.2
- 2,000 - 917 - - 2,917
The IBKS SSI New Technology Business Investment Fund 1
250 - (2) (2) - - 246
IBK PSEP Private Equity Fund
994 - - 50 - - 1,044
IBKS Special Purpose Acquisition Company No.3
19 - - - - - 19
IBKS Special Purpose Acquisition Company No.5
20 17 - - - - 37
IBKS Special Purpose Acquisition Company No.6
- 15 - - - - 15
IBKS Special Purpose Acquisition Company GMB
15 14 - - - - 29
98,223 33,443 (159) (260) (176) (4,288) 126,783
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
45
June 30, 2016 (In millions of
Korean won)
Beginning Acquisition (disposal) Dividends
Share of profit
(loss) of associat-
es
Accumulated other
comprehensive income Ending
United Asset Management Corp.
130,881 (105,675) (26,961) 1,758 (3) -
Korea Machinery Auction & Exchange
4,628 - - (388) - 4,240
Joong-ang Special Industry Co., Ltd.
1,642 - - (421) - 1,221
Shin Kwang Co., Ltd. - 470 - - - 470
Changwoo Textile Co., Ltd. - 500 - - - 500
Mirae Asset AGRO Project Fund
3,294 - - 98 (56) 3,336
Private Investment Special Company for Global SW Firm Fostering
828 - - 377 80 1,285
IBK-OCTUS Green Industry Growth Private Equity Fund
5,999 (3,743) - 248 (410) 2,094
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth No.1. PEF
7,375 - - (40) (284) 7,051
KoFC-QCP-IBKC Frontier Champ 2010- 2 Private Equity Fund
7,444 (3,640) - (1,144) 65 2,725
KoFC IBKS KEISTONE Corporate Recovery Private Equity Fund
400 - - - - 400
Korea Global Infra Recovery Private Equity Fund
4,000 - - 192 - 4,192
IBK-Daesung Contents Small Giant Fund
8,182 (3,420) - 460 748 5,970
IBKC-IDV IP Private Equity Fund No. 1
3,005 (595) (714) 775 59 2,530
KT Music Contents Fund 1 2,023 - - (68) (35) 1,920
IBK-KTB Contents IP Fund 5,512 - - 876 (1,111) 5,277
IBKC-GNTECH Second Fund
18,484 (3,960) (3,060) (895) 756 11,325
SHC-EN Fund 3,234 (2,366) - 542 - 1,410
IBK-DAEKYO Contents Fund
3,105 - - 45 - 3,150
SM New Technology Fund No.1
1,932 - - (18) - 1,914
CCVC Culture-ICT Convergence Fund
496 - - (19) - 477
KDBC-EUM Corporate's Financial Stabilization Private Equity Fund NO.4
- 10,000 - 1,398 - 11,398
KEPS Calista Private Equity Fund
- 3,760 - - 8,812 12,572
Credian Healthcare Private
Equity Fund Ⅱ - 2,976 - (47) - 2,929
IBK PSEP Private Equity Fund4
- 1,000 - - - 1,000
IBKS Special Purpose 45 - - - - 45
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
46
Acquisition Company No.2
IBKS Special Purpose Acquisition Company No.3
10 9 - - - 19
IBKS Special Purpose Acquisition Company No.4
10 8 - - - 18
212,529 (104,676) (30,735) 3,729 8,621 89,468
Major financial information of the Group’s associates as at June 30, 2017 and December 31, 2016, are as follows: June 30, 2017
(In millions of Korean won)
Total
assets
Total
liabilities
Total
equity
Operating
income1
Profit
(loss) for
the
period1
Korea Machinery Auction & Exchange
12,287 605 11,682 659 (341)
Joong-ang Special Industry Co., Ltd.
15,658 13,525 2,133 7,559 (716)
Shin Kwang Co., Ltd. 8,717 6,371 2,346 - -
Changwoo Textile Co., Ltd. 12,464 7,242 5,222 - -
Mirae Asset AGRO Project Fund 13,089 1,058 12,031 521 286
Private Investment Special Company for Global SW Firm Fostering
3,303 - 3,303 - 167
IBK-OCTUS Green Industry Growth Private Equity Fund
10,436 9,271 1,165 33 23
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth No.1 PEF
29,361 161 29,200 392 231
KOFC-QCP-IBKC Frontier Champ 2010- 2 Private Equity Fund
5,426 88 5,338 1,374 (9,944)
KOFC IBKS KEISTONE Corporate Recovery Private Equity Fund
388,014 4,425 383,589 - (177)
Korea Global Infra Recovery Private Equity Fund
164,972 345 164,627 6,413 6,080
IBK-Daesung Contents Small Giant Fund
12,697 97 12,600 396 297
IBKC-IDV IP Private Equity Fund 4,860 32 4,828 285 250
KT Music Contents Fund 1 9,522 903 8,619 16 (143)
IBK-KTB Contents IP Fund 16,364 1,261 15,103 1,641 (1,879)
IBKC-GNTECH Second Fund 13,529 123 13,406 1,891 1,633
IBK-DAEKYO Contents Fund 9,338 - 9,338 461 (584)
SM New Technology Fund No.1 5,306 - 5,306 70 6
CCVC Culture-ICT Convergence Fund
4,583 - 4,583 3 (120)
KDBC-EUM Corporate's Financial Stabilization Private Equity Fund NO.4
29,723 84 29,639 7,741 7,546
KEPS Calista Private Equity Fund 36,582 1 36,581 - (86)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
47
Credian Healthcare Private Equity
FundⅡ 12,031 47 11,984 125 29
E&F Moorim Birdie New Technology Business Investment Fund
12,300 - 12,300 60 (78)
IBK-Daesung Majestic Contents Small Giant Korea Fund
10,232 75 10,157 5 (147)
IBK-ISU Contents Fund 4,943 37 4,906 14 (64)
KTBN Media Contents Fund 4,871 1 4,870 - (112)
The Value-up SME Specialized Solution New Technology Business Investment Fund 1
2,705 - 2,705 9 6
KAI-KSM Crowd Seeding Fund 2,005 - 2,005 2 (95)
Presto Private Equity Fund No. 4 12,172 24 12,148 60 (52)
Platformpartners Active Mezzanine PEF 7
7,891 - 7,891 26 22
Deoksong-Naegak Expressway Co.,Ltd.
231,767 196,767 35,000 - -
IBK Davos Global High-Dividends Master Fund(Equity)
9,575 18 9,557 - 499
EN Growth Investment No.5 13,471 - 13,471 891 (452)
KT-IBKC Future Investment Fund 1
21,350 - 21,350 66 (609)
PoscoPlutus Project Fund 4,490 - 4,490 - (56)
QCP-IBKC Contents Investment Fund
2,105 - 2,105 - (210)
AION ASTER Private Trust Fund For Specialized Investment
4,310 9 4,301 10 1
Smart Private Equity Fund No.2 15,019 51 14,968 1 (237)
Shinyoung Private Equity Fund No.2
14,589 2 14,587 4,741 4,587
The IBKS SSI New Technology Business Investment Fund 1
1,490 - 1,490 - (5)
IBK PSEP Private Equity Fund 44,284 346 43,938 519 428
IBKS Special Purpose Acquisition Company No.3
9,941 1,473 8,468 - 8
IBKS Special Purpose Acquisition Company No.5
9,659 1,245 8,414 - (3)
IBKS Special Purpose Acquisition Company No.6
315 1 314 - -
IBKS Special Purpose Acquisition Company GMB
11,843 1,540 10,303 - 3
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
48
December 31, 2016
(In millions of Korean won)
Total
assets
Total
liabilities
Total
equity
Operating
income1
Profit
(loss) for
the
period1
Korea Machinery Auction & Exchange 12,637 614 12,023 248 (1,600)
GUMAN Heavy Ind. Co., Ltd. 13,641 14,717 (1,076) - (569)
GUMAN Co., LTD. 6,890 8,314 (1,424) - (1,182) Joong-ang Special Industry Co., Ltd. 15,188 12,340 2,848 2,043 (969)
Shin Kwang Co., Ltd. 7,589 4,572 3,017 - -
Changwoo Textile Co., Ltd. 11,227 5,873 5,354 - -
Mirae Asset AGRO Project Fund 15,941 996 14,945 548 392 Private Investment Special Company for Global SW Firm Fostering 3,496 - 3,496 - 1,050
IBK-OCTUS Green Industry Growth Private Equity Fund 10,667 1,667 9,000 876 857
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth No.1 PEF 32,126 170 31,956 - (181)
KOFC-QCP-IBKC Frontier Champ 2010- 2 Private Equity Fund 28,267 146 28,121 14,281 (19,109)
KOFC IBKS KEISTONE Corporate Recovery Private Equity Fund 388,020 4,387 383,633 194,190 217,081
Korea Global Infra Recovery Private Equity Fund 165,603 333 165,270 8,977 8,648
IBK-Daesung Contents Small Giant Fund 15,117 251 14,866 1,412 1,278
IBKC-IDV IP Private Equity Fund 4,913 2 4,911 1,762 1,569
KT Music Contents Fund 1 10,377 331 10,046 12 (339)
IBK-KTB Contents IP Fund 17,935 1,342 16,593 4,439 3,894
IBKC-GNTECH Second Fund 16,903 157 16,746 1,482 (1,492)
IBK-DAEKYO Contents Fund 9,957 35 9,922 193 122
SM New Technology Fund No.1 5,374 - 5,374 11 (50) CCVC Culture-ICT Convergence Fund 2,335 50 2,285 7 (97)
KDBC-EUM Corporate's Financial Stabilization Private Equity Fund NO.4 43,090 85 43,005 5,937 5,627
KEPS Calista Private Equity Fund 37,168 - 37,168 - (486) Credian Healthcare Private Equity
Fund Ⅱ 12,002 47 11,955 - - E&F Moorim Birdie New Technology Business Investment Fund 12,377 - 12,377 - -
IBK-Daesung Majestic Contents Small Giant Korea Fund 5,948 78 5,870 - -
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
49
IBK-ISU Contents Fund 5,008 38 4,970 - -
KTBN Media Contents Fund 2,502 20 2,482 - - The Value-up SME Specialized Solution New Technology Business Investment Fund 1 2,700 1 2,699 - -
KAI-KSM Crowd Seeding Fund 2,100 - 2,100 - -
EN Growth Investment No. 5 14,279 2 14,277 - -
KT-IBKC Future Investment Fund 7,110 151 6,959 - -
PoscoPlutus Project Fund 4,906 - 4,906 - - The IBKS SSI New Technology Business Investment Fund 1 1,498 3 1,495 - -
IBK PSEP Private Equity Fund 41,830 103 41,727 85 (190) IBKS Special Purpose Acquisition Company No.3 9,916 1,457 8,459 - 10
IBKS Special Purpose Acquisition Company No.5 1,797 1,221 576 - -
IBKS Special Purpose Acquisition Company GMB 2,011 1,495 516 - -
1 Operating income and profit (loss) for the period amounts are for the six-month period ended June
30, 2017 and 2016. Major commitments with investments in associates as at June 30, 2017 and December 31, 2016, are as follows: June 30, 2017
(In millions of Korean won)
Committed
contribution
Contribution
amount
Executory
Contribution
Mirae Asset AGRO Project Fund 5,000 4,000 1,000
Private Investment Special Company for Global SW Firm Fostering1
14,964 14,964 -
IBK-OCTUS Green Industry Growth Private Equity Fund2
33,486 33,486 -
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth No.1. PEF
12,426 12,426 -
KOFC-QCP-IBKC Frontier Champ 2010- 2 Private Equity Fund3,4
20,000 19,290 710
KOFC IBKS KEISTONE Corporate Recovery Private Equity Fund1
3,000 3,000 -
Korea Global Infra Recovery Private Equity Fund
4,000 4,000 -
IBK-Daesung Contents Small Giant Fund 7,200 7,200 -
IBKC-IDV IP Private Equity Fund3,5 7,000 4,200 2,800
KT Music Contents Fund 1 3,000 2,100 900
IBK-KTB Contents IP Fund 4,500 4,500 -
IBKC-GNTECH Second Fund3 18,000 18,000 -
IBK-DAEKYO Contents Fund 3,000 3,000 -
SM New Technology Fund No.1 2,000 2,000 -
CCVC Culture-ICT Convergence Fund 2,000 1,000 1,000
KDBC-EUM Corporate's Financial Stabilization 10,000 10,000 -
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
50
Private Equity Fund NO.4
KEPS Calista Private Equity Fund 3,900 3,900 -
Credian Healthcare Private Equity Fund Ⅱ 3,300 2,976 324
E&F Moorim Birdie New Technology Business Investment Fund
3,000 3,000 -
IBK-Daesung Majestic Contents Small Giant Korea Fund
3,000 2,100 900
IBK-ISU Contents Fund 3,500 1,750 1,750
KTBN Media Contents Fund 3,500 1,750 1,750
The Value-up SME Specialized Solution New Technology Business Investment Fund 1
4,500 1,350 3,150
KAI-KSM Crowd Seeding Fund 2,500 656 1,844
Presto Private Equity Fund No. 4 3,000 3,000 -
Platformpartners Active Mezzanine PEF 7 3,000 3,000 -
Deoksong-Naegak Expressway Co.,Ltd. 55,000 17,500 37,500
EN Growth Investment No. 5 3,000 3,000 -
KT-IBKC Future Investment Fund 1 15,000 11,250 3,750
PoscoPlutus Project Fund 1,000 1,000 -
QCP-IBKC Contents Investment Fund 10,000 1,000 9,000
AION ASTER Private Trust Fund For Specialized Investment
1,000 1,000 -
Smart Private Equity Fund No.2 3,000 3,000 -
Shinyoung Private Equity Fund No.2 2,000 2,000 -
The IBKS SSI New Technology Business Investment Fund 1
250 250 -
IBK PSEP Private Equity Fund 1,000 1,000 -
IBKS Special Purpose Acquisition Company No.3
10 10 -
IBKS Special Purpose Acquisition Company No.5
20 20 -
IBKS Special Purpose Acquisition Company No.6
15 15 -
IBKS Special Purpose Acquisition Company GMB
15 15 -
274,086 207,708 66,378
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
51
December 31, 2016
(In millions of Korean won)
Committed
contribution
Contribution
amount
Executory
Contribution
Mirae Asset AGRO Project Fund 5,000 4,000 1,000
Private Investment Special Company for Global SW Firm Fostering1
14,964 14,964 -
IBK-OCTUS Green Industry Growth Private Equity Fund2
33,486 33,486 -
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth No.1. PEF
12,426 12,426 -
KOFC-QCP-IBKC Frontier Champ 2010- 2 Private Equity Fund3,4
20,000 19,290 710
KOFC IBKS KEISTONE Corporate Recovery Private Equity Fund1
3,000 3,000 -
Korea Global Infra Recovery Private Equity Fund
4,000 4,000 -
IBK-Daesung Contents Small Giant Fund 7,200 7,200 -
IBKC-IDV IP Private Equity Fund3,5 7,000 4,200 2,800
KT Music Contents Fund 1 3,000 2,100 900
IBK-KTB Contents IP Fund 4,500 4,500 -
IBKC-GNTECH Second Fund 3 18,000 18,000 -
IBK-DAEKYO Contents Fund 3,000 3,000 -
SM New Technology Fund No.1 2,000 2,000 -
CCVC Culture-ICT Convergence Fund 2,000 500 1,500
KDBC-EUM Corporate's Financial Stabilization Private Equity Fund NO.4
10,000 10,000 -
KEPS Calista Private Equity Fund 3,900 3,900 -
Credian Healthcare Private Equity Fund Ⅱ 3,300 2,976 324
E&F Moorim Birdie New Technology Business Investment Fund
3,000 3,000 -
IBK-Daesung Majestic Contents Small Giant Korea Fund
3,000 1,200 1,800
IBK-ISU Contents Fund 3,500 1,750 1,750
KTBN Media Contents Fund 3,500 875 2,625
The Value-up SME Specialized Solution New Technology Business Investment Fund 1
4,500 1,350 3,150
KAI-KSM Crowd Seeding Fund 2,500 656 1,844
EN Growth Investment No. 5 3,000 3,000 -
KT-IBKC Future Investment Fund 1 15,000 3,750 11,250
PoscoPlutus Project Fund 1,000 1,000 -
The IBKS SSI New Technology Business Investment Fund 1
250 250 -
IBK PSEP Private Equity Fund 1,000 1,000 -
IBKS Special Purpose Acquisition Company No.3
10 10 -
IBKS Special Purpose Acquisition Company No.5
20 20 -
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
52
IBKS Special Purpose Acquisition Company GMB
15 15 -
197,071 167,418 29,653
1 The Group is obligated to cover for the loss up to the total management fees received upon liquidation. As at June 30, 2017, the Group does not expect any priority funding liability. 2 In case the respective associate is liquidated and as part of the liquidation process if funds required
for distribution and refunds to partners are insufficient, general partners are required to allocate \ 3
billion of contractual investment for distribution and refunds. As at June 30, 2017, such expected
priority funding liability amounts to \ 3 billion. 3 The Group committed to refund a portion of the management fees if the accumulated amount of investment is less than the certain ratio of aggregated committed contribution. 4 In case funds required for distribution and refunds to partners are insufficient during liquidation, the
general partners are required to allocate up to \ 5 billion from the contractual investment amount of
IBK Capital Corporation. 5 In case the funds required for distribution and refunds to partners are insufficient during liquidation, general partners are required to allocate up to the amount invested by the limited liability partners from the amount reserved for management fees of IBK Capital Corporation and task force for co-operation.
Investments in non-consolidated structured entities as at June 30, 2017 and December 31, 2016, are as follows: (a) Summary of non-consolidated structured entities Purpose and character, financing methods, and total assets of non-consolidated structured entities that has no influence owned by the Group as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) Purpose and
character
Financing
methods
Total assets1
June 30, 2017
December 31,
2016
Beneficiary securities and
others
Investments and
distributions Equity stakes
14,902,785 11,827,386
SPCs
Asset securitization,
real estate development
and others
ABL, ABCP
and
Borrowing 93,551,494 81,534,747
108,454,279 93,362,133
1 The \ 17,039,928 million (December 31, 2016: \19,385,740 million) of the total assets are based
on unaudited financial statements.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
53
(b) Investments and maximum exposures Details of the Group’s shares of non-consolidated structured entities and related risk as at June 30, 2017 and December 31, 2016, are as follows: June 30, 2017
(In millions of Korean won) Assets
Securities
Loans receivable Others Total
Beneficiary securities and others 1,750,889 - - 1,750,889
SPCs 92,293 5,048,349 1,583 5,142,225
1,843,182 5,048,349 1,583 6,893,114
(In millions of Korean won) Liabilities Maximum
exposures1 Provisions Others Total
Beneficiary securities and others - - - 1,946,011
SPCs 927 10,364 11,291 10,556,417
927 10,364 11,291 12,502,428
December 31, 2016
(In millions of Korean won) Assets
Securities
Loans receivable Others Total
Beneficiary securities and others 1,798,312 - 12,483 1,810,795
SPCs 82,107 5,073,939 2,662 5,158,708
1,880,419 5,073,939 15,145 6,969,503
(In millions of Korean won) Liabilities Maximum
exposures1 Provisions Others Total
Beneficiary securities and others - 725 725 1,971,293
SPCs 1,250 658,273 659,523 10,046,404
1,250 658,998 660,248 12,017,697
1 Maximum exposure includes the amount probable to be finalized when certain conditions are met in the future through commitments including investment assets, purchase commitments, providing lines of credit and others recognized in the financial statements.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
54
10. Investment Properties Changes in investment properties for the six-month periods ended June 30, 2017 and 2016, are as follows:
June 30, 2017
(In millions of Korean won) Land Buildings Total
Acquisition cost
January 1, 2017 66,480 36,520 103,000
Acquisition - 238 238
Transfers (19,067) (2,106) (21,173)
June 30, 2017 47,413 34,652 82,065
Accumulated depreciation
and impairment loss
January 1, 2017 - 14,497 14,497
Depreciation - 381 381
Transfers - (548) (548)
June 30, 2017 - 14,330 14,330
Net book amount
January 1, 2017 66,480 22,023 88,503
June 30, 2017 47,413 20,322 67,735
June 30, 2016
(In millions of Korean won) Land Buildings Total
Acquisition cost
January 1, 2016 67,960 38,439 106,399
Acquisition - 88 88
Transfers (1,256) (2,109) (3,365)
June 30, 2016 66,704 36,418 103,122
Accumulated depreciation
and impairment loss
January 1, 2016 - 14,489 14,489
Depreciation - 410 410
Transfers - (729) (729)
June 30, 2016 - 14,170 14,170
Net book amount
January 1, 2016 67,960 23,950 91,910
June 30, 2016 66,704 22,248 88,952
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
55
Methodology and inputs used to valuate investment properties as at June 30, 2017, are as follows:
The fair value of investment properties as at June 30, 2017 and December 31, 2016, is \ 97,760
million and \ 121,574 million, respectively, and the fair value was determined by a certified
independent valuation company. As for the land, it is valuated using an officially assessed price for a comparable property as well as considering the price trend analysis and other objective factors. Buildings are valuated using the cost method along with considering other relevant factors such as infrastructure, raw materials, and progress of the construction and others. Fair value of investment properties is classified as level 3 investment in accordance with the standards disclosed in Note 23.2, Fair Value Hierarchy. Rental income recognized from investment properties for the six-month periods ended June 30, 2017
and 2016, are \ 690 million and \ 727 million, respectively.
11. Property and Equipment Changes in property and equipment for the six-month periods ended June 30, 2017 and 2016, are as follows: June 30, 2017
(In millions of Korean won)
Type Fair value Valuation method Inputs
Land and Buildings 97,760 Cost method
Officially assessed price,
price change trends,
transaction history
(In millions of
Korean won) Land Buildings
Leasehold
improvements
Equipment
and
vehicles Others Total
Acquisition cost
January 1, 2017 822,861 1,120,085 153,431 749,217 10,105 2,855,699
Acquisition 352 6,432 5,132 13,559 6,083 31,558
Disposal (275) (765) (541) (5,691) - (7,272)
Transfers 24,340 2,477 - 507 (6,151) 21,173
Foreign exchange
translation (18) (24) (515) (641) - (1,198)
June 30, 2017 847,260 1,128,205 157,507 756,951 10,037 2,899,960
Accumulated
depreciation and
impairment loss
January 1, 2017 1,178 252,950 130,688 649,984 - 1,034,800
Depreciation - 11,832 6,618 23,037 - 41,487
Disposal (216) (764) (621) (5,550) - (7,151)
Transfers - 548 - - - 548
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
56
June 30, 2016
Foreign exchange
translation - (17) (419) (484) - (920)
June 30, 2017 962 264,549 136,266 666,987 - 1,068,764
Net book amount
January 1, 2017 821,683 867,135 22,743 99,233 10,105 1,820,899
June 30, 2017 846,298 863,656 21,241 89,964 10,037 1,831,196
(In millions of
Korean won) Land Buildings
Leasehold
improvements
Equipment
and
vehicles Others Total
Acquisition cost
January 1, 2016 621,210 954,979 143,815 742,161 1,642 2,463,807
Acquisition 74 1,953 3,200 11,708 6,812 23,747
Disposal (39) (396) (441) (10,313) - (11,189)
Transfers 1,413 2,603 - - (651) 3,365
Foreign exchange
translation (2) (2) (562) (740) - (1,306)
June 30, 2016 622,656 959,137 146,012 742,816 7,803 2,478,424
Accumulated
depreciation and
impairment loss
January 1, 2016 1,178 239,121 114,264 624,860 - 979,423
Depreciation - 10,457 7,980 26,812 - 45,249
Disposal - (101) (305) (10,121) - (10,527)
Transfers - 729 - - - 729
Foreign exchange
translation - (2) (339) (402) - (743)
June 30, 2016 1,178 250,204 121,600 641,149 - 1,014,131
Net book amount
January 1, 2016 620,032 715,858 29,551 117,301 1,642 1,484,384
June 30, 2016 621,478 708,933 24,412 101,667 7,803 1,464,293
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
57
12. Intangible Assets Changes in intangible assets for the six-month periods ended June 30, 2017 and 2016, are as follows:
June 30, 2017
(In millions of
Korean won)
Development
costs Software
Intangible
assets under
development
Member-
ships Others Total
Acquisition cost
January 1, 2017 351,404 199,993 2,451 32,511 84,765 671,124
Acquisition 986 1,446 7,990 2,894 10,487 23,803
Disposal (439) (391) - (256) - (1,086)
Transfers 3,119 - (3,119) - - -
Foreign
exchange
translation - (189) - (52) - (241)
June 30, 2017 355,070 200,859 7,322 35,097 95,252 693,600
Accumulated
amortization
and impairment
losses
January 1, 2017 214,481 134,710 - 3,349 60,157 412,697
Amortization 24,664 12,186 - - 4,447 41,297
Disposal (439) (349) - - - (788)
Foreign
exchange
translation - (149) - 47 - (102)
June 30, 2017 238,706 146,398 - 3,396 64,604 453,104
Net book amount
January 1, 2017 136,923 65,283 2,451 29,162 24,608 258,427
June 30, 2017 116,364 54,461 7,322 31,701 30,648 240,496
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
58
June 30, 2016
13. Income Tax Expense Details of income tax expense for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
June 30, 2017 June 30, 2016
(In millions of Korean won)
Three
months
Six
months
Three
months
Six
months
Current tax expense 78,245 260,285 84,819 263,468 Adjustments recognized in the current year in relation to the current tax of prior years 95 (27,038) (70) (13,510)
Change in deferred tax assets and liabilities
Adjusting beginning deferred tax expenses (15) 21,930 75 (21,249)
(In millions of
Korean won)
Development
costs Software
Intangible
assets under
development
Member-
ships Others Total
Acquisition cost
January 1, 2016 342,829 185,080 1,334 32,056 79,230 640,529
Acquisition 3,236 1,557 1,999 2,502 518 9,812
Disposal - (61) - (1,426) - (1,487)
Foreign
exchange
translation - (371) - 72 - (299)
June 30, 2016 346,065 186,205 3,333 33,204 79,748 648,555
Accumulated
amortization
and impairment
losses
January 1, 2016 175,525 111,136 - 3,472 47,877 338,010
Amortization 24,462 12,121 - - 4,311 40,894
Impairment
loss - - - 12 - 12
Disposal - (33) - (1) - (34)
Foreign
exchange
translation - (172) - (3) - (175)
June 30, 2016 199,987 123,052 - 3,480 52,188 378,707
Net book amount
January 1, 2016 167,304 73,944 1,334 28,584 31,353 302,519
June 30, 2016 146,078 63,153 3,333 29,724 27,560 269,848
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
59
Deferred tax expenses due to temporary
differences 86,853 41,831 83,612 59,473
Tax expense recognized directly in equity Changes in the fair value of available-for-sale
financial assets (57,142) (51,630) (71,698) (86,305)
Other components 1,881 (2,564) (1,061) (2,750)
Tax expense 109,917 242,814 95,677 199,127
The relationship between profit before income tax and tax expense for the three-month and six-month periods ended June 30, 2017 and 2016, follows:
June 30, 2017 June 30, 2016
(In millions of Korean won)
Three
months
Six
months
Three
months
Six
months
Profit before income tax expense 470,052 1,042,303 385,274 866,447
Tax rate1
Tax expense calculated by applicable tax rate 113,637 252,006 93,121 209,449
Adjustments Unrecognized temporary differences and
others (3,815) 17,846 2,626 3,188
Refunds 95 (27,038) (70) (13,510)
Income tax expense 109,917 242,814 95,677 199,127
Effective tax rate 23.38% 23.30% 24.83% 22.98%
1 Tax rates applied are as follows: 24.2% for \ 20,000 million and above, 22% for less than \ 20,000
million but more than \ 200 million, and 11% applies to less than \ 200 million.
Temporary differences and changes in deferred tax assets and liabilities as at and for the three-month and six-month period ended June 30, 2017 and as at and for the year ended December 31, 2016, are as follows:
June 30, 2017
Three-month period
(In millions of Korean won) Beginning
Increase (decrease)
Ending
Financial assets held for trading 22,061 (3,514) 18,547
Available-for-sale financial assets (573,689) (241,245) (814,934)
Provision for impairment 11,541 (3,924) 7,617
Investments in associates (197,316) 9,771 (187,545)
Derivatives 194,065 (117,987) 76,078 Property and equipment, investment properties (158,026) (1,363) (159,389)
Prepaid expenses (310,985) (22,708) (333,693)
Accrued income (296,128) (26,865) (322,993)
Provisions 405,722 (9,206) 396,516
Post-employment benefit obligations 229,506 (13,030) 216,476
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
60
Unearned revenue 41,621 (4,043) 37,578
Accrued expenses 8,949 (4,726) 4,223
Other financial liabilities 8,985 1,075 10,060
Others 87,540 78,926 166,466
(526,154) (358,839) (884,993)
Tax loss carryforwards 12,214 (2,842) 9,372
(513,940) (361,681) (875,621)
Average tax rate 24.20% 24.20%
Total deferred tax liabilities effect (124,373) (211,900) Temporary differences not recognized as deferred tax assets 2,957 2,268
(127,330) (214,168)
Deferred tax assets 8,983 6,534
Deferred tax liabilities (136,313) (220,702)
June 30, 2017
Six-month period
(In millions of Korean won) Beginning Adjustment1
Beginning after
adjustments
Increase (decrease)
Ending
Financial assets held for trading 30,365 - 30,365 (11,818) 18,547
Available-for-sale financial assets (509,468) (2,824) (512,292) (302,642) (814,934)
Provision for impairment (13,108) - (13,108) 20,725 7,617
Investments in associates (190,725) - (190,725) 3,180 (187,545)
Derivatives 63,084 (758) 62,326 13,752 76,078 Property and equipment, investment properties (156,951) - (156,951) (2,438) (159,389)
Prepaid expenses (308,068) - (308,068) (25,625) (333,693)
Accrued income (305,233) - (305,233) (17,760) (322,993)
Provisions 388,657 57 388,714 7,802 396,516 Post-employment benefit obligations 198,342 - 198,342 18,134 216,476
Unearned revenue 42,685 - 42,685 (5,107) 37,578
Accrued expenses 7,392 14 7,406 (3,183) 4,223
Other financial liabilities 5,688 - 5,688 4,372 10,060
Others 125,824 (87,111) 38,713 127,753 166,466
(621,516) (90,622) (712,138) (172,855) (884,993)
Tax loss carryforwards 15,869 - 15,869 (6,497) 9,372
(605,647) (90,622) (696,269) (179,352) (875,621)
Average tax rate 24.20% 24.20%
Total deferred tax liabilities effect (146,567) (211,900)
Temporary differences not recognized as deferred tax assets 3,840 2,268
(150,407) (214,168)
Deferred tax assets 7,684 6,534
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
61
Deferred tax liabilities (158,091) (220,702)
December 31, 2016
(In millions of Korean won) Beginning Adjustment1
Beginning after
adjustments
Increase (decrease)
Ending
Financial assets held for trading (10,748) - (10,748) 41,113 30,365
Available-for-sale financial assets (601,444) (59,936) (661,380) 151,912 (509,468)
Provision for impairment (12,045) - (12,045) (1,063) (13,108)
Investments in associates (178,243) - (178,243) (12,482) (190,725)
Derivatives 23,447 (26) 23,421 39,663 63,084 Property and equipment, investment properties (150,889) 1 (150,888) (6,063) (156,951)
Prepaid expenses (274,110) - (274,110) (33,958) (308,068)
Accrued income (386,346) 102,326 (284,020) (21,213) (305,233)
Provisions 330,051 16 330,067 58,590 388,657 Post-employment benefit obligations 80,615 (546) 80,069 118,273 198,342
Unearned revenue 40,166 - 40,166 2,519 42,685
Accrued expenses 12,296 (3,291) 9,005 (1,613) 7,392
Other financial liabilities 10,793 - 10,793 (5,105) 5,688
Others 102,871 49,265 152,136 (26,312) 125,824
(1,013,586) 87,809 (925,777) 304,261 (621,516)
Tax loss carryforwards 33,259 - 33,259 (17,390) 15,869
(980,327) 87,809 (892,518) 286,871 (605,647)
Average tax rate 24.20% 24.20%
Total deferred tax liabilities effect (237,239) (146,567)
Temporary differences not recognized as deferred tax assets 8,111 3,840
(245,350) (150,407)
Deferred tax assets 12,221 7,684
Deferred tax liabilities (257,571) (158,091)
1 Adjustments were made at the final tax return. As at June 30, 2017, total amounts of tax loss carryforwards where deferred tax assets were not
recognized are \ 9,372 million (December 31, 2016: \ 15,869 million).
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
62
14. Other Assets Details of other assets as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won)
June 30, 2017 December 31, 2016
Other financial assets
Unsettled accounts receivable 910,509 4,552,732
Other receivables 527,834 100,410
Unsettled spot exchange receivables 2,957,262 2,431,092
Leasehold deposits provided 831,812 830,472
Accrued income 870,419 844,070
Present value discounts (14,939) (12,772) Provision for impairment of other financial
instruments
(13,868) (28,446)
Others 10,285 9,906
6,079,314 8,727,464
Other assets
Prepaid expenses 161,347 127,239
Petty cash 15,393 13,505
Stationery 5,489 3,927
Special account asset 1,120,261 1,018,456
Other 82,388 79,237
1,384,878 1,242,364
7,464,192 9,969,828
15. Deposit Liabilities Details of deposit liabilities as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won)
June 30, 2017 December 31, 2016
Demand deposits in Korean won 35,529,906 34,263,717
Demand deposits in foreign currencies 7,405,402 7,095,687
42,935,308 41,359,404
Time & savings deposits in Korean won 49,194,825 48,096,258
Time & savings deposits in foreign currencies 4,823,009 3,911,360
54,017,834 52,007,618
Negotiable certificates of deposit 6,555,806 7,398,067
Others 3,470,114 3,219,024
106,979,062 103,984,113
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
63
16. Debts Debts as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won)
Lender Interest
rate (%) June 30, 2017
December 31,
2016
Borrowings in Korean won
Borrowings in Korean
won from BOK
Bank of Korea 0.50 ~ 0.75
5,502,698 5,482,649
Borrowings in Korean
won from funds
Small & Medium
Business Corporation
and others
0.00 ~ 4.10
11,830,884 10,896,004
Borrowings in Korean
won from the
government
Ministry of Strategy and
Finance and others 0.00 ~ 4.00
1,972,749 2,015,381
Borrowings in Korean
won from deposit banks
Woori Bank and others 2.63 ~ 2.66
40,000 50,000
Other borrowings in
Korean won
Samsung Electronics
Co., Ltd. and others
1.47 ~ 2.23
3,049,300 2,966,830
22,395,631 21,410,864
Borrowings in foreign
currencies
Overdraft due to banks
in foreign currencies
JP Morgan & Chase
Bank and others
-
249,862 173,393
Borrowings from bank
in foreign currencies
World Bank and others
0.00 ~ 1.77
1,179,461 1,085,594
Other borrowings in
foreign currencies
The Bank of New York
Mellon and others
0.00 ~ 2.43
1,249,095 1,204,872
2,678,418 2,463,859
Bills sold Counter sale 0.75 ~ 2.19 146,304 174,994
Call money
Call money in Korean
won
Woori Bank
1.27
300,000 -
Call money in foreign
currencies
CHINATRUST,HONG
KONG and others
1.22 ~ 1.55
736,666 761,082
1,036,666 761,082
Bonds sold under
repurchase agreements
Repurchase agreements
sold to customers
0.75 ~ 5.20
1,763,707 1,859,697
Others National IT Industry
Promotion Agency
-
6,667 -
28,027,393 26,670,496
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
64
Details of debts from financial institutions as at June 30, 2017 and December 31, 2016, are as follows: (In millions of Korean won) June 30, 2017 December 31, 2016
Bank of Korea
5,502,698 5,482,649
Others
6,608,439 6,173,378
12,111,137 11,656,027
17. Debentures Details of debentures as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Debentures in Korean won
86,081,635 84,704,785
Debentures in foreign currencies
3,108,797 2,775,199
Other debentures
4,049,435 3,430,915
Less : Discount on debentures
(38,308) (47,774)
93,201,559 90,863,125
Details of debentures in Korean won and in foreign currencies as at June 30, 2017 and December 31, 2016, are as follows: Debentures in Korean won
(In millions of Korean won) Interest rate
(%) June 30, 2017 December 31, 2016
Small and Medium Industry (SMI) finance bonds
Counter 1.00 ~ 7.77 59,303,435 54,120,933
Market 1.26 ~ 5.75 21,702,341 25,732,151
Subordinated SMI finance bonds 2.37 ~ 4.67 5,100,010 4,850,010
86,105,786 84,703,094
Unissued SMI finance bonds 11 60
Gain on valuation of fair market value risk hedge (current period)
(24,825) (50,505)
Loss on valuation of fair market value risk hedge (prior periods)
663 52,136
(24,162) 1,631
86,081,635 84,704,785
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
65
Debentures in foreign currencies
(In millions of Korean won) Interest rate
(%) June 30, 2017 December 31, 2016
Debentures in foreign currencies 0.01 ~ 4.80 3,028,927 2,760,038
Offshore finance bonds issued 2.25 65,273 -
3,094,200 2,760,038
Gain on valuation of fair market value risk hedge (current period)
(1,002) (9,103)
Loss on valuation of fair market value risk hedge (prior periods)
15,599 24,264
14,597 15,161
3,108,797 2,775,199
18. Net Defined Benefit Liabilities Changes in the net defined benefit liabilities recognized in relation to the defined benefit plan for the six-month periods ended June 30, 2017 and 2016, are as follows: June 30, 2017
June 30, 2016
(In millions of Korean won)
Present value of defined benefit
obligation
Fair value of plan assets
Net defined
benefit liabilities
Beginning balance 647,607 (622,517) 25,090
Current service cost 59,245 - 59,245
Interest expenses (income) 9,043 (8,502) 541
Paid in plan assets - (41,390) (41,390)
Benefits paid (7,766) 7,001 (765)
Remeasurements:
Return on plan assets - 3,639 3,639
Ending balance 708,129 (661,769) 46,360
(In millions of Korean won)
Present value of defined benefit
obligation
Fair value of plan assets
Net defined
benefit liabilities
Beginning balance 533,398 (430,555) 102,843
Current service cost 56,807 - 56,807
Interest expenses (income) 7,552 (6,199) 1,353
Paid in plan assets - (70,000) (70,000)
Benefits paid (18,487) 10,338 (8,149)
Remeasurements:
Return on plan assets - 2,742 2,742
Change in financial assumptions 36 - 36
Ending balance 579,306 (493,674) 85,632
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
66
Expenses recognized related to the defined benefit plans for the six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won)
June 30, 2017
June 30, 2016
Current service cost
59,245 56,807
Interest expenses of net defined benefit liabilities
541 1,353
59,786 58,160
The significant actuarial assumptions as at June 30, 2017 and December 31, 2016, are as follows:
June 30, 2017 December 31, 2016
Discount rate (%)
2.58 ~ 3.43 2.58~3.43
Future salary growth rate (%)
2.09 ~ 3.41 2.09~3.41 Plan assets as at June 30, 2017 and December 31, 2016, consist of:
(In millions of Korean won)
June 30, 2017 December 31, 2016
Quoted price
Unquoted
price
Quoted price
Unquoted
price
Cash and cash equivalents - 661,769 - 622,517
The sensitivity of the defined benefit obligation to changes in the principal assumptions as at June 30,
2017 and December 31, 2016, are as follows:
June 30, 2017
December 31, 2016
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. 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. The Group is exposed to various risks through the defined benefit plans and the most significant risk is as below: Decrease in earning rate of prime-rate bonds: Decrease in earning rate of prime-rate bonds may bring an increase in a certain portion of financial assets’ value as an offset effect. However, as a result, the defined benefit obligation will be increased.
(In millions of Korean won)
Change in
assumption Increase in
assumption Decrease in
assumption
Discount rate 1.00% (71,325) 84,854
Future salary growth rate 1.00% 84,117 (72,067)
(In millions of Korean won)
Change in
assumption Increase in
assumption Decrease in
assumption
Discount rate 1.00% (72,913) 88,463
Future salary growth rate 1.00% 87,294 (73,375)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
67
The expected maturity analysis of undiscounted pension benefits as at June 30, 2017 and December 31, 2016, is as follows:
(In millions of Korean won) June 30, 2017
December 31, 2016
Within 10 years 250,113 227,608
10 years ~ within 20 years 252,444 237,854
20 years ~ within 30 years 533,527 508,027
30 years and longer 56,621 56,163
1,092,705 1,029,652
The Group's best estimate of expected contributions for the six-month period ended June 30, 2017
are \ 104,190 million and weighted average duration of the defined benefit liability is 16.3 years.
The Group recognized expense related to the defined contribution plans for the six-month periods
ended June 30, 2017 and 2016 amounts to \ 1,160 million and \ 615 million, respectively.
For the certain employees who have worked for more than 20 years, liabilities are recorded using actuarial methods for the pension to be paid to employees who would voluntarily retire prior to their legal retirement date. Pension liabilities recorded as at June 30, 2017 and December 31, 2016, are
\ 94,734 million and \ 91,511 million, respectively.
19. Provisions Details and changes in provisions for other liabilities and charges for the six-month periods ended June 30, 2017 and 2016, are as follows:
June 30, 2017
(In millions of Korean won) Beginning Increase Reversal Others Ending Payment guarantees outstanding 50,940 - (5,964) (84) 44,892
Unused ceiling 93,048 - (11,680) (187) 81,181
Provision for litigation 1,692 9,801 - - 11,493
Provision for restoration 10,276 57 (30) (100) 10,203
Provision for award credits 3,273 - (356) - 2,917
Others 231,224 16,656 - 24 247,904
390,453 26,514 (18,030) (347) 398,590
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
68
June 30, 2016
(In millions of Korean won) Beginning Increase Reversal Others Ending Payment guarantees outstanding 50,551 1,023 - 15 51,589
Unused ceiling 106,795 - (9,480) 1 97,316
Provision for litigation 1,715 - (823) - 892
Provision for restoration 9,653 80 - 113 9,846
Provision for award credits 3,380 48 - - 3,428
Others 159,689 41,278 - 97 201,064
331,783 42,429 (10,303) 226 364,135
Payment guarantees and unused loan commitments The Group recognizes the estimated amount based on loss incurred from the payment guarantees and unused loan commitment as provisions. Details of provisions for payment guarantees as at June 30, 2017 and December 31, 2016, are as follows:
Details of provisions for unused loan commitments as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of
Korean won) June 30, 2017 December 31, 2016
Payment
guarantees Provision
Ratio
(%)
Payment
guarantees Provision
Ratio
(%)
Confirmed payment
guarantees in Korean
won
695,379 6,369 0.92 715,890 6,990 0.98
Confirmed payment
guarantees in foreign
currencies
2,172,400 23,335 1.07 2,028,269 23,038 1.14
Unconfirmed payment
guarantees 1,829,291 15,188 0.83 2,050,103 20,911 1.02
Bills endorsed - - - 110 1 0.91
4,697,070 44,892 0.96 4,794,372 50,940 1.06
(In millions of
Korean won) June 30, 2017 December 31, 2016
Commitment
outstanding1 Provision
Ratio
(%)
Commitment
outstanding1 Provision
Ratio
(%)
Corporate loan
commitment 33,568,470 57,898 0.17 35,214,584 69,372 0.20
Retail loan commitment 2,165,942 2,245 0.10 2,096,454 2,234 0.11
Credit line on credit
cards 10,615,521 21,038 0.20 9,988,442 21,442 0.21
46,349,933 81,181 0.18 47,299,480 93,048 0.20
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
69
1 Excludes commitments that are not required to set up provisions for unused loan commitments. Litigation Details of lawsuits the Group has filed and is facing as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017
December 31, 2016
Plaintiff No. of lawsuits 399 502
Claims 483,785 557,465
Defendant No. of lawsuits 169 134
Claims 147,030 131,701
The Group establishes provisions considering the probability of the outcome of the lawsuit. Provision for restoration The Group recognizes a provision to the extent that the Group is obliged to rectify damage already caused, and the present value valuation is applied if the rent is long-term and present value is material. Provisions for general wages The Bank estimated the expected future payable amount in relation to the claims for the additional payments of employees’ wages (or severance payments) and recognized the best estimate as a provision. The Bank lost in the first trial on May 26, 2016 and won in the second trial on May 12, 2017. The Bank’s intention of appeal to the Supreme Court and outcome of the lawsuit cannot be reasonably predicted as at June 30, 2017.
20. Other Liabilities Details of other liabilities as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won)
June 30, 2017
December 31, 2016
Other financial liabilities
Financial guarantee liabilities
54,051 46,308
Borrowings from trust accounts
1,807,869 1,541,576
Borrowing from other business account
397,428 980,056
Guaranteed deposits
174,939 222,336
Unsettled inter-office account in foreign currencies
1,901,753 864,454
Dividends payable
5,782 5,296
Other payables
552,989 212,149
Unsettled spot exchange
2,957,535 2,439,067
Accrued expenses
1,341,264 1,282,684
Agencies
768,973 246,244
Others
479,488 375,993
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
70
10,442,071 8,216,163
Other liabilities
Income tax payable
210,091 208,160
Unearned revenue
182,254 173,280
Insurance liabilities
2,994,898 2,592,368
Special accounts
1,169,174 1,017,557
Others
393,396 296,154
4,949,813 4,287,519
15,391,884 12,503,682
21. Lease Finance lease – the Group as a lessor The Group has finance lease contracts as a lessor on various types of assets, and the details of assets held under a finance lease as at June 30, 2017 and December 31, 2016, are as follows:
The accumulated provision for impairment for assets held under a finance lease as at June 30, 2017
and December 31, 2016, are \ 13,538 million and \ 14,607 million, respectively.
Operating lease – the Group as a lessee The Group has lease contracts with companies regarding car and printer rentals, and others. The future minimum lease payments arising from the non-cancellable lease contracts as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Within 1 year 57,939 65,210
Between 1 and 5 years 44,774 46,547
102,713 111,757
(In millions of
Korean won) June 30, 2017 December 31, 2016
Minimum
lease
receipts
Unrealized
interests
income
Present
value
Minimum
lease
receipts
Unrealized
interests
income
Present
value
Within 1 year 76,840 2,220 74,620 85,680 3,072 82,608 Between 1 and 5 years
290,297 21,897 268,400 254,199 17,241 236,958
Over 5 years 17,420 561 16,859 17,281 863 16,418
384,557 24,678 359,879 357,160 21,176 335,984
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
71
Operating lease – the Group as a lessor The Group has multiple operating lease contracts for land and buildings classified as investment properties. Remaining years on these operating leases are less than five years, and all operating lease receipts are subject to increase annually depending on the market conditions. The future minimum lease receipts arising from the non-cancellable lease contracts as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Within 1 year 539 444
Between 1 and 5 years 446 395
985 839
22. Contingent Liabilities and Commitments
Details of payment guarantees and endorsed bills as at June 30, 2017 and December 31, 2016, are
as follows:
(In millions of Korean won) June 30, 2017
December 31,
2016
Confirmed payment guarantees in Korean won
Financial guarantee contracts 1,669,598 1,650,389
Others 695,379 715,890
2,364,977 2,366,279
Confirmed payment guarantees in foreign currencies
Financial guarantee contracts 522,389 606,777
Letters of guarantees for importers 101,982 118,950
Others 2,070,418 1,909,319
2,694,789 2,635,046
Unconfirmed payment guarantees
Customer’s liability on letters of credit 1,828,782 2,049,585
Others 509 518
1,829,291 2,050,103
Bills endorsed
Bills endorsed with recourse - 110
- 110
6,889,057 7,051,538
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
72
Details of commitments as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won)
June 30, 2017
December 31,
2016
Commitments on loans in Korean won 37,600,396 37,947,719
Commitments on loans in foreign currencies 8,775,672 9,707,178
Others 5,564,674 6,155,831
51,940,742 53,810,728
Credit offering commitments consist of loan commitments and revolving credit commitments. Generally, there is a term of validity or other expiration clauses in a commitment. There could be commitments that are not fully used. Therefore, the notional amount may not be equal to the future cash consumed. However, most credit offering commitments require customers to maintain certain credit levels. Thus, the potential credit loss should be less than total used commitment. In general, as longer commitments entail higher credit risk, the Group monitors the commitments throughout their maturity.
Trust Accounts
(1) Composition of the Group’s trust accounts as at June 30, 2017 and December 31, 2016, and for
the six-month periods ended June 30, 2017 and 2016, are as follows:
1 Financial information of the trust accounts has been prepared in accordance with Korean Accounting Standard 5004 Trust Accounts, and enforcement regulations of Financial Investment Services under the Financial Investment Services and Capital Markets Act.
(2) Major transactions between the Group and the Trust Accounts for the six-month periods ended
June 30, 2017 and 2016, are as follows:
(In millions of Korean
won)
Type June 30, 2017
December 31, 2016 /
June 30, 2016
Income Trust operation income 33,456
29,443
Expense Interest expense 11,611
20,000
Receivable Operation fees receivables 1,168
1,119
Fees receivable 26,580
25,574
27,748
26,693
Payable Trust accounts 1,807,869
1,541,576
Interest payable 365
367
1,808,234 1,541,943
Others (1) As at June 30, 2017, the Bank owns export trade receivables (USD 84,458,900) from Moneual, Inc., which is guaranteed by the Korea Trade Insurance Corporation. The Bank made a claim to the Korea Trade Insurance Corporation for payment of the uncollected insurance and the guarantee obligation arising from the bankruptcy of Moneual, Inc. However, the Bank received a notification of
(In millions of Korean won) Total assets Operating income
June 30, 2017
December 31,
2016 June 30, 2017 June 30, 2016
Unconsolidated1 52,904,073
52,408,491 128,195
126,206
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
73
payment refusal from the Korea Trade Insurance Corporation on May 19, 2015. The Bank filed a lawsuit against Korea Trade Insurance Corporation on August 3, 2015. The Bank partially won the lawsuit at the first trial on February 17, 2017, however, the Bank appealed against it, and the second trial is in process. As at June 30, 2017, financial impact in relation to the outcome of the civil suit is not predictable. (2) The Bank provides settlement services in Korean won for the transactions between Korea and Iran, and an internal investigation is in progress as requested by the U.S. Attorney’s Office and New York State Attorney General's Office to confirm if the services are in compliance with the legal restrictive measures imposed by the U.S. government against transactions conducted with certain countries or institutions, and the relevant documents have been submitted to U.S. authorities. In January 2013, the Korean Prosecutors previously concluded that the Bank and its executives and staff were not guilty for the fake transaction of “A” Corporation, which utilized the settlement service of the Group. As at June 30, 2017, the outcome of the investigation and subsequent impact are not predictable or measurable.
23. Financial Assets and Financial Liabilities - Fair Value There are no significant changes in business or economic environment that would result in material effects on fair value of financial assets and liabilities during the six-month period ended June 30, 2017.
23.1 Book Amount and Fair Value of Financial Instruments Book amount and fair value of financial instruments as at June 30, 2017 and December 31, 2016, are
as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Book amount Fair value Book amount Fair value
Assets
Cash and due from banks 15,072,354 15,072,335 11,699,220 11,699,208
Financial assets held for trading 7,970,600 7,970,600 8,313,556 8,313,556
Financial assets designated at fair value
through profit or loss 511,339 511,339 478,908 478,908
Available-for-sale financial assets 14,903,505 14,903,505 16,770,997 16,770,997
Held-to-maturity financial assets 19,402,846 19,523,339 14,133,675 14,279,878
Loans receivable
Loans in Korean won 183,277,042 182,745,658 177,564,256 177,318,879
Loans in foreign currencies 3,771,926 3,773,881 3,795,033 3,796,039
Interbank loans in foreign currencies 1,959,134 1,959,134 787,470 787,470
Domestic import usance bills 2,941,241 2,941,241 3,104,821 3,101,462
Call loan 1,708,387 1,708,387 2,661,416 2,661,416
Bills bought in Korean won / bills
bought in foreign currencies 1,851,980 1,850,870 1,799,273 1,793,146
Payment on guarantees 33,283 33,283 38,005 38,005
Credit card receivable 2,662,129 2,662,129 2,569,484 2,569,803
Bonds purchased under repurchase 1,982,445 1,982,445 2,056,629 2,056,629
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
74
agreements
Others 856,408 915,651 859,913 862,774
Provision for impairment (2,212,366) (2,212,366) (2,490,259) (2,490,259)
Present value discount (16,194) (16,194) (9,454) (9,454)
Loan origination cost 324,943 324,943 300,726 300,726
199,140,358 198,669,062 193,037,313 192,786,636
Derivatives assets for hedge accounting 152,345 152,345 174,147 174,147
Other assets 6,079,314 6,080,640 8,727,464 8,730,247
263,232,661 262,883,165 253,335,280 253,233,577
Liabilities
Financial liabilities held for trading 2,074,134 2,074,134 2,620,960 2,620,960
Financial liabilities designated at fair
value through profit or loss 1,361,783 1,361,783 1,233,788 1,233,788
Deposit liabilities
Deposits in Korean won 88,192,973 88,107,957 85,576,772 85,554,840
Negotiable certificates of deposit 6,555,806 6,525,500 7,398,067 7,397,691
Deposits in foreign currencies 12,230,283 12,230,192 11,009,274 11,007,985
106,979,062 106,863,649 103,984,113 103,960,516
Debts
Borrowings in Korean won 22,395,631 22,395,659 21,410,864 21,410,864
Borrowings in foreign currencies 2,678,418 2,678,362 2,463,859 2,425,756
Bills sold 146,304 146,054 174,994 174,991
Foundation fund 6,667 6,667 - -
Call money 1,036,666 1,036,666 761,082 761,082
Bonds sold under repurchase
agreements 1,763,707 1,763,359 1,859,697 1,859,700
28,027,393 28,026,767 26,670,496 26,632,393
Debentures
Trading SME Industry finance
debentures 86,053,868 85,511,263 84,667,552 84,990,608
Debentures issued in foreign
currencies 3,101,249 3,108,779 2,767,204 2,775,199
Others 4,046,442 4,047,048 3,428,369 3,428,369
93,201,559 92,667,090 90,863,125 91,194,176
Derivatives liabilities for hedge
accounting 248,097 248,097 354,174 354,174
Other liabilities 10,442,071 10,434,007 8,216,163 8,214,679
242,334,099 241,675,527 233,942,819 234,210,686
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
75
Standards applied in measuring the fair value of financial instruments are as follows: - Cash and due from banks: Book amount of cash is considered to be the fair value. In addition, as
demand deposits and deposits for settlements are liquid in nature and do not have a fixed maturity, their book amounts are also considered to approximate the fair value. Fair value of due from bank is calculated using discounted cash flow model. However, for deposits that are on demand and whose contractual maturity / interest rate change cycle is less than three months, book amount is considered to be the fair value.
- Marketable securities: For a listed security, fair value is measured at its quoted market price in its
active market, and when such price is not available, fair value is measured by third party valuation experts. Third party experts apply one of the following valuation techniques by considering case-specific factors: Discounted Cash Flow Model, Imputed Market Value Model, and Free Cash Flow to Equity Model, Dividend Discount Model, Risk-adjusted Valuation Model, and Net Asset Value Method.
- Loans receivable: For loans that are on demand and whose contractual maturity / interest rate
change cycle is less than three months, book value is considered to be the fair value. Fair value of a loan is calculated by discounting the future cash flows by the interest rate where market risk and other risks are reflected, less allowance for loan loss.
- Derivatives: Derivative instruments that are traded in active markets are measured at fair value by
using quoted prices, if available. Derivatives that are not traded in active market are measured at fair value by using valuation techniques. Widespread derivatives not traded in active markets, such as Interest rate swaps and foreign currency swaps, are measured by using valuation technique that are based on observable inputs. However, in some cases, determining appropriate valuation techniques and when there are no observable inputs to measure the fair value of some complex derivative instruments could be difficult. In those cases, they are measured by the independent valuation experts.
- Other financial assets and liabilities: For other financial assets and liabilities that are on demand in
nature whose contractual maturity / interest rate change cycle is less than three months, book amount is considered to be the fair value. Fair value of other financial assets and liabilities is calculated by discounting the future cash flows by the interest rate where market risk and other risks are reflected.
- Deposit liabilities: For deposits that are on demand and whose contractual maturity / interest rate
change cycle is less than three months, book amount is considered to be the fair value. Fair value of a deposit is calculated using the future cash flows by interest rate where market risk and other risks are reflected.
- Debts: For borrowings that are on demand and whose contractual maturity / interest rate change
cycle is less than three months, book amount is considered to be the fair value. Fair value of a borrowing is calculated by discounting the future cash flows by the interest rate where market risk and other risks are reflected.
- Debentures: Fair value of debentures is fair value provided by external credit rating companies less
accrued interest payables. For debentures whose fair value cannot be provided by external credit rating companies, the fair value is calculated by discounting the future cash flows by the interest rate where market risk and other risks are reflected.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
76
23.2 Fair Value Hierarchy Fair value hierarchy classifications of the financial assets and financial liabilities that are measured at
fair value as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017
Level 1 Level 2 Level 3 Total
Financial assets
Financial assets held for trading 2,277,483 5,526,085 167,032 7,970,600 Financial assets designated at fair value through profit or loss - 200,711 310,628 511,339
Available-for-sale financial assets1 2,891,261 9,186,346 2,825,898 14,903,505 Derivatives assets for hedge accounting - 152,345 - 152,345
5,168,744 15,065,487 3,303,558 23,537,789
Financial liabilities
Financial liabilities held for trading 525,975 1,363,506 184,653 2,074,134 Financial liabilities designated at fair value through profit or loss - 313,158 1,048,625 1,361,783
Derivatives liabilities for hedge accounting - 215,659 32,438 248,097
525,975 1,892,323 1,265,716 3,684,014
(In millions of Korean won) December 31, 2016
Level 1 Level 2 Level 3 Total
Financial assets
Financial assets held for trading 1,652,992 6,489,506 171,058 8,313,556 Financial assets designated at fair value through profit or loss - 227,933 250,975 478,908
Available-for-sale financial assets1 3,974,418 10,199,071 2,597,508 16,770,997 Derivatives assets for hedge accounting - 174,147 - 174,147
5,627,410 17,090,657 3,019,541 25,737,608
Financial liabilities
Financial liabilities held for trading 122,626 2,304,207 194,127 2,620,960 Financial liabilities designated at fair value through profit or loss - 239,973 993,815 1,233,788
Derivatives liabilities for hedge accounting - 320,921 33,253 354,174
122,626 2,865,101 1,221,195 4,208,922
1 From available-for-sale financial assets, unlisted equity securities amounting to \ 152,595 million as
at June 30, 2017 (December 31, 2016: \ 137,042 million), were measured at cost as their fair value
could not be measured reliably and hence has been categorized as Level 3. Equity instruments carried at cost include unlisted securities of public entities or non-profit entities whose economic values are difficult to be quantified. Also, unlisted equity instruments invested in project financing funds are valued at cost since their future cash flows are difficult to be projected in a reliable manner. The Group has no plan to sell these securities in the near future.
Fair value hierarchy classifications of the financial assets and financial liabilities whose fair values are
disclosed as at June 30, 2017 and December 31, 2016, are as follows:
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
77
June 30, 2017
(In millions of Korean won) Level 1 Level 2 Level 3 Total
Financial assets
Cash and due from banks 643,602 13,717,895 710,838 15,072,335
Held-to-maturity financial assets 4,589,211 14,934,128 - 19,523,339
Loans receivable - - 198,669,062 198,669,062
Other financial assets - - 6,080,640 6,080,640
5,232,813 28,652,023 205,460,540 239,345,376
Financial liabilities
Deposit liabilities - 42,956,731 63,906,918 106,863,649
Debts - - 28,026,767 28,026,767
Debentures - 5,084,113 87,582,977 92,667,090
Other financial liabilities - - 10,434,007 10,434,007
- 48,040,844 189,950,669 237,991,513
December 31, 2016
(In millions of Korean won) Level 1 Level 2 Level 3 Total
Financial assets
Cash and due from banks 1,288,006 9,542,500 868,702 11,699,208
Held-to-maturity financial assets 3,024,633 11,255,245 - 14,279,878
Loans receivable - - 192,786,636 192,786,636
Other financial assets - - 8,730,247 8,730,247
4,312,639 20,797,745 202,385,585 227,495,969
Financial liabilities
Deposit liabilities - 41,359,339 62,601,177 103,960,516
Debts - - 26,632,393 26,632,393
Debentures - 28,446,330 62,747,846 91,194,176
Other financial liabilities - - 8,214,679 8,214,679
- 69,805,669 160,196,095 230,001,764
Items that are measured at fair value or for which the fair value is disclosed are categorized by the fair value hierarchy levels, and the defined levels are as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). All inputs other than quoted prices included in level 1 that are observable (either directly
that is, prices, or indirectly that is, derived from prices) for the asset or liability (Level 2). Unobservable inputs for the asset or liability (Level 3).
Fair value hierarchy disclosure is applicable to assets and liabilities that are measured or disclosed at
fair value.
The Group recognizes transfers between levels on the actual date of the event or change in
circumstances causing the transfer.
23.3 Transfers between Fair Value Hierarchy Levels of Recurring Fair Value
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
78
Measurements
Changes in Level 3 of the fair value hierarchy for the six-month periods ended June 30, 2017, and
2016, are as follows:
June 30, 2017
(In millions of Korean won)
Financial
assets held for
trading
Financial assets
designated at fair
value through profit
or loss
Available-for-sale
financial assets
Total financial
assets
Beginning balance 171,058 250,975 2,597,508 3,019,541
Purchases 13,137 78,610 290,882 382,629
Sales (26,150) (22,608) (72,723) (121,481)
Settlements 2,849 - - 2,849
Transfer out of level 3 - - (7,460) (7,460)
Profit or loss 6,138 3,651 (14,717) (4,928)
Other comprehensive
income - - 32,408 32,408
Ending balance 167,032 310,628 2,825,898 3,303,558
(In millions of Korean won)
Financial
liabilities held
for trading
Financial liabilities
designated at fair
value through
profit or loss
Derivative
liabilities for hedge
accounting
Total financial
liabilities
Beginning balance 194,127 993,815 33,253 1,221,195
Purchases 4,609 380,887 - 385,496
Sales (9,631) (344,215) - (353,846)
Settlements 148 - - 148
Transfer out of level 3 - - - -
Profit or loss (4,600) 18,138 (815) 12,723
Other comprehensive
income - - - -
Ending balance 184,653 1,048,625 32,438 1,265,716
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
79
June 30, 2016
(In millions of Korean won)
Financial
assets held for
trading
Financial assets
designated at fair
value through profit
or loss
Available-for-sale
financial assets
Total financial
assets
Beginning balance 98,851 212,572 2,129,995 2,441,418
Purchases 17,244 62,804 334,579 414,627
Sales (46,666) (58,156) (92,549) (197,371)
Settlements (1,504) - - (1,504)
Transfer out of level 3 - - 3,047 3,047
Profit or loss 88,782 5,000 (5,844) 87,938
Other comprehensive
income - - 64,843 64,843
Ending balance 156,707 222,220 2,434,071 2,812,998
(In millions of Korean won)
Financial
liabilities held
for trading
Financial liabilities
designated at fair
value through
profit or loss
Derivative
liabilities for hedge
accounting
Total financial
liabilities
Beginning balance 55,102 810,422 45,749 911,273
Purchases 26,740 117,683 - 144,423
Sales (14,207) (187,173) - (201,380)
Settlements 85 - 5,825 5,910
Transfer out of level 3 - - - -
Profit or loss 47,690 12,996 (18,761) 41,925
Other comprehensive
income - - - -
Ending balance 115,410 753,928 32,813 902,151
1 Transferred from Level 3 to level 2 when inputs have been observable and transferred from Level 2
to level 3 when inputs have been unobservable. The Group recognizes transfer between levels on the
date of the event or change in circumstances that caused the transfer.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
80
23.4 Profit or Loss in Level 3 of the Fair Value Hierarchy
Profit or loss in Level 3 of the fair value hierarchy for the six-month periods ended June 30, 2017, and
2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Total profit or loss
Profit or loss related to
instruments held
Total profit or
loss
Profit or loss related to
instruments held
Financial assets
Financial assets held for trading 6,138
14,143
88,782
15,387 Financial assets designated at fair value through profit or loss 3,651
1,652
5,000
4,874
Available-for-sale financial assets (14,717)
(18,103)
(5,844)
(9,919)
(4,928)
(2,308)
87,938
10,342
Financial liabilities
Financial liabilities held for trading 4,600
(2,183)
(47,690)
(56,674) Financial liabilities designated at fair value through profit or loss (18,138)
(15,548)
(12,996)
(14,271) Derivative financial liabilities for hedge accounting 815
815
18,761
3,609
(12,723)
(16,916)
(41,925)
(67,336)
Profit or loss incurred in Level 3 of the fair value hierarchy is recognized as ‘net gains (losses) on financial assets/liabilities held for trading’, ‘net gains (losses) on financial assets/liabilities designated at fair value through profit or loss’, ‘net gains (losses) on hedge accounting’ and ‘other gains (losses) from financial instruments’ in the consolidated statements of comprehensive income.
23.5 Sensitivity analysis for Recurring Fair Value Measurements Categorized as Level 3
Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable
changes in the fair value of financial instruments which are affected by the unobservable parameters,
using a statistical technique. When the fair value is affected by more than two input parameters, the
most favorable or most unfavorable amounts are presented. Financial instruments within Level 3 that
are subject to the sensitivity analysis are derivative instruments related to interest rates and stocks
whose changes in fair value are recognized in the profit or loss for the period, and equity and
beneficiary securities whose changes in fair value are recognized in the profit or loss for the period or
other comprehensive income.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
81
The results of the sensitivity analysis for the effect on profit or loss from changes in inputs for each
financial instrument for the six-month periods ended June 30, 2017 and 2016, is as follows:
(In millions of Korean won) June 30, 2017
Favorable Unfavorable
Profit for the
period
Other comprehensive
income
Profit (loss) for the period
Other
comprehensive income
Financial assets
Financial assets designated at fair
value through profit or loss1 1,091
-
(1,091)
-
Derivatives financial assets 1 1,456
-
(1,453)
-
Available-for-sale financial assets2 -
24,811
-
(24,810)
2,547
24,811
(2,544)
(24,810)
Financial liabilities Financial liabilities designated at fair
value through profit or loss1 1,142
-
(1,142)
-
Derivatives financial liabilities 1 767
-
(770)
-
1,909
-
(1,912)
-
(In millions of Korean won) June 30, 2016
Favorable Unfavorable
Profit for the
period
Other comprehensive
income
Profit (loss) for the period
Other
comprehensive income
Financial assets
Financial assets designated at fair value through profit or loss1 677
-
(677)
-
Derivatives financial assets 1 1,328
-
(1,324)
-
Available-for-sale financial assets2 -
19,729
-
(19,728)
2,005
19,729
(2,001)
(19,728)
Financial liabilities Financial liabilities designated at fair
value through profit or loss1 1,112
-
(1,112)
-
Derivatives financial liabilities 1 230
-
(241)
-
1,342
-
(1,353)
-
1 For other derivative instruments related to shares, changes in their fair value are calculated by increasing or decreasing the volatilities, which are significant unobservable inputs, by 100bp. For derivative instruments related to interest rates, changes in fair value are calculated by increasing or decreasing the correlation coefficient between interests or volatility of the underlying assets, which are significant unobservable inputs, by 10%. 2 Among equity securities, for redeemable convertible preference shares, changes in their fair value are calculated by increasing or decreasing the value of ordinary shares and its volatilities by 10%. And for other equity securities, changes in their fair value are calculated by increasing or decreasing the correlation between growth ratio (0~1%) and discount rate (1%) or liquidation value (1%) and
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
82
discount rate, which are significant unobservable inputs. For beneficiary certificates, their sensitivity from changes in inputs cannot be analyzed as a practical expedient. However, in case that it consists only of physical real estate, the sensitivity is calculated by changes from the correlation between discount rate on cash flows from rent (1%) and change rate in real estate sale price (1%).
23.6 Valuation Techniques and Inputs As at June 30, 2017 and December 31, 2016, the Group uses the following valuation techniques and inputs used to develop the fair value measurements for assets and liabilities that are measured at fair value on a recurring or nonrecurring basis and categorized within Level 2 and Level 3 of the fair value hierarchy.
June 30, 2017
(In millions of Korean won)
Fair value Level Valuation technique
Level 3 inputs
Unobservable
inputs
Range of unobservable
inputs (%)
Relationship of unobservable
inputs to fair value Financial assets
Cash and due from banks
13,717,895 2 DCF Model N/A N/A N/A N/A
710,838 3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
the fair value
Financial assets held for trading
5,526,085
2
DCF Model, Implied forward
rates, Black-Scholes
Model
N/A N/A N/A N/A
167,032
3
DCF Model, Black-Scholes
Model, Binomial trees,
Hull-White Model
Index volatility,
Volatility of individual stock
Volatility of underlying asset,
Interest rates correlation
coefficient and others
Index volatility 16.27 ~ 19.51
The higher the index volatility, the higher
the fair value
fluctuation
Volatility of individual
share 8.60 ~ 83.93
The higher the volatility of individual stock, the higher the fair value fluctuation
Volatility of underlying
asset
0.51
The higher the volatility of
underlying asset, the higher the fair value
fluctuation
Financial assets designated at fair value through profit and loss
200,711 2
DCF Model, Implied forward
rates N/A N/A N/A N/A
310,628
3
DCF Model, Binomial trees,
Monte Carlo simulation
Index volatility, Volatility of
individual stock, Discount rate and
others
Index volatility 16.27 ~ 19.51
The higher the index volatility, the higher
the fair value
fluctuation
Volatility of individual
stock 1.40 ~ 33.21
The higher the volatility of individual stock, the higher the fair value fluctuation
Discount rate 1.01 ~ 20.17
The lower the discount rate, the
higher the fair value
Available-for-sale financial assets
9,186,346 2 DCF Model N/A N/A N/A N/A
2,825,898
3 DCF Model,
FCFE Model, Net Asset Value
Growth rate
Growth rate 0.00 ~6.24 The higher the growth rate, the
higher the fair value
Discount rate 4.02 ~ 15.77
The lower the discount rate, the
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
83
higher the fair value
Held-to-maturity financial assets
14,934,128
2 DCF Model N/A N/A N/A N/A
Loans receivable
198,669,062
3
DCF Model
Counterparty Credit risk,
Other spreads and others
Counterparty
Credit risk 1
The higher the counterparty credit risk, the lower the
fair value
Other spreads 1 The higher the other spreads, the lower
the fair value Derivative assets for hedge accounting
152,345
2 DCF Model,
Implied forward rates
N/A N/A N/A N/A
Other financial assets
6,080,640
3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
the fair value
252,481,608
Financial liabilities
Financial liabilities held for trading
1,363,506
2
DCF Model, Implied forward
rates, Black-Scholes
Model
N/A N/A N/A N/A
184,653
3
DCF Model, Black-Scholes
Model, Binomial trees,
Hull-White Model
Index volatility,
Volatility of individual stock
Volatility of underlying asset,
Interest rates correlation
coefficient and others
Index volatility 16.27 ~ 19.51
The higher the index volatility, the higher
the fair value fluctuation
Volatility of individual
stock 1.40 ~ 83.93
The higher the volatility of individual stock, the higher the fair value fluctuation
Volatility of underlying
asset
0.51
The higher the volatility of
underlying asset, the higher the fair value
fluctuation
Financial liabilities designated at fair value through profit and loss
313,158
2
DCF Model, Implied forward
rates N/A N/A N/A N/A
1,048,625
3 Monte Carlo simulation
Index volatility and
others Index volatility 16.27 ~ 19.51
The higher the index volatility, the higher
the fair value fluctuation
Deposit liabilities
42,956,731 2 DCF Model N/A N/A N/A N/A
63,906,918
3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
the fair value
Debts
28,026,767
3 DCF Model Other spreads Other spreads 1 The higher the other spreads, the lower
the fair value
Debentures
5,084,113 2 DCF Model N/A N/A N/A N/A
87,582,977
3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
the fair value
Derivative liabilities for
215,659
2
DCF Model, Implied forward
rates N/A N/A N/A N/A
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
84
hedge accounting
32,438
3 Hull-White Model
Underlying asset price,
Interest rate, Volatility of
underlying asset and others,
Interest rates correlation
coefficient and others
Volatility of
underlying
asset
0.51
The higher the
volatility of
underlying asset, the
higher the fair value
fluctuation
Other financial liabilities
10,434,007
3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
the fair value
241,149,552
December 31, 2016
(In millions of Korean won)
Fair value Level Valuation technique
Level 3 inputs
Unobservable
inputs
Range of unobservable
inputs (%)
Relationship of unobservable
inputs to fair value Financial assets
Cash and due from banks
9,542,500 2 DCF Model N/A N/A N/A N/A
868,702 3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
the fair value
Financial assets held for trading
6,489,506 2
DCF Model, Implied forward
rates, Black-Scholes
Model
N/A N/A N/A N/A
171,058
3
DCF Model, Black-Scholes
Model, Binomial trees,
Hull-White Model
Index volatility, Volatility of
individual stock Volatility of
underlying asset
Index volatility 16.27 ~ 19.51
The higher the index volatility, the higher
the fair value
fluctuation
Volatility of individual
stock 6.49 ~ 83.93
The higher the volatility of individual stock, the higher the fair value fluctuation
Volatility of underlying
asset 0.54
The higher the volatility of
underlying asset, the higher the fair value
fluctuation
Financial assets designated at fair value through profit and loss
227,933 2
DCF Model, Implied forward
rates N/A N/A N/A N/A
250,975
3
DCF Model, Binomial trees,
Monte Carlo simulation
Index volatility, Volatility of
individual stock, Discount rate and
others
Index volatility 16.27 ~ 19.51
The higher the index volatility, the higher
the fair value
fluctuation
Volatility of individual
stock 6.49 ~ 58.35
The higher the volatility of individual stock, the higher the fair value fluctuation
Discount rate 1.92 ~ 20.14
The lower the discount rate, the
higher the fair value
Available-for-sale financial assets
10,199,071 2 DCF Model N/A N/A N/A
2,597,508 3
DCF Model, FCFE Model,
Growth rate,
Discount rate and Growth rate 0.00 ~11.85
The higher the growth rate, the
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
85
Net Asset Value, Binomial trees, Asset-based
approach, Discount
Dividend Model
others higher the fair value
Discount rate 4.05 ~ 23.65 The lower the
discount rate, the higher the fair value
Held-to-maturity financial assets
11,255,245
2 DCF Model N/A N/A N/A N/A
Loans receivable
192,786,636
3
DCF Model
Counterparty Credit risk,
Other spreads and others
Counterparty
Credit risk 1
The higher the counterparty credit risk, the lower the
fair value
Other spreads 1 The higher the other spreads, the lower
the fair value Derivative assets for hedge accounting
174,147
2 DCF Model,
Implied forward rates
N/A N/A N/A N/A
Other financial assets
8,730,247
3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
the fair value
243,293,528
Financial liabilities
Financial liabilities held for trading
2,304,207
2
DCF Model, Implied forward
rates, Black-Scholes
Model
N/A N/A N/A N/A
194,127
3
DCF Model, Black-Scholes
Model, Binomial trees,
Hull-White Model
Index volatility, Volatility of
individual stock, Volatility of
underlying asset
Index volatility 16.27 ~ 19.51
The higher the index volatility, the higher
the fair value fluctuation
Volatility of individual
stock 6.49 ~ 83.93
The higher the volatility of individual stock, the higher the fair value fluctuation
Volatility of underlying
asset 0.54
The higher the volatility of
underlying asset, the higher the fair value
fluctuation
Financial liabilities designated at fair value through profit and loss
239,973
2
DCF Model, Implied forward
rates N/A N/A N/A N/A
993,815
3 Monte Carlo simulation
Index volatility and
others Index volatility 16.27 ~ 19.51
The higher the index volatility, the higher
the fair value fluctuation
Deposit liabilities
41,359,339 2 DCF Model N/A N/A N/A N/A
62,601,177
3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
the fair value
Debts
26,632,393
3 DCF Model Other spreads Other spreads 1 The higher the other spreads, the lower
the fair value
Debentures
28,446,330 2 DCF Model N/A N/A N/A N/A
62,747,846
3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
86
the fair value
Derivative liabilities for hedge accounting
320,921
2
DCF Model, Implied forward
rates N/A N/A N/A N/A
33,253
3 Hull-White Model
Underlying asset price,
Interest rate, Volatility of
underlying asset
Volatility of underlying
asset 0.54
The higher the volatility of
underlying asset, the higher the fair value
fluctuation
Other financial liabilities
8,214,679
3 DCF Model Other spreads Other spreads 1
The higher the other spreads, the lower
the fair value
234,088,060
1 Ranges of inputs for assets and liabilities carried at fair value are not disclosed.
23.7 Investments Valuation Process The Bank organized a Valuation Committee comprised of Risk Management, Trading, and Accounting Departments in order to review the accuracy and appropriateness of valuation techniques. The Committee also discusses and approves other relevant matters such as selecting external professionals or changing the expertise. The Bank maintains a separate team designated to measure the fair value and review the financial instruments measured by the internal valuation model on a regular basis. Results of the regular reviews are reported to the head of Risk Management. As for subsidiaries, valuation techniques and the results are reported to the Director of Finance of each subsidiary and communicated to the Accounting Department at the Bank on a regular basis.
23.8 Book Amounts of Financial Instruments by Category Book amounts of financial assets and liabilities as at June 30, 2017 and December 31, 2016, are as follows: June 30, 2017
(In millions of Korean won)
Financial assets held for trading
Financial assets designated at fair
value through profit or loss
Loans and receivables
Available-for-sale financial
assets
Financial assets
Cash and due from banks - - 15,072,354 -
Marketable securities 6,564,984 511,339 - 14,903,505
Loans receivable - - 199,140,358 -
Derivatives 1,405,616 - - -
Other financial assets - - 6,079,314 -
7,970,600 511,339 220,292,026 14,903,505
(In millions of Korean won) Held-to-maturity financial assets
Derivatives for
hedge accounting Total
Financial assets
Cash and due from banks - - 15,072,354
Marketable securities 19,402,846 - 41,382,674
Loans receivable - - 199,140,358
Derivatives - 152,345 1,557,961
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
87
Other financial assets - - 6,079,314
19,402,846 152,345 263,232,661
(In millions of Korean won)
Financial liabilities held for trading
Financial liabilities
designated at fair value
through profit or loss
Financial liability at amortized
cost
Derivatives for hedge
accounting Total
Financial liabilities
Financial liabilities held for trading 560,092 1,361,783 - - 1,921,875
Deposit liabilities - - 106,979,062 - 106,979,062
Debts - - 28,027,393 - 28,027,393
Debentures - - 93,201,559 - 93,201,559
Derivatives 1,514,042 - - 248,097 1,762,139
Other financial liabilities - - 10,442,071 - 10,442,071
2,074,134 1,361,783 238,650,085 248,097 242,334,099
December 31, 2016
(In millions of Korean won)
Financial assets held for trading
Financial assets designated at fair
value through profit or loss
Loans and receivables
Available-for-sale financial
assets
Financial assets
Cash and due from banks - - 11,699,220 -
Marketable securities 5,747,778 478,908 - 16,770,997
Loans receivable - - 193,037,313 -
Derivatives 2,565,778 - - -
Other financial assets - - 8,727,464 -
8,313,556 478,908 213,463,997 16,770,997
(In millions of Korean won) Held-to-maturity financial assets
Derivatives for
hedge accounting Total
Financial assets
Cash and due from banks - - 11,699,220
Marketable securities 14,133,675 - 37,131,358
Loans receivable - - 193,037,313
Derivatives - 174,147 2,739,925
Other financial assets - - 8,727,464
14,133,675 174,147 253,335,280
(In millions of Korean won)
Financial liabilities held for trading
Financial liabilities
designated at fair value
through profit or loss
Financial liability at amortized
cost
Derivatives for hedge
accounting Total
Financial liabilities
Financial liabilities held for 110,107 1,233,788 - - 1,343,895
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
88
trading
Deposit liabilities - - 103,984,113 - 103,984,113
Debts - - 26,670,496 - 26,670,496
Debentures - - 90,863,125 - 90,863,125
Derivatives 2,510,853 - - 354,174 2,865,027
Other financial liabilities - - 8,216,163 - 8,216,163
2,620,960 1,233,788 229,733,897 354,174 233,942,819
24. Equity Share capital
The Group is authorized to issue two billion shares with a par value of \ 5,000 per share, and the
details of outstanding shares as at June 30, 2017 and December 31, 2016, are as follows: June 30, 2017 (In millions of Korean won and number of shares)
Ordinary shares Convertible
preferred shares1 Preferred shares Total
Number of shares 559,978,815 53,125,282 44,847,038 657,951,135
Book amount 2,799,895 265,626 224,235 3,289,756
December 31, 2016 (In millions of Korean won and number of shares)
Ordinary shares Convertible
preferred shares1 Preferred shares Total
Number of shares 559,978,815 53,125,282 44,847,038 657,951,135
Book amount 2,799,895 265,626 224,235 3,289,756
1 One convertible preferred share can be converted into one ordinary share and is participating, non-cumulative preferred share.
Hybrid capital instruments Details of hybrid capital instruments as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won)
Issuance date Maturity date
Annual
Interest
rate (%)
June 30, 2017 December 31,
2016
Hybrid capital 2013.10.23 2043.10.23 5.25 200,000 200,000
instruments in
Korean won 2015.03.10
2045.03.10
3.84
70,000 70,000
2015.03.10 2045.03.10 4.33 330,000 330,000
2015.09.14 2045.09.14 3.77 200,000 200,000
2016.09.20 - 3.16 290,000 290,000
2016.09.20 - 2.80 10,000 10,000
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
89
2016.11.04 - 3.27 250,000 250,000
2016.11.04 - 2.88 50,000 50,000
2017.03.10 - 3.87 150,000 -
2017.03.10 - 3.36 150,000 -
Issuance costs (2,240) (1,760)
1,697,760 1,398,240
The Bank is entitled to exercise call options five or ten years after the date of issuance and if not exercised, the interest rate is to be adjusted. The Bank has the option to renew the maturity without changing any conditions. Reserves Details of reserves as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Share premium 532,767 532,766
Gain on sale of treasury shares 12,262 12,262
Other reserves 13,018 8,861
558,047 553,889
Accumulated other comprehensive income Changes of accumulated other comprehensive income for the six-month periods ended June 30, 2017 and 2016, are as follows: June 30, 2017
(In millions of Korean won)
Changes in the fair value of
available-for-sale financial assets
Share of other
comprehensi-ve income of associates
Exchange differences
on translation of foreign operations
Cash flow hedge
Changes in valuation of hedge of a
net investment in a foreign operation
Remeasure- ments of net
defined benefit
liabilities Total
Beginning balance 756,058 7,183 (5,343) - (8,400) (82,902) 666,596 Available-for-sale financial assets - Reclassification of AFS to profit or loss (45,618) - - - - - (45,618)
- The changes in the fair value 258,965 - - - - - 258,965
- Tax effect (51,630) - - - - - (51,630)
161,717 - - - - - 161,717
Investments in associates
- Share of other comprehensive income of associates - (922) - - - - (922)
- Tax effect - 223 - - - - 223
- (699) - - - - (699)
Exchange difference - - (34,110) - - - (34,110)
Cash flow hedge
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
90
- Changes in cash flow hedge - - - (2) - - (2)
- Tax effect - - - - - - -
- - - (2) - - (2)
Hedge of a net investment in a foreign operation
- Gain or loss of valuation - - - - 15,144 - 15,144
- Tax effect - - - - (3,665) - (3,665)
- - - - 11,479 - 11,479
Net defined benefit liabilities
- Remeasurements - - - - - (3,627) (3,627)
- Tax effect - - - - - 878 878
- - - - - (2,749) (2,749)
Ending balance 917,775 6,484 (39,453) (2) 3,079 (85,651) 802,232
June 30, 2016
(In millions of Korean won)
Changes in the fair value of
available-for-sale financial assets
Share of other
comprehensi-ve income of associates
Exchange differences
on translation of foreign operations
Cash flow hedge
Changes in valuation of hedge of a
net investment in a foreign operation
Remeasure- ments of net
defined benefit
liabilities Total
Beginning balance 809,526 4,326 14,905 16 (8,295) (72,802) 747,676 Available-for-sale financial assets
- Reclassification of AFS to profit or loss (78,648) - - - - - (78,648)
- The changes in the fair value 435,282 - - - - - 435,282
- Tax effect (86,305) - - - - - (86,305)
270,329 - - - - - 270,329
Investments in associates
- Share of other comprehensive income of associates - 5,731 - - - - 5,731
- Tax effect - (1,387) - - - - (1,387)
- 4,344 - - - - 4,344
Exchange difference - - (18,237) - - - (18,237)
Cash flow hedge
- Changes in cash flow hedge - - - (21) - - (21)
- Tax effect - - - 5 - - 5
- - - (16) - - (16)
Hedge of a net investment in a foreign operation
- Gain or loss of valuation - - - - 8,413 - 8,413
- Tax effect - - - - (2,036) - (2,036)
- - - - 6,377 - 6,377
Net defined benefit liabilities
- Remeasurements - - - - - (2,759) (2,759)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
91
- Tax effect - - - - - 668 668
- - - - - (2,091) (2,091)
Ending balance 1,079,855 8,670 (3,332) - (1,918) (74,893) 1,008,382
The Group recognizes the changes in fair value of available-for-sale financial assets as accumulated other comprehensive income. The Group recognizes the changes in the ownership of the investor in other comprehensive income of the investee as share of other comprehensive income of associates. The Group recognizes the exchange differences caused by translating the financial statements of overseas subsidiaries into the presentation currency as the exchange differences on foreign exchange translation of foreign operations. For cash flow hedges, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge shall be recognized directly in equity as the accumulated other comprehensive income. The Group has non-derivatives designated as hedging instruments to hedge an investment in foreign operation and the effective portion of hedging investments is recognized in other comprehensive income. The Group recognizes the remeasurements of net defined benefit liabilities as accumulated other comprehensive income.
25. Retained Earnings
Retained earnings as at June 30, 2017 and December 31, 2016, consist of:
(In millions of Korean won) June 30, 2017 December 31, 2016
Legal reserves1 3,364,142 3,294,597
Reserve for credit losses 2,219,478 1,922,153
Voluntary reserve other than recapitalization 5,776,299 5,511,399
Retained earnings carried over from prior year 1,132,207 1,313,338
12,492,126 12,041,487
1 Pursuant to Article 42 of the Medium and Small Sized Entity Banking Act, the Bank appropriates no less than 25% of profit for the period until the reserve reaches the total amount of the share capital. Also, in accordance with Commercial Code of the Republic of Korea, the Group’s subsidiaries appropriate, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued share capital. The reserve is not available for cash dividends payment, but may be transferred to share capital or used to reduce accumulated deficit. When the accumulated legal reserves (the sum of capital reserves and earned profit reserves) are greater than 1.5 times the paid-in capital amount, the excess legal reserves may be distributed (in accordance with a resolution of the shareholders’ meeting). Other reserves reserved by the Bank’s Tokyo, and Ho Chi Minh City, Hanoi and New Delhi branches in accordance with the local banking laws, respectively, are included.
Reserve for Credit Losses
The reserve for credit losses is calculated in accordance with the Supervisory Regulations on Banking Business Article 29 (1) and (2), and is disclosed in the notes to the consolidated financial statements.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
92
Details of reserve for credit losses as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Beginning
2,219,478 1,922,153
Estimated
204,575 297,325
Ending
2,424,053 2,219,478
Details of adjusted earnings per share and others for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months
Provision of reserve for credit losses 65,660 204,575 119,211 244,891 Adjusted profit with reserve for credit losses1
294,475 594,914 170,386 422,429
Adjusted profit attributable to owners of the Bank1
291,983 591,332 167,382 418,390
Adjusted earnings per share (in Korean won)
419 853 227 584
1 Consolidated adjusted profit with reserve for credit losses and adjusted profit attributable to owners of the Bank reflected is not an amount in accordance with Korean IFRS, but a pre-tax amount assuming the reversal of reserve for credit losses is reflected in consolidated profit for the period and profit attributable to owners of the Parent Company.
26. Net Interest Income and Expenses Details of interest income and expenses for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months
Interest income
Cash and due from banks 16,645 31,978 11,957 25,158
Financial assets held for trading 30,612 58,878 31,790 64,058 Financial assets designated at fair value through profit or loss
915 1,832 952 1,896
Available-for-sale financial assets 45,273 94,800 62,148 129,442
Held-to-maturity financial assets 92,937 177,144 82,937 169,256
Loans receivable 1,771,216 3,497,541 1,729,875 3,447,085
Others 29,820 59,115 28,318 57,971
1,987,418 3,921,288 1,947,977 3,894,866
Interest expenses
Financial liabilities held for trading 2,177 4,129 2,194 4,558
Deposit liabilities 188,854 375,094 195,633 401,849
Debentures 411,074 810,499 438,677 882,384
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
93
Debts 84,488 167,907 98,094 196,401
Others 10,015 19,367 13,512 27,167
696,608 1,376,996 748,110 1,512,359
Net interest income 1,290,810 2,544,292 1,199,867 2,382,507
Interest income for impaired financial assets for the six-month periods ended June 30, 2017 and 2016,
amounts to \ 17,133 million and \ 18,937 million, respectively.
27. Net Fee and Commission Income and Expenses Details of fee and commission income and expenses for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months
Fees and commission income
Commission income in Korean won 140,043 251,328 110,462 213,328
Commission income in foreign currencies 37,568 74,403 37,187 72,429 Commissions income related to credit card
45,805 89,864 36,799 72,492
Guarantee fees 11,905 23,296 11,212 22,181
235,321 438,891 195,660 380,430
Fees and commission expenses
Commissions paid in Korean won 17,546 49,655 21,745 37,400
Commissions paid in foreign currencies 3,601 6,606 3,372 6,402
Commissions paid related to credit card 86,122 162,354 74,622 145,488
107,269 218,615 99,739 189,290
Net fees and commission income 128,052 220,276 95,921 191,140
28. Net Gain or Loss from Financial Instruments Held for Trading and Designated at Fair Value through Profit or Loss Net gain or loss from financial instruments held for trading and from financial instruments designated at fair value through profit or loss for the six-month periods ended June 30, 2017 and 2016, are as follows:
Financial instruments held for trading June 30, 2017
(In millions of Korean won) Dividends
Valuation gain
Valuation
loss
Gain on sale
Loss on
sale Net gain
(loss)
Equity securities 2,550 2,520 390 7,606 1,369 10,917
Debt securities - 7,696 7,266 22,917 22,491 856
Derivatives - 1,546,677 1,566,021 2,174,746 2,234,107 (78,705)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
94
June 30, 2016
Financial instruments designated at fair value through profit or loss June 30, 2017
June 30, 2016
29. Other Gain or Loss from Financial Instruments Other gain or loss from financial instruments for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months Six
months
Three months
Six months
Available-for-sale financial assets
Dividends income 18,903 82,737 17,636 83,007
Gain on sale 37,223 111,277 68,887 134,234
Loss on sale (934) (6,218) - (11,790)
Loans receivable
Gain on sale 2,307 34,745 16,790 32,637
Loss on sale (45,890) (47,131) (28,742) (29,396)
Others 2,898 6,266 2,123 3,671
Securities sold - 506 290 878 303 791
Others - 3,309 634 6,204 2,073 6,806
2,550 1,560,708 1,574,601 2,212,351 2,260,343 (59,335)
(In millions of Korean won) Dividends
Valuation gain
Valuation
loss
Gain on sale
Loss on
sale Net gain
(loss)
Equity securities 2,927 933 535 2,068 1,227 4,166
Debt securities - 39,964 2,159 54,098 27,747 64,156
Derivatives - 1,047,592 1,025,022 1,906,923 1,901,808 27,685
Securities sold - 307 2,615 771 464 (2,001)
Others - 1,043 80 4,796 1,087 4,672
2,927 1,089,839 1,030,411 1,968,656 1,932,333 98,678
(In millions of Korean won) Dividends
Valuation gain
Valuation
loss
Gain on sale
Loss on
sale Net loss
Financial instruments designated at fair value through profit or loss
50 26,877 34,267 7,093 23,667 (23,914)
(In millions of Korean won) Dividends
Valuation gain
Valuation
loss
Gain on sale
Loss on
sale Net loss
Financial instruments designated at fair value through profit or loss
33 20,103 31,344 4,164 6,122 (13,166)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
95
(In millions of Korean won) June 30, 2017 June 30, 2016
14,507 181,676 76,694 212,363
30. General and Administrative Expenses General and administrative expenses for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months
Employee-related expenses
Salaries 329,685 573,190 316,486 552,692
Employee benefits 2,589 3,309 2,541 3,297 Post-employment benefits – Defined benefit plans
28,721 58,603 28,996 57,037
Post-employment benefits – Defined contribution plans
444 1,123 302 551
Special post-employment benefits - 1,176 14,460 32,179
361,439 637,401 362,785 645,756
Other general administrative expenses
Rental expenses 25,525 50,168 25,396 50,002
Taxes and dues 32,198 55,913 33,338 58,045
Advertising expenses 18,098 32,659 22,159 33,044
Depreciation on investment properties 187 381 192 409
Depreciation on property and equipment 21,296 41,058 22,800 44,599
Amortization 20,689 41,254 20,541 40,875
Payment commissions 30,917 54,848 25,714 50,879
Awards expense 494 1,036 433 972
Others 78,632 178,935 69,281 126,887
228,036 456,252 219,854 405,712
589,475 1,093,653 582,639 1,051,468
31. Other Operating Income Other operating income for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months
Reversal of provision for payment guarantee 3,755 5,964 - -
Reversal of provision for financial guarantees - - 1,253 619
Reversal of provision for unused commitments 6,994 11,680 1,778 9,480
Reversal of provision for litigation - - 1,207 823
Reversal of provision for restoration (2) 30 9 -
Reversal of provision for award credits 233 356 - -
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
96
(In millions of Korean won) June 30, 2017 June 30, 2016
Others 65,533 70,637 30,278 59,024
76,513 88,667 34,525 69,946
32. Other Operating Expenses Other operating expenses for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months
Contribution expenses 79,321 161,389 83,244 166,533
Provision for payment guarantee - - 2,092 1,023
Provision for financial guarantees 570 4,104 - -
Provision for restoration - - - 10
Provision for litigation 410 9,801 - -
Provision for award credits - - 13 48
Provision for others 1,739 16,656 41,271 41,278
Others 104,553 147,132 68,250 139,595
186,593 339,082 194,870 348,487
33. Non-operating Income and Expenses Non-operating income and expenses for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months
Non-operating income
Share of profit of associates 2,229 3,300 3,279 5,862
Gain on disposal of investments in associates 38 617 173 275
Gain on disposal of property and equipment 99 491 1,219 1,221
Gain on disposal of intangible assets - 82 - -
Rent income 475 884 533 966
Other gains 10,776 16,873 20,240 32,320
13,617 22,247 25,444 40,644
Non-operating expenses
Share of loss of associates 796 3,560 1,540 2,133
Loss on disposal of investments in associates 13 268 3,190 3,190
Impairment loss on investments in associates 4,288 4,288 - -
Loss on disposal of property and equipment 113 143 3 25
Loss on retirement of property and equipment 4 53 5 353
Loss on disposal of intangible assets 3 3 8 8
Return on dormant deposits 2,999 6,386 1,480 2,959
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
97
(In millions of Korean won) June 30, 2017 June 30, 2016
Donation 5,305 7,534 4,043 8,595
Impairment loss on intangible assets - - 12 12
Other loss 5,133 10,899 21,890 30,175
18,654 33,134 32,171 47,450
(5,037) (10,887) (6,727) (6,806)
34. Transferable or Transferred Financial Assets Transferable or transferred financial assets that are not completely derecognized as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won)
Book amount
Repurchase agreement sold1
Loaned securities Asset-backed
securities2
Financial
assets held
for trading
Available-for-
sale financial
assets
Held-to-
maturity
financial
assets
Financial
assets held
for trading
Available-for-
sale financial
assets
Held-to-
maturity
financial
assets
Financial
assets
designated at
fair value
through profit
and loss
June 30, 2017 1,540,718 53,100 184,870 10,014 10,229 95,018
10,364
December 31,
2016 1,479,962 - 457,229 - 100,233 131,416
10,413
1 Assets that were not derecognized are restricted, and \ 1,763,707 million and \ 1,859,697 million
were reported as borrowings related to bonds sold under repurchase agreements as at June 30, 2017 and December 31, 2016, respectively. 2 The Group transferred the Group’s holding hybrid capital instruments via contract with a securitization company during the six-month period ended June 30, 2017 and the year ended December 31, 2016. This transaction is accounted for as direct holding hybrid capital instruments since the Group assumes obligations when the securitization company issues asset-backed securities based on the hybrid capital instruments. Assets that were not derecognized are restricted
on the use such as disposals and others, and \ 10,364 million and \ 10,413 million were reported
as other liabilities related to hybrid capital instruments as at June 30, 2017 and December 31, 2016, respectively.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
98
35. Offsetting of Financial Assets and Liabilities
The Group’s financial instruments including derivatives, repurchase agreements, securities lending
transactions and others are subject to a viable master netting agreement or similar agreements
including derivative clearing agreements, global master repurchase agreements, global master
securities lending agreements, and financial collateral.
Details of the Group’s recognized financial assets subject to enforceable master netting arrangements
or similar agreements as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of
Korean won)
June 30, 2017
Amount not offset
Total
assets
Offset
liabilities
Net book
amount
Financial
instruments
Cash
collateral Net amount
Derivative assets 1,603,633 - 1,603,633 1,336,100 1,881 265,652
Bonds purchased
under repurchase
agreements 1,980,000 - 1,980,000 1,980,000 - -
Loaned securities 115,261 - 115,261 115,261 - -
Unsettled spot
exchange receivable 2,783,053 - 2,783,053 2,763,881 - 19,172
Other 13,848,227 12,891,285 956,942 - - 956,942
20,330,174 12,891,285 7,438,889 6,195,242 1,881 1,241,766
(In millions of
Korean won)
December 31, 2016
Amount not offset
Total
assets
Offset
liabilities
Net book
amount
Financial
instruments
Cash
collateral Net amount
Derivative assets 2,872,404 - 2,872,404 2,282,243 5,130 585,031
Bonds purchased
under repurchase
agreements 2,035,000 - 2,035,000 2,035,000 - -
Loaned securities 231,649 - 231,649 231,649 - -
Unsettled spot
exchange receivable 2,122,135 - 2,122,135 2,121,802 - 333
Other 17,320,367 12,766,027 4,554,340 - - 4,554,340
24,581,555 12,766,027 11,815,528 6,670,694 5,130 5,139,704
Financial liabilities that are subject to a legally enforceable master netting or similar agreements as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of
Korean won)
June 30, 2017
Amount not offset
Total
liabilities
Offset
assets
Net book
amount
Financial
instruments
Cash
collateral Net amount
Derivative liability 2,321,117 - 2,321,117 1,822,482 68,946 429,689
Repurchase
agreements sold 475,890 - 475,890 475,890 - -
Securities sold 560,092 - 560,092 560,092 - -
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
99
Unsettled spot
exchange payables 2,783,771 - 2,783,771 2,763,881 - 19,890
Other 14,837,406 12,891,285 1,946,121 1,823,740 - 122,381
20,978,276 12,891,285 8,086,991 7,446,085 68,946 571,960
(In millions of
Korean won)
December 31, 2016
Amount not offset
Total
liabilities
Offset
assets
Net book
amount
Financial
instruments
Cash
collateral Net amount
Derivative liability 3,307,346 - 3,307,346 2,275,249 124,407 907,690
Repurchase
agreements sold 467,400 - 467,400 467,400 - -
Securities sold 108,183 - 108,183 108,183 - -
Unsettled spot
exchange payables 2,130,081 - 2,130,081 2,121,801 - 8,280
Other 13,628,111 12,766,027 862,084 859,146 - 2,938
19,641,121 12,766,027 6,875,094 5,831,779 124,407 918,908
36. Insurance Contracts
36.1 Insurance Liabilities Details of insurance liabilities that are included in other liabilities as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Pension Premium reserve 2,969,251 2,566,755 Reserve for outstanding claims 20,612 20,945 Guarantee reserve 1,304 1,882 Reserve for policyholders’ profit
dividends
2,363 1,700 Reserve for policyholders’ dividends 358 360 Reserve for losses on dividend
insurance contract
1,010 726
2,994,898 2,592,368
Changes in insurance liabilities for the six-month periods ended June 30, 2017 and 2016, are as follows:
June 30, 2017
(In millions of
Korean won)
Premium
reserve
Reserve for
outstanding
claims
Guarantee
reserve
Reserve for
policy-
holders’
profit
dividends
Reserve for
policy-
holders’
dividends
Reserve for
losses on
dividend
insurance
contract Total
Beginning 2,566,755 20,945 1,882 1,700 360 726 2,592,368
Increase
(Decrease) 402,496 (333) (578) 663 (2) 284 402,530
Ending 2,969,251 20,612 1,304 2,363 358 1,010 2,994,898
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
100
June 30, 2016
(In millions of
Korean won)
Premium
reserve
Reserve for
outstanding
claims
Guarantee
reserve
Reserve for
policy-
holders’
profit
dividends
Reserve for
policy-
holders’
dividends
Reserve for
losses on
dividend
insurance
contract Total
Beginning 2,048,388 20,604 2,266 435 177 189 2,072,059
Increase 242,497 1,218 70 568 (2) 243 244,594
Ending 2,290,885 21,822 2,336 1,003 175 432 2,316,653
36.2 Insurance related Assets Details of insurance related assets that are included in other assets as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won)
June 30, 2017 December 31, 2016
Unamortized acquisition cost
51,529 49,603 Changes in unamortized acquisition cost for the six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won)
June 30, 2017 June 30, 2016
Beginning
49,603 45,335
Increase
10,790 13,733
Amortization
(8,864) (7,556)
Ending
51,529 51,512
Details of insurance revenues for the six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won)
June 30, 2017 June 30, 2016
Insurance fee
524,765 342,252
Pension fee
5 6
524,770 342,258
Details of insurance expenses for the six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won)
June 30, 2017 June 30, 2016
Refunds
122,709 99,174
Reserves
402,365 244,421
525,074 343,595
Business expenses related to insurance expenses for the six-month periods ended June 30, 2017
and 2016, are \ 24,652 million and \ 20,622 million, respectively.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
101
36.3 Insurance Risk 36.3.1 Overview of insurance risk Insurance risk is the risk of loss arising from the actual risk at the time of claims exceeding the estimated risk at the time of underwriting. Insurance risk is classified by insurance price risk and policy reserve risk. 36.3.2 Characteristic and exposure of insurance price risk Insurance price risk is the risk of loss arising from differences between premiums from policyholders and actual claims paid. As the Group sells annuity products, there is no insurance price risk for the Group. 36.3.3 Characteristic and exposure of policy reserve risk Policy reserve risk is the risk of loss arising from differences between policy reserves the Group holds and actual claims to be paid. As the Group sells annuity products, there is no policy reserve risk for the Group. 36.3.4 Overview of interest rate risk The interest rate risk is the risk that arises due to the difference in value changes between assets and liabilities when market interest rate changes, and is referred to as ALM (Asset Liability Management) risk. As the risk for the price of endowment such as refunds of annuity is closely related to the difference between expected interest rate and the yield, it is measured in the interest rate risk.
37. Earnings per Share Attributable to Owners of the Parent Company Details of profit attributable to owners of the Parent Company for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months
Profit attributable to the owners of the Parent
Company
357,643 795,907 286,593 663,281
Profit attributable to preferred shares 66,973 144,244 58,100 129,971
Profit attributable to the ordinary owners of the
Parent Company
290,670 651,663 228,493 533,310
Profit attributable to convertible preferred
share
27,576 61,823 21,677 50,754
Diluted profit attributable to the ordinary
owners of the Parent Company
318,246 713,486 250,170 584,064
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
102
The weighted average number of ordinary shares outstanding for the three-month six-month periods ended June 30, 2017 and 2016, is as follows:
(In thousand shares) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months Weighted average number of ordinary share
(excluding treasury share)
559,979 559,979 559,979 558,230
Dilutive effect of convertible preferred share 53,125 53,125 53,125 53,125
Adjusted weighted average number of ordinary shares (excluding treasury share)
613,104 613,104 613,104 611,355
Basic earnings per share and diluted earnings per share attributable to owners of the Parent Company for the three-month and six-month periods ended June 30, 2017 and 2016, are as follows:
(In Korean won) June 30, 2016 June 30, 2015
Three
months
Six
months
Three
months
Six
months
Basic earnings per share 519 1,164 408 955
Diluted earnings per share 519 1,164 408 955
38. Dividends Details of dividends for the periods ended December 31, 2016 and 2015, are as follows:
(In millions of Korean won)
Dividends to be
approved Ordinary share Preferred share Total
December 31, 2016 ₩ 480 per share 268,790 47,027 315,817
December 31, 2015 ₩ 450 per share 250,381 44,088 294,469 Dividends for hybrid capital instruments for the six-month periods ended June 30, 2017 and 2016, are
₩ 30,231 million and ₩ 36,372 million, respectively.
39. Restricted and Pledged Assets Details of restricted and pledged assets as at June 30, 2017 and December 31, 2016, are as follows: (In millions of Korean won)
Assets(book value) Lender June 30, 2017
December 31, 2016
Remarks
Restricted assets
Reserve deposits in Korean won
Bank of Korea
9,514,677 6,517,446
Act of Bank of Korea
Reserve deposits in Korean won
Korea Federation of Savings Banks
10,000 10,000
Act of Savings Banks
Due from banks in Korean won
Korea Federation of Savings Banks
10,000 10,000
Checking deposits
Reserve deposits in foreign currencies
People's Bank of China
268,906 235,259
Act of People's Bank of China
Due from banks in SG NEWEDGE UK 129,509 124,407
Derivative
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
103
foreign currencies LIMITED and others instruments
Due from banks in foreign currencies
Agricultural Bank of China and others
- 46,243
Deposit collateral
Due from other banks in foreign currencies
Bank of Korea
1,076,654 695,181
Act of Bank of Korea
Due from banks in foreign currencies
JP Morgan Chase
3,726 3,323
Asset collateral
Deposit The Korea Securities Finance Corporation and others
76,546
21,792
Deposits for beneficiary securities and others
Government and public bonds, others
The Korea Securities Finance Corporation and others
115,000
232,000
Loaned securities
11,205,018 7,895,651
Pledged assets1
Government and public bonds, and others
Bank of Korea
6,408,710 5,901,138
Collateral pledged for borrowings
Government and public bonds, and others
Customers and others
1,818,333
2,013,687
Bonds sold under repurchase agreement
Government and public bonds, and others
Bank of Korea
1,692,000 2,132,000
Overnight sweep accounts
Government and public bonds, and others
Bank of Korea
1,820,800 1,860,800
Settlement risk of Bank of Korea
Government and public bonds, and others
KTB Investment & Securities and others
53,800
89,300
Substitute securities
Government and public bonds, and others
Korea Securities Depository and others
872,167
916,265
Derivatives transactions
Government and public bonds, and others
Korea Securities Finance Corporation
657,023
547,497
Deposits for stock lending transactions
Government and public bonds, and others
Korea Federation of Savings Banks
3,853 3,860
Act of Savings Banks
13,326,686 13,464,547
1 The assets are pledged as collaterals. As at June 30, 2017, the total amount of pledged assets
amounts to \ 13,375,044 million (December 31, 2016: \ 13,527,890 million).
From collaterals obtained, even if there is no default of the owner, those that can be sold by the Group at will and those that can be designated as pledged assets as at June 30, 2017 and December 31, 2016, are as follows: (In millions of Korean won)
Collaterals obtained Provided to June 30, 2017 December 31,
2016 Remarks
Government and public
bonds, others Bank of Korea 1,978,908 2,108,587
Bonds purchased
under repurchase
agreements
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
104
40. Related Party Transactions Related parties of the Group as at June 30, 2017 and December 31, 2016, are as follows:
June 30, 2017 December 31, 2016
The Ultimate Parent Company
The Government of the Republic of Korea The Government of the Republic of Korea
Associates Korea Machinery Auction & Exchange Korea Machinery Auction & Exchange
- GUMAN Heavy Ind. Co., Ltd.
- GUMAN Co., LTD.
Joong-ang Special Industry Co., Ltd. Joong-ang Special Industry Co., Ltd.
Shinkwang Co., Ltd. Shinkwang Co., Ltd.
Changwoo Textile Co., Ltd. Changwoo Textile Co., Ltd.
Mirae Asset AGRO Project Fund Mirae Asset AGRO Project Fund
Private Investment Special Company for
Global SW Firm Fostering
Private Investment Special Company for
Global SW Firm Fostering
IBK-OCTUS Green Industry Growth
Private Equity Fund
IBK-OCTUS Green Industry Growth
Private Equity Fund
KoFC IBK Hi Investment Hyundai Heavy
Industries Shared Growth No. 1 PEF
KoFC IBK Hi Investment Hyundai Heavy
Industries Shared Growth No. 1 PEF
KoFC-QCP-IBKC Frontier Champ 2010-2
Private Equity Fund
KoFC-QCP-IBKC Frontier Champ 2010-2
Private Equity Fund
KoFC IBKS KEISTONE Corporate Recovery
Private Equity Fund
KoFC IBKS KEISTONE Corporate Recovery
Private Equity Fund
Korea Global Infra Recovery Private Equity
Fund
Korea Global Infra Recovery Private Equity
Fund
IBK-Daesung Contents Small Giant Fund IBK-Daesung Contents Small Giant Fund
IBKC-IDV IP Private Equity Fund No. 1 IBKC-IDV IP Private Equity Fund No. 1
KT Music Contents Fund 1 KT Music Contents Fund 1
IBK-KTB Contents IP Fund IBK-KTB Contents IP Fund
IBK-GNTECH Secondary Fund IBK-GNTECH Secondary Fund
IBK-DAEKYO Contents Fund IBK-DAEKYO Contents Fund
SM New Technology Fund No.1 SM New Technology Fund No.1
CCVC Culture-ICT Convergence Fund CCVC Culture-ICT Convergence Fund
KDBC-EUM Corporate's Financial
Stabilization Private Equity Fund NO.4
KDBC-EUM Corporate's Financial Stabilization
Private Equity Fund NO.4
KEPS Calista Private Equity Fund KEPS Calista Private Equity Fund
Credian Healthcare Private Equity Fund Ⅱ Credian Healthcare Private Equity Fund Ⅱ
E&F Moorim Birdie New Technology
Business Investment Fund
E&F Moorim Birdie New Technology Business
Investment Fund
IBK-Daesung Majestic Contents Small Giant
Korea Fund
IBK-Daesung Majestic Contents Small Giant
Korea Fund
IBK-ISU Contents Fund IBK-ISU Contents Fund
KTBN Media Contents Fund KTBN Media Contents Fund
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
105
June 30, 2017 December 31, 2016
The Value-up SME Specialized Solution
New Technology Business Investment
Fund 1
The Value-up SME Specialized Solution New
Technology Business Investment Fund 1
KAI-KSM Crowd Seeding Fund KAI-KSM Crowd Seeding Fund
Presto Private Equity Fund No. 4 -
Platformpartners Active Mezzanine PEF 7 -
Deoksong-Naegak Expressway Co.,Ltd. -
IBK Davos Global High-Dividends Master
Fund [Equity] -
EN Growth Investment No. 5 EN Growth Investment No. 5
KT-IBKC Future Investment Fund 1 KT-IBKC Future Investment Fund 1
PoscoPlutus Project Fund PoscoPlutus Project Fund
QCP-IBKC Contents Investment Fund -
AION ASTER Private Trust Fund For
Specialized Investment -
Smart Private Equity Fund No.2 -
Shinyoung Private Equity Fund No.2 -
The IBKS SSI New Technology Business
Investment Fund 1 The IBKS SSI New Technology Business
Investment Fund 1
IBK PSEP Private Equity Fund IBK PSEP Private Equity Fund
IBKS No.3 Special Purpose Acquisition
Company
IBKS No.3 Special Purpose Acquisition
Company
IBKS No.5 Special Purpose Acquisition
Company
IBKS No.5 Special Purpose Acquisition
Company
IBKS No.6 Special Purpose Acquisition
Company -
IBKSGMB Special Purpose Acquisition
Company
IBKSGMB Special Purpose Acquisition
Company Additional related parties are as follows:
40.1 Controlling Party of the Group Controlling party of the Group is the Government of the Republic of Korea which holds 50.91% of the shares (including convertible preferred share) of the Bank as at June 30, 2017.
40.2 Government-associated Organizations under the same control The Group has borrowings from government-associated organizations, such as Small & Medium Business Corporation and others, for policy purposes.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
106
40.3 Key Management The Group defines members of the Board of Directors, auditors and executives of the Bank as key management.
Details of transactions by each related party for the six-month periods ended June 30, 2017 and 2016,
are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016 Associates Korea Machinery Auction &
Exchange Interest expense
1 -
GUMAN Heavy Ind. Co., Ltd. Interest income - 45
GUMAN Co., LTD. Interest income - 31
Joong-ang Special Industry Co., Ltd.
Interest income 145 101
Other income 2 3
Shin Kwang Co., Ltd. Interest income 68 69
Other income 1 1
Changwoo Textile Co., Ltd. Interest income 60 58
Interest expense 1 -
Other income 25 1
Mirae Asset AGRO Project Fund Interest expense 8 9
IBK-OCTUS Green Industry Growth Private Equity Fund
Interest expense
33 13
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth
No. 1 PEF Interest expense
4 -
KoFC-QCP-IBKC Frontier Champ 2010-2 Private Equity Fund
Interest expense
14 27
SHC-EN Fund Interest expense - 4
IBKC-IDV IP Private Equity Fund
No. 1 Interest expense
1 -
KT Music Contents Fund 1 Interest expense 1 -
SM New Technology Fund No.1 Interest expense - 1
IBK-ISU Contents Fund Interest expense 3 -
KTBN Media Contents Fund Interest expense 6 -
KAI-KSM Crowd Seeding Fund Interest expense 3 -
Deoksong-Naegak Expressway
Co.,Ltd. Interest income 738 -
Interest expense 15 -
Other income 775 -
KT-IBKC Future Investment Fund 1
Interest expense 3
-
Other income 2 -
Smart Private Equity Fund No.2 Interest expense 1 -
IBKS No.2 Special Purpose Acquisition Company
Interest expense
- 10
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
107
Due to the nature of the industry, fund transactions including fund loan and borrowing transactions
with related parties take place frequently. Outstanding balances arising from sales / purchases of
goods and services as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016 Associates
Korea Machinery Auction & Exchange
Deposit liabilities
320 54
Other liabilities 1 -
GUMAN Heavy Ind. Co., Ltd. Loans - 6,292
GUMAN Co., LTD. Loans - 4,172
Joong-ang Special Industry Co., Ltd.
Loans 6,218 6,036
Deposit liabilities
7 7
Shinkwang Co., Ltd. Loans 4,321 3,722
Deposit liabilities
51 112
Other liabilities 1 -
Changwoo Textile Co., Ltd. Loans 4,458 4,463
Deposit liabilities
918 1,128
Mirae Asset AGRO Project Fund
Deposit liabilities
1,251 4,426
Other liabilities 3 3
IBK-OCTUS Green Industry Growth Private Equity Fund
Deposit liabilities
9,855 10,090
Other liabilities 2 2
KoFC IBK Hi Investment Hyundai Heavy Industries Shared Growth No. 1 PEF
Deposit liabilities
841 729
KOFC-QCP-IBKC Frontier Champ 2010-2 Private Equity Fund
Deposit liabilities
332 65
IBKC-IDV IP Private Equity Fund No. 1
Deposit liabilities
408 741
KT Music Contents Fund 1
Deposit liabilities
1,013 -
Other liabilities 1 -
SM New Technology Fund No.1
Deposit liabilities
26 78
IBK-ISU Contents Fund
Deposit liabilities
1,243 1,006
KTBN Media Contents Fund
Deposit liabilities
969 2,501
The Value-up SME Specialized Solution New Technology Business Investment Fund 1
Deposit liabilities
200 50
KAI-KSM Crowd Seeding Fund
Deposit liabilities
573 2,100
Presto Private Equity Fund No. 4
Deposit liabilities
135 -
Deoksong-Naegak Expressway Co.,Ltd.
Loans 2 -
Deposit liabilities
13,328 -
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
108
(In millions of Korean won) June 30, 2017 December 31, 2016 Other liabilities 2 -
KT-IBKC Future Investment Fund 1
Deposit liabilities
7,641 5,392
QCP-IBKC Contents Investment Fund
Deposit liabilities
35 -
Smart Private Equity Fund No.2
Deposit liabilities
1,288 -
Details of unused commitments provided to related parties by the Group as at June 30, 2017 and
December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017 December 31, 2016
Associates Joong-ang Special Industry Co., Ltd. 18 200
Shinkwang Co., Ltd. 344 183
Changwoo Textile Co., Ltd. 45 41
Deoksong-Naegak Expressway Co.,Ltd. 23 -
Provision for impairment for loan losses of related party receivables and impairment loss (reversals)
as at and for the six-month period ended June 30, 2017 and as at December 31, 2016 and for the six-
month period ended June 30, 2016, are as follows: (In millions of Korean won)
June 30, 2017 December 31, 20161
Provision for impairment
Reversal of
impairment loss
Provision for impairment
Impairment loss
Associates 819 (4,672) 5,491 548
1 Provision for impairment is amount as at December 31, 2016, and impairment loss is amount for the
six-month period ended June 30, 2016.
No payment guarantees are provided by the Group for the funding sources of the related parties, and
no collaterals and payment guarantees are provided by the related parties as at June 30, 2017 and
December 31, 2016.
Compensation paid to the key management1 for the three-month and six-month periods ended June
30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017 June 30, 2016
Three
months
Six
months
Three
months
Six
months
Short-term employee benefits2 608 1,218 578 1,172
Post-employment benefits - 172 - -
608 1,390 578 1,172
1 The Group defines members of the Board of Directors, auditors and executives of the Bank as key
management. 2 Other than short-term employee benefits above, the Group paid performance bonuses of \ 1,788
million as a result of management assessment from a government-run bank for the six-month period
ended June 30, 2017.
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
109
41. Segment Information
Each segment is a strategic business unit that offers different products and services, and is managed
separately because each business has different risks and opportunities requiring different technology
and marketing strategies. The Group consists of the following seven operating segments: - Retail banking: The retail banking segment’s assets and liabilities are mainly with individuals and
households. This segment handles private customer current accounts, savings, deposits, retail loans and mortgage loans.
- Corporate banking: The corporate banking segment’s assets and liabilities are mainly with private
and public enterprises. The activities within this segment include loans, overdrafts, other credit facilities, and import/exports.
- Money market: The activities within this segment include foreign currency, treasury and investments. - IB: The activities within this segment include overseas business and investments. - Credit card operations: The credit card segment’s assets and liabilities are mainly with individuals or
corporate cardholders and card merchants, and it handles domestic as well as overseas credit and debit card operations.
- Foreign exchange: The activities within this segment include FX and imports/exports.
- Others: This refers to the segments not listed above.
The Group monitors the performance of the operating segments for the purpose of resource allocation
and performance review. Performance of each operating segment is measured by operating gain or
loss that differs from that recognized in financial statements. Financing of the Group and corporate
income tax are managed at the Group level and are not allocated to segments. Besides, the transfer
price among segments is determined at fair price based upon the arm’s length transaction that is
similar in form to a transaction with a third party.
Assets and other accounts by segment as at June 30, 2017 and December 31, 2016, and for the six-
month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017
Retail Corporate Money market
IB Credit card
Assets 31,926,654 142,486,855 50,903,726 7,199,925 2,688,549
Interest income 661,649 2,456,494 459,219 99,719 277,293
Interest expenses 324,488 979,352 365,219 74,831 20,052
Net interest income 337,161 1,477,142 94,000 24,888 257,241
Fees and commission income 65,450 73,054 12,815 24,430 89,920
Fees and commission expenses 8,906 8,239 3,741 45 180,375 Net fees and commission income (expenses) 56,544 64,815 9,074 24,385 (90,455)
Impairment loss (reversal) on financial assets 19,685 645,936 (1,568) (11,453) 41,651
Profit (loss) for the period (107,147) 568,851 180,223 60,908 89,475
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
110
(In millions of Korean won) June 30, 2017
Foreign exchange
Others Adjustments Total
Assets 4,368,506 26,894,844 421,224 266,890,283
Interest income 99,560 (115,804) (16,842) 3,921,288
Interest expenses 25,101 (412,047) - 1,376,996
Net interest income 74,459 296,243 (16,842) 2,544,292
Fees and commission income 63,294 109,822 106 438,891
Fees and commission expenses 1,952 14,527 830 218,615 Net fees and commission income (expenses) 61,342 95,295 (724) 220,276
Impairment loss (reversal) on financial assets 13,559 40,026 (104,245) 643,591
Profit (loss) for the period 90,387 (63,466) (19,742) 799,489
(In millions of Korean won) June 30, 2016 / December 31, 2016
Retail Corporate Money market
IB Credit card
Assets 31,564,532 138,265,618 45,666,838 6,691,900 2,589,974
Interest income 664,001 2,429,864 516,735 91,891 247,284
Interest expenses 352,282 1,044,176 405,740 67,048 19,151
Net interest income 311,719 1,385,688 110,995 24,843 228,133
Fees and commission income 60,230 66,604 13,774 20,383 72,547
Fees and commission expenses 9,131 9,279 4,083 45 160,334 Net fees and commission
income (expenses) 51,099 57,325 9,691 20,338 (87,787) Impairment loss (reversal) on financial assets 28,885 597,275 5,351 (6,676) 34,912
Profit (loss) for the period (117,549) 481,219 138,957 101,854 55,616
(In millions of Korean won) June 30, 2016 / December 31, 2016
Foreign exchange
Others Adjustments Total
Assets1 4,387,686 27,658,315 26,517 256,851,380
Interest income 59,993 (102,046) (12,856) 3,894,866
Interest expenses 10,746 (386,784) - 1,512,359
Net interest income 49,247 284,738 (12,856) 2,382,507
Fees and commission income 60,270 86,487 135 380,430
Fees and commission expenses 1,670 8,951 (4,203) 189,290 Net fees and commission income (expenses) 58,600 77,536 4,338 191,140
Impairment loss (reversal) on financial assets 32,305 21,063 (73,491) 639,624
Profit (loss) for the period 53,197 (38,564) (7,410) 667,320 1 Total assets are amounts as at December 31, 2016, and interest income and others are amounts for
the six-month period ended June 30, 2016. Also, intercompany transactions between operating
segments are eliminated during consolidation.
Non-current assets and income (interest income and fees and commission income) from external
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
111
customers by location as at June 30, 2017 and December 31, 2016, and for the six-month periods
ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won) June 30, 2017
Korea
Overseas offices
Total
Non-current assets 2,126,836
12,591 2,139,427
Interest income 3,797,281
124,007 3,921,288
Fees and commission income 422,200
16,691 438,891
(In millions of Korean won) June 30, 2016 / December 31, 2016
Korea
Overseas offices
Total
Non-current assets1 2,153,536
14,293 2,167,829
Interest income 3,788,072
106,794 3,894,866
Fees and commission income 363,466
16,964 380,430 1 Non-current assets are amounts as at December 31, 2016, and interest income and others are
amounts for the six-month period ended June 30, 2016.
42. Information for Non-controlling Interests
The profit or loss allocated to non-controlling interests and accumulated non-controlling interests of
subsidiaries that are material to the Group for the six-month periods ended June 30, 2017 and 2016,
is as follows:
(In millions of June 30, 2017
Korean won) Non-
controlling interest rate (%)
Accumulated non-controlling interests at the
beginning of the period
Profit or loss allocated to
non-controlling interests
Dividends paid to non-controlling interests Others
Accumulated non-controlling interests at the
end of the period
IBK Securities Co., Ltd.
16.14
89,217 3,523 - (18) 92,722
IBK System Co., Ltd.
44.37
8,223 314 (206) (255) 8,076
97,440 3,837 (206) (273) 100,798
(In millions of June 30, 2016
Korean won) Non-
controlling interest rate (%)
Accumulated non-controlling interests at the
beginning of the period
Profit or loss allocated to
non-controlling interests
Dividends paid to non-controlling interests Others
Accumulated non-controlling interests at the
end of the period
IBK Securities Co., Ltd.
16.14
84,147 3,303 - (87) 87,363
IBK System Co., Ltd.
44.37
6,613 981 (206) (245) 7,143
90,760 4,284 (206) (332) 94,506
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
112
The summarized financial information for each subsidiary with non-controlling interests that are
material to the Group before inter-company eliminations is described in Note 2.2. There is no effect on
equity attributable to the Group due to the transaction with non-controlling interests.
43. Supplemental Cash Flow Information Adjustments in expenses and revenues for the six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won)
June 30, 2017
June 30, 2016
Loss on translation of cash and cash equivalents in foreign currency
15,712 -
Loss on valuation of financial assets held for trading
1,574,601 1,030,411
Loss on valuation of financial assets designated at fair value through profit or loss
34,267 31,344
Loss on disposal of available-for-sale financial assets
6,218 11,790
Impairment loss on available-for-sale financial assets
19,977 24,952
Impairment loss on loans receivables
638,070 615,042
Loss on valuation of derivatives held for hedging
52,827 121,349
Impairment loss on investments in associates 4,288 -
Loss on disposal of investments in associates
268 3,190
Share of loss (profit) of associates, net 260 (3,729)
Interest expense
1,376,996 1,512,359
Income tax expense
242,814 199,127
Depreciation of property and equipment & investment properties
41,868 45,659
Loss on disposal of property and equipment
143 25
Loss on retirement of property and equipment
53 353
Amortization
41,297 40,894
Loss on disposal of intangible assets 3 8
Impairment loss on intangible assets - 12
Post-employment benefits
59,786 58,160
Contribution to provisions
26,457 42,357
Provision for financial guarantee contracts 4,104 -
Gain on translation of cash and cash equivalents in foreign currencies
- (37,343)
Gain on valuation of financial assets held for trading
(1,560,708) (1,089,839)
Gain on valuation of financial assets designated at fair value through profit or loss
(26,877) (20,103)
Gain on disposal of available-for-sale financial assets
(111,277) (134,234)
Gain on valuation of derivatives held for hedging (127,357) (100,669)
Gain on disposal of investments in associates
(616) (275)
Interest income
(3,921,288) (3,894,866)
Dividend income
(85,337) (85,967)
Gain on disposal of property and equipment
(491) (1,221)
Gain on disposal of intangible assets
(82) -
Reversal of provision for impairment of other financial assets
(14,455) (369)
Reversal of provisions (18,030) (10,303)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
113
(In millions of Korean won)
June 30, 2017
June 30, 2016
Reversal of provision for financial guarantee contracts
- (619)
(1,726,509) (1,642,505)
Changes in operating assets and liabilities for the six-month periods ended June 30, 2017 and 2016, are as follows:
(In millions of Korean won)
June 30, 2017
June 30, 2016
Changes in financial assets held for trading (217,762) (298,249)
Changes in financial assets designated at fair value through profit or loss 88,175 (302,974)
Changes in loans receivable (6,688,203) (8,572,815)
Changes in due from banks (3,650,768) (101,155)
Changes in derivatives held for hedging (35,030) (8,675)
Changes in other assets 2,483,677 (2,044,765)
Changes in deposit liabilities 2,994,949 (92,393)
Changes in provisions (347) 226
Payment of severance benefits (750) (1,857)
Changes in plan assets (41,390) (70,000)
Changes in other liabilities 2,964,479 4,362,275
(2,102,970) (7,130,382)
Details of cash and cash equivalents as at June 30, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) June 30, 2017
December 31, 2016
Currency in Korean won
879,130 1,031,814
Foreign currencies
265,097 256,193
Due from banks
13,928,127 10,411,213
15,072,354 11,699,220
Less : Restricted due from banks and others
(12,486,148) (8,835,381)
Cash and cash equivalents in the statements of cash flows
2,586,206 2,863,839
Significant non-cash activities for the six-month periods ended June 30, 2017 and 2016, are as
follows:
(In millions of Korean won)
June 30, 2017
June 30, 2016
Reclassified from investment properties to property and
equipment 20,625 (2,636)
Write-off of loans receivable 776,748 487,466
Changes in the fair value of available-for-sale financial
assets 213,347 356,634
Tax effects on changes in the fair value of available-
for-sale financial assets (51,630) (86,305)
Industrial Bank of Korea and Subsidiaries Notes to the Consolidated Interim Financial Statements June 30, 2017 and 2016 (Unaudited), and December 31, 2016
114
Share of other comprehensive income of associates
(922) 5,731
Tax effects on share of other comprehensive income of
associates 223 (1,387)
Exchange differences (34,110) (18,237)
Cash flow hedge
(2) (21)
Tax effect on cash flow hedge
- 5
Changes in hedges of a net investments in a foreign
operation 15,144 8,413
Tax effect on changes in fair value of hedges of net
investments in a foreign operation (3,665) (2,036)
Remeasurements of net defined benefit liabilities
(3,627) (2,759)
Tax effect on remeasurements of net defined benefit liabilities
878 668