DGB FINANCIAL GROUP CO., LTD. DGB Financial Group Co., Ltd. and Subsidiaries
Consolidated Financial Statements
As of and for the years ended December 31, 2023 and 2022
DGB FINANCIAL GROUP CO., LTD.
Contents
Page(s) | |
Independent Auditor's Report | 1 - 5 |
Consolidated Statements of Financial Position | 6 |
Consolidated Statements of Comprehensive Income | 7 - 8 |
Consolidated Statements of Changes in Equity | 9 - 10 |
Consolidated Statements of Cash Flows | 11 - 12 |
Notes to the Consolidated Financial Statements | 13 - 188 |
Independent Auditor's Report on Internal Control over Financial Reporting for | |
Consolidation Purposes | 189 - 190 |
ICFR for Consolidation Purposes Operating Status Report | 191 |
Independent Auditor's Report
(English Translation of a Report Originally Issued in Korean)
To the Board of Directors and Shareholders of DGB Financial Group Co., Ltd.
Opinion
We have audited the accompanying consolidated financial statements of DGB Financial Group Co., Ltd. and its subsidiaries (collectively referred to as the "Group"), which comprise the consolidated statement of financial position as of December 31, 2023, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2023, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).
We also have audited, in accordance with Korean Standards on Auditing, the Group's Internal Control over Financial Reporting for consolidation purposes as of December 31, 2023, based on Conceptual Framework for Designing and Operating Internal Control over Financial Reporting, and our report dated March 13, 2024 expressed an unqualified opinion.
Basis for opinion
We conducted our audit in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the consolidated financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
1. Allowance for Expected Credit Losses on Loans Measured at Amortized Cost
Reason why the matter was determined to be a Key Audit Matter :
The impairment guidance under Korean IFRS 1109 Financial Instruments requires the determination of significant increases in credit risk and measurement of expected credit losses using forward-looking information and others. Accordingly, as described in Note 3 to the consolidated financial statements, the Group recognizes the allowance for expected credit losses for loans measured at amortized cost, considering all reasonable and supportable information, including forward looking information.
1
As described in Note 11, loans measured at amortized cost subject to individual or collective assessments amount to W 63,190 billion, and related allowances for credit losses of W806.9 billion as of December 31, 2023.
Individually assessed expected credit losses are measured based on estimates of expected cash flows for each borrower, while collective assessed expected credit losses are measured based on various and complex input variables and assumptions. We focused on this area because the measurement of expected credit losses involves management's assumptions and judgments and has a significant impact on the consolidated financial statements.
How our audit addressed Key Audit Matter:
(1) Assessment of expected credit losses on an individual basis
We obtained an understanding and evaluated the processes and controls relating to the assessment of expected credit losses on an individual basis. In particular, we focused on the assumptions used in estimating future cash flows. We obtained an understanding and evaluated the processes and controls relating to management's calculation of expected credit losses on an individual basis.
We evaluated whether management's estimation was reasonable and we assessed the key assumptions in the cash flow projection including sales rate of PF loans subject to individual assessment and individual assessment and collateral valuation. As part of these procedures, we assessed whether sales status of PF were consistent with current market conditions. Furthermore, we assessed the appropriateness of collateral valuation by assessing reasonableness of appraisal report and auction success rate used by management.
(2) Assessment of expected credit losses on a collective basis
We obtained an understanding and evaluated the processes and controls relating to management's calculation of expected credit losses on a collective basis in accordance with impairment requirements under Korean IFRS 1109 Financial Instruments.
As explained in Note 3(8), management assesses credit ratings to recognize lifetime expected credit losses on loans with significant increase in credit risk and impaired loans. Other than these cases, management recognizes 12-months of expected credit losses. To calculate all expected credit losses, management has applied forward-looking information, possible multiple scenarios, probability of default, loss given default and other assumptions estimated through its internal procedures and controls implemented for various assumptions.
We assessed the design and operating effectiveness of controls relating to credit ratings that reasonably reflect both qualitative and quantitative information. Our testing over the accuracy and reliability of the information included agreeing qualitative and quantitative information with relevant evidence.
We reviewed the appropriateness of the Group's policies and procedures to determine significant increases in credit risk, and tested the reasonableness of expected credit loss model applied by each of the three stages (Stage 1, 2 and 3) depending on how significantly credit risk was increased.
Our audit involved risk specialists to statistically analyze the correlation between forward-looking information and probability of default or loss given default. We assessed the appropriateness of methodologies for adjusting the probability of default to reflect forward-looking information on estimation of expected credit losses. We further tested the reasonableness and mathematical accuracy of the information through recalculation and inspection of supporting data.
We reviewed the methodologies used by management to verify that probability of default and loss given default were calibrated using sufficient and reasonable historical data. We determined that the default and loss data used were appropriately gathered and applied in accordance with internal control procedures. We evaluated management's default and loss data by agreeing them with relevant evidence.
2
2. Loss ratio assumptions used to estimate fulfilment cash flows of the insurance contracts
Reason why the matter was determined to be a Key Audit Matter:
Korean IFRS 1117 Insurance Contracts requires insurance liabilities to be measured by estimating all future cash flows of insurance contracts, and also requires the cash flow estimates shall reflect conditions existing at the measurement date including assumptions at that date about the future in a reasonable and unbiased way. The Group has developed a methodology for estimating future cash flows that uses a variety of information to make reasonable estimates of future cash flow, which requires high degree of management interpretation and judgement.
As described in Notes 2, management estimates future cash flows using various actuarial assumptions as inputs. Among the actuarial assumptions, the calculation of loss ratio assumptions includes various and complex inputs, including historical data, and management's estimates and judgment. Due to these facts, loss ratio assumptions are determined as a key audit matter.
As described in Notes, 22, the net book value of the liability for remaining coverage was W52,854 million, which is presented as insurance contract liabilities, reinsurance contract liabilities, insurance contract assets, and reinsurance contact assets in the consolidated statement of financial position as of December 31, 2023.
How our audit addressed Key Audit Matter :
We obtained an understanding of management's processes and validated controls related to loss ratio assumption. We assessed the methodology whether the loss ratio assumption is estimated based on sufficient and reasonable historical data, and evaluated the underlying information including historical data used in estimates was properly complied and used in accordance with internal control procedures. Also, we used actuarial specialists to obtain an understanding of the calculation of the loss ratio assumption, evaluate the reasonableness and accuracy of the loss ration assumption by performing recalculations and other procedures, and test the accuracy and completeness of the historical data used in management's estimates by reconciling the data to supporting documents.
Other Matters
The consolidated financial statements of the Group for the year ended December 31, 2022 were audited by Ernst & Young Han Young who expressed an unqualified opinion on those statements on March 13, 2023. The consolidated financial statements audited by Ernst & Young Han Young who expressed an unqualified opinion did not reflect the adjustments of Korean IFRS 1117 Insurance Contracts described in Note 2. The Group's consolidated financial statements for the year ended December 31, 2022 and consolidated statement of financial positions as of January 1, 2022, presented herein for comparative purposes, were restated to reflect this adjustment.
Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
3
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
- The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is is Sungeun Jin, Certified Public Accountant.
4
Seoul, Korea
March 13, 2024
This report is effective as of March 13, 2024, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
5
DGB Financial Group Co., Ltd. and Subsidiaries
Consolidated Statements of Financial Position
As of December 31, 2023 and 2022, and January 1, 2022
(In millions of Korean won) | |||||
December 31, | December 31, | January 1, | |||
Note | 2023 | 2022 | 2022 | ||
Assets | |||||
Cash and due from banks | 5,38,41,42 | W | 4,713,787 | 4,144,082 | 4,206,142 |
Financial assets at fair value through profit or loss | 6,9,41,42 | 11,092,085 | 11,109,237 | 9,769,807 | |
Derivative financial instruments | 13,41,42 | 88,905 | 270,761 | 68,607 | |
Financial assets at fair value through other | 7,9,12,41,42 | 7,356,552 | 7,203,483 | 8,200,516 | |
comprehensive income | |||||
Securities at amortized cost | 8,9,12,41,42 | 4,354,862 | 4,202,524 | 4,348,999 | |
Loans receivable at amortized cost | 11,12,40,41,42 | 62,383,691 | 59,738,168 | 55,748,730 | |
Reinsurance contract assets | 22,42 | 6,917 | 4,788 | 1,753 | |
Investments in associates | 10 | 142,893 | 110,191 | 39,284 | |
Property and equipment | 14,40 | 813,540 | 837,818 | 826,711 | |
Investment property | 16 | 158,446 | 157,866 | 145,724 | |
Intangible assets | 15 | 274,998 | 285,570 | 266,455 | |
Current tax assets | 57,179 | 21,964 | 669 | ||
Deferred tax assets | 36 | 123,843 | 161,284 | 48,052 | |
Retirement benefit assets | 21 | 116,818 | 100,863 | 8,204 | |
Other assets | 12,17,40,41,42 | 1,675,268 | 1,635,321 | 1,679,449 | |
Total assets | 4 | W | 93,359,784 | 89,983,920 | 85,359,102 |
Liabilities | |||||
Depository liabilities | 18,40,41 | W | 57,288,479 | 53,640,451 | 50,936,610 |
Financial liabilities at fair value through profit or | 6,41,42 | 527,775 | 462,023 | 1,480,916 | |
loss | |||||
Financial liabilities designated at fair value | 6,41,42 | 706,512 | 899,977 | 715,908 | |
through profit or loss | |||||
Derivative financial instruments | 13,41,42 | 139,128 | 307,432 | 98,198 | |
Borrowings | 19,41 | 12,034,132 | 13,249,997 | 9,898,820 | |
Debentures | 19,41 | 8,242,523 | 7,488,893 | 7,025,331 | |
Retirement benefit obligations | 21 | 3,021 | 110 | - | |
Provisions | 20,39 | 114,692 | 59,015 | 57,704 | |
Current tax liabilities | 25,071 | 86,218 | 62,751 | ||
Deferred tax liabilities | 36 | 4,288 | 9,580 | - | |
Insurance contract liabilities | 22,42 | 5,363,738 | 5,032,863 | 5,725,561 | |
Reinsurance contract liabilities | 22,42 | 10,879 | 6,380 | 10,984 | |
Other liabilities | 23,40,41,42 | 2,615,992 | 2,333,253 | 2,941,174 | |
Total liabilities | 4 | W | 87,076,230 | 83,576,192 | 78,953,957 |
Equity | |||||
Total equity attributable to equity holders of | 24,25,26 | W | 5,948,770 | 5,578,022 | 5,576,260 |
DGB Financial Group Co., Ltd. | |||||
Capital stock | 24 | 845,729 | 845,729 | 845,729 | |
Hybrid equity securities | 24 | 613,765 | 498,098 | 498,098 | |
Capital surplus | 24 | 1,562,451 | 1,562,451 | 1,562,451 | |
Capital adjustments | 24 | (20,578) | - | - | |
Accumulated other comprehensive loss | 26 | (341,694) | (359,718) | (74,360) | |
Retained earnings | 25 | 3,289,097 | 3,031,462 | 2,744,342 | |
Non-controlling interest | 24 | 334,784 | 829,706 | 828,885 | |
Total equity | W | 6,283,554 | 6,407,728 | 6,405,145 | |
Total liabilities and equity | 4 | W | 93,359,784 | 89,983,920 | 85,359,102 |
See accompanying notes to the consolidated financial statements.
6
DGB Financial Group Co., Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2023 and 2022
(In millions of Korean won, except earnings per share) | ||||
Note | 2023 | 2022 | ||
Interest income | W | 4,027,412 | 2,902,440 | |
Interest income on financial instruments at fair value through profit or loss | 263,757 | 168,918 | ||
Interest income on financial instruments at fair value through other comprehensive income | 189,328 | 166,903 | ||
Interest income on financial instruments at amortized cost | 3,558,563 | 2,555,689 | ||
Interest income on insurance and reinsurance | 15,764 | 10,930 | ||
Interest expense | 2,391,760 | 1,247,012 | ||
Interest expense on financial instruments | 2,208,873 | 1,073,308 | ||
Interest expense on insurance and reinsurance | 182,887 | 173,704 | ||
Net interest income | 4,27 | 1,635,652 | 1,655,428 | |
Insurance and reinsurance finance income | 13,161 | 73,021 | ||
Insurance and reinsurance finance expense | 105,932 | 11,204 | ||
Net insurance and reinsurance finance income(loss) | (92,771) | 61,817 | ||
Fee and commission income | 328,119 | 499,648 | ||
Fee and commission expense | 98,049 | 125,098 | ||
Net fee and commission income | 4,28 | 230,070 | 374,550 | |
Insurance income | 270,822 | 246,900 | ||
Insurance expense | 170,401 | 176,344 | ||
Net insurance income | 4,29 | 100,421 | 70,556 | |
Net gain (loss) on financial assets at fair value through profit or loss | 4,30 | 421,917 | (81,125) | |
Net gain (loss) on financial instruments designated at fair value through profit or loss | 4,30 | (65,252) | 43,086 | |
Net gain on financial assets at fair value through other comprehensive income | 4,31 | 29,352 | 8,259 | |
Provision for credit losses | 4,32 | 556,278 | 351,476 | |
Net gain on foreign currency transactions | 4 | 61,267 | 40,468 | |
General and administrative expenses | 4,33 | 1,035,719 | 1,065,822 | |
Other operating loss, net | 4,34 | (194,404) | (133,768) | |
Operating Profit | 4 | 534,255 | 621,973 | |
Non-operating net loss | 35 | (1,899) | (12,778) | |
Net profit before income tax expenses | 532,356 | 609,195 | ||
Income tax expenses | 36 | 120,175 | 163,796 | |
Net income attributable to equity holders of DGB Financial Group Co., Ltd. | 387,838 | 410,524 | ||
Net income attributable to non-controlling interest | 24,343 | 34,875 | ||
Consolidated net income for the year | 4 | W | 412,181 | 445,399 |
7
DGB Financial Group Co., Ltd. and Subsidiaries Consolidated Statements of Comprehensive Income, continued
For the years ended December 31, 2023 and 2022
(In millions of Korean won, except earnings per share) | Note |
Items that may be subsequently reclassified to profit or loss:
Gain (loss) on valuation of debt securities at fair value through other comprehensive income Gain on translation of foreign operations
Loss on valuation of hedges of net investment in foreign operations Gain (loss) on valuation of cash flow hedges
Loss on valuation of investment stock using the equity method Insurance finance income (expense)
Reinsurance finance income (expense)
Items that will not be subsequently reclassified to profit or loss:
Gain (loss) on valuation of equity instruments at fair value through other comprehensive income
Remeasurement of defined benefit plan
Consolidated other comprehensive income (loss) for the year | 26 | W |
2023 2022
41,239 (331,614)
265,333 (782,016)
5,914 25,204
(6,641) (25,956)
3,378 (4,204)
-
(744)
(224,451) 451,368
(2,294) 4,734
(23,065) 46,182
3,662 (8,182)
(26,727) 54,364
18,174 (285,432)
Comprehensive income attributable to Equity holders of DGB Financial Group Co., Ltd. | 405,863 | 125,166 | |
Comprehensive income attributable to on-controlling interests | 24,492 | 34,801 | |
Total consolidated comprehensive income for the year | W | 430,355 | 159,967 |
Basic and diluted earnings per share in won | 37 | 2,180 | 2,319 |
See accompanying notes to the consolidated financial statements.
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DGB Financial Group published this content on 07 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 May 2024 06:34:06 UTC.
