5. OPERATING SEGMENTS
In evaluating the operational performance of the Group and allocating resources accordingly, the Group’s Chief Operation Decision Maker (the “CODM”) utilizes the information per types of customers. This financial information of the segments is regularly reviewed by the CODM to make decisions about resources to be allocated to each segment and evaluate its performance.
| (1) | Segment by types of customers |
The Group’s reporting segments comprise the following customers: consumer banking, corporate banking, investment banking, capital market, credit card and headquarters and others. The reportable segments are classified based on the target customers for whom the service is being provided.
| • | Consumer banking: Loans/deposits and financial services for consumers, etc. |
| • | Corporate banking: Loans/deposits and export/import, financial services for corporations, etc. |
| • | Investment banking: Domestic/foreign investment, structured finance, M&A, Equity & fund investment related business, venture advisory related tasks, real estate SOC development practices etc. |
| • | Capital market: Fund management, investment securities and derivatives business, etc. |
| • | Credit Card: Credit card, cash service and card loan, etc. and |
| • | Headquarter and others: Segments that do not belong to above operating segments |
The details of operating income by each segment are as follows (Unit: Korean Won in millions):
| For the year ended December 31, 2015 | ||||||||||||||||||||||||||||||||||||
| Consumer banking |
Corporate banking |
Investment banking |
Capital market |
Credit Card |
Head- quarter and Others |
Sub-total | Inter- segment transaction |
Total | ||||||||||||||||||||||||||||
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Net Interest income |
1,289,088 | 1,699,913 | 5,601 | 40,913 | 378,019 | 743,092 | 4,156,626 | 605,274 | 4,761,900 | |||||||||||||||||||||||||||
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Interest income |
2,850,985 | 3,255,796 | 154,460 | 19,394 | 500,449 | 1,585,636 | 8,366,720 | 331,515 | 8,698,235 | |||||||||||||||||||||||||||
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Interest expense |
(1,227,921 | ) | (1,880,195 | ) | (18 | ) | (81 | ) | (122,430 | ) | (979,449 | ) | (4,210,094 | ) | 273,759 | (3,936,335 | ) | |||||||||||||||||||
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Inter-segment |
(333,976 | ) | 324,312 | (148,841 | ) | 21,600 | — | 136,905 | — | — | — | |||||||||||||||||||||||||
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Net non-interest income |
554,957 | 513,686 | 115,111 | 18,015 | 98,034 | 279,437 | 1,579,240 | (947,937 | ) | 631,303 | ||||||||||||||||||||||||||
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Non-interest income |
886,057 | 503,321 | 489,659 | 5,760,567 | 871,486 | 3,245,543 | 11,756,633 | (366,953 | ) | 11,389,680 | ||||||||||||||||||||||||||
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Non-interest expense |
(353,032 | ) | (25,993 | ) | (374,548 | ) | (5,742,552 | ) | (773,452 | ) | (2,907,816 | ) | (10,177,393 | ) | (580,984 | ) | (10,758,377 | ) | ||||||||||||||||||
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Inter-segment |
21,932 | 36,358 | — | — | — | (58,290 | ) | — | — | — | ||||||||||||||||||||||||||
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Other expense |
(1,790,292 | ) | (1,795,561 | ) | 53,089 | (44,187 | ) | (321,265 | ) | (470,592 | ) | (4,368,808 | ) | 327,191 | (4,041,617 | ) | ||||||||||||||||||||
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Administrative expense |
(1,782,234 | ) | (925,566 | ) | (14,933 | ) | (16,945 | ) | (124,362 | ) | (553,539 | ) | (3,417,579 | ) | 267,192 | (3,150,387 | ) | |||||||||||||||||||
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Impairment losses on credit loss and others |
(8,058 | ) | (869,995 | ) | 68,022 | (27,242 | ) | (196,903 | ) | 82,947 | (951,229 | ) | 59,999 | (891,230 | ) | |||||||||||||||||||||
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Operating income |
53,753 | 418,038 | 173,801 | 14,741 | 154,788 | 551,937 | 1,367,058 | (15,472 | ) | 1,351,586 | ||||||||||||||||||||||||||
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Non-operating income (expense) |
(19,113 | ) | (2,189 | ) | 43,728 | 197 | (5,150 | ) | 136,954 | 154,427 | (54,067 | ) | 100,360 | |||||||||||||||||||||||
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Net income before income tax expense |
34,640 | 415,849 | 217,529 | 14,938 | 149,638 | 688,891 | 1,521,485 | (69,539 | ) | 1,451,946 | ||||||||||||||||||||||||||
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Income tax expense |
(8,383 | ) | (98,886 | ) | (52,642 | ) | (3,615 | ) | (32,780 | ) | (136,891 | ) | (333,197 | ) | (43,357 | ) | (376,554 | ) | ||||||||||||||||||
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Net income |
26,257 | 316,963 | 164,887 | 11,323 | 116,858 | 552,000 | 1,188,288 | (112,896 | ) | 1,075,392 | ||||||||||||||||||||||||||
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| For the year ended December 31, 2016 | ||||||||||||||||||||||||||||||||||||
| Consumer banking |
Corporate banking |
Investment banking |
Capital market |
Credit Card |
Head- quarter and Others |
Sub-total | Inter- segment transaction |
Total | ||||||||||||||||||||||||||||
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Net Interest income |
1,484,233 | 1,741,140 | 14,613 | 48,826 | 428,095 | 713,678 | 4,430,585 | 588,959 | 5,019,544 | |||||||||||||||||||||||||||
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Interest income |
2,979,811 | 3,026,148 | 153,160 | 19,575 | 556,681 | 1,492,148 | 8,227,523 | 284,789 | 8,512,312 | |||||||||||||||||||||||||||
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Interest expense |
(1,023,290 | ) | (1,780,990 | ) | (225 | ) | (324 | ) | (128,586 | ) | (863,523 | ) | (3,796,938 | ) | 304,170 | (3,492,768 | ) | |||||||||||||||||||
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Inter-segment |
(472,288 | ) | 495,982 | (138,322 | ) | 29,575 | — | 85,053 | — | — | — | |||||||||||||||||||||||||
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Net non-interest income |
557,410 | 550,194 | 160,885 | 4,033 | 79,713 | 302,800 | 1,655,035 | (955,695 | ) | 699,340 | ||||||||||||||||||||||||||
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Non-interest income |
923,810 | 535,514 | 605,026 | 7,590,087 | 986,147 | 4,563,280 | 15,203,864 | (433,879 | ) | 14,769,985 | ||||||||||||||||||||||||||
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Non-interest expense |
(405,912 | ) | (32,873 | ) | (444,141 | ) | (7,586,054 | ) | (906,434 | ) | (4,173,415 | ) | (13,548,829 | ) | (521,816 | ) | (14,070,645 | ) | ||||||||||||||||||
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Inter-segment |
39,512 | 47,553 | — | — | — | (87,065 | ) | — | — | — | ||||||||||||||||||||||||||
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Other expense |
(1,875,579 | ) | (1,476,190 | ) | (110,863 | ) | (51,995 | ) | (364,137 | ) | (574,606 | ) | (4,453,370 | ) | 308,692 | (4,144,678 | ) | |||||||||||||||||||
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Administrative expense |
(1,788,672 | ) | (966,878 | ) | (14,983 | ) | (17,964 | ) | (148,001 | ) | (793,978 | ) | (3,730,476 | ) | 252,000 | (3,478,476 | ) | |||||||||||||||||||
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Impairment losses on credit loss and others |
(86,907 | ) | (509,312 | ) | (95,880 | ) | (34,031 | ) | (216,136 | ) | 219,372 | (722,894 | ) | 56,692 | (666,202 | ) | ||||||||||||||||||||
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Operating income |
166,064 | 815,144 | 64,635 | 864 | 143,671 | 441,872 | 1,632,250 | (58,044 | ) | 1,574,206 | ||||||||||||||||||||||||||
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Non-operating income (expense) |
(35,081 | ) | (1,619 | ) | 46,559 | (5,288 | ) | (1,504 | ) | 55,291 | 58,358 | (79,175 | ) | (20,817 | ) | |||||||||||||||||||||
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Net income before income tax expense |
130,983 | 813,525 | 111,194 | (4,424 | ) | 142,167 | 497,163 | 1,690,608 | (137,219 | ) | 1,553,389 | |||||||||||||||||||||||||
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Income tax expense |
(31,698 | ) | (203,983 | ) | (26,909 | ) | 1,071 | (32,774 | ) | 16,475 | (277,818 | ) | 1,962 | (275,856 | ) | |||||||||||||||||||||
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Net income |
99,285 | 609,542 | 84,285 | (3,353 | ) | 109,393 | 513,638 | 1,412,790 | (135,257 | ) | 1,277,533 | |||||||||||||||||||||||||
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| For the year ended December 31, 2017 | ||||||||||||||||||||||||||||||||||||
| Consumer banking |
Corporate banking |
Investment banking |
Capital market |
Credit Cards |
Head- quarters and others |
Sub-total | Inter- segment transaction |
Total | ||||||||||||||||||||||||||||
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Net Interest income |
1,702,939 | 1,795,377 | 12,124 | 36,883 | 463,603 | 622,790 | 4,633,716 | 586,934 | 5,220,650 | |||||||||||||||||||||||||||
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Interest income |
3,149,625 | 2,964,813 | 148,500 | 18,834 | 599,550 | 1,360,734 | 8,242,056 | 308,631 | 8,550,687 | |||||||||||||||||||||||||||
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Interest expense |
(955,836 | ) | (1,681,652 | ) | (243 | ) | — | (135,947 | ) | (834,662 | ) | (3,608,340 | ) | 278,303 | (3,330,037 | ) | ||||||||||||||||||||
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Inter-segment |
(490,850 | ) | 512,216 | (136,133 | ) | 18,049 | — | 96,718 | — | — | — | |||||||||||||||||||||||||
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Net non-interest income |
649,950 | 571,336 | 152,168 | 69,671 | 73,537 | 389,004 | 1,905,666 | (745,990 | ) | 1,159,676 | ||||||||||||||||||||||||||
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Non-interest income |
802,387 | 680,778 | 366,523 | 9,548,399 | 1,163,575 | 2,683,407 | 15,245,069 | (395,833 | ) | 14,849,236 | ||||||||||||||||||||||||||
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Non-interest expense |
(253,961 | ) | (170,268 | ) | (214,355 | ) | (9,478,728 | ) | (1,090,038 | ) | (2,132,053 | ) | (13,339,403 | ) | (350,157 | ) | (13,689,560 | ) | ||||||||||||||||||
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Inter-segment |
101,524 | 60,826 | — | — | — | (162,350 | ) | — | — | — | ||||||||||||||||||||||||||
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Other income(expense) |
(1,906,561 | ) | (1,149,288 | ) | (63,835 | ) | 14,662 | (398,652 | ) | (939,406 | ) | (4,443,080 | ) | 219,496 | (4,223,584 | ) | ||||||||||||||||||||
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Administrative expense |
(1,808,974 | ) | (832,429 | ) | (12,881 | ) | (16,567 | ) | (163,536 | ) | (954,238 | ) | (3,788,625 | ) | 257,824 | (3,530,801 | ) | |||||||||||||||||||
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Impairment losses due to credit loss and others |
(97,587 | ) | (316,859 | ) | (50,954 | ) | 31,229 | (235,116 | ) | 14,832 | (654,455 | ) | (38,328 | ) | (692,783 | ) | ||||||||||||||||||||
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Operating income |
446,328 | 1,217,425 | 100,457 | 121,216 | 138,488 | 72,388 | 2,096,302 | 60,440 | 2,156,742 | |||||||||||||||||||||||||||
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Non-operating income (expense) |
(98,510 | ) | (3,153 | ) | 39,350 | — | (5,219 | ) | (112,734 | ) | (180,266 | ) | (26,970 | ) | (207,236 | ) | ||||||||||||||||||||
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Net income before income tax expense |
347,818 | 1,214,272 | 139,807 | 121,216 | 133,269 | (40,346 | ) | 1,916,036 | 33,470 | 1,949,506 | ||||||||||||||||||||||||||
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Income tax expense |
(84,172 | ) | (296,634 | ) | (33,834 | ) | (29,335 | ) | (32,055 | ) | 63,396 | (412,634 | ) | (6,784 | ) | (419,418 | ) | |||||||||||||||||||
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Net income |
263,646 | 917,638 | 105,973 | 91,881 | 101,214 | 23,050 | 1,503,402 | 26,686 | 1,530,088 | |||||||||||||||||||||||||||
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(2) Information on products and services
The products of the Group are classified as interest-bearing products such as loans, deposits and debt securities and non-interest bearing products such as loan commitment, credit commitment, equity securities, and credit card service. This classification of products has been reflected in the segment information presenting interest income and non-interest income.
(3) Information on geographical areas
Among the Group’s revenue (interest income and non-interest income) from services, revenue from the domestic customers for the years ended December 31, 2015, 2016 and 2017 amounted to 18,974,359 million Won, 22,265,508 million Won and 22,279,666 million Won, respectively, and revenue from the foreign customers amounted to 1,113,556 million Won, 1,016,788 million Won and 1,120,257 million Won, respectively. Among the Group’s non-current assets (investments in joint ventures and associates, investment properties, premises and equipment and intangible assets), non-current assets attributed to domestic subsidiaries as of December 31, 2016 and 2017 are 3,498,327 million Won and 3,550,764 million Won, respectively, and foreign subsidiaries are 240,946 million Won and 233,732 million Won, respectively.