Woori Financial audits Woori Bank

Woori Financial Group audited Woori Bank for two months and found 30 insolvent loans worth US$8.76 million from May 7 to July 6.

The holding group plans to punish those who authorized them.

It is rare for a holding company to audit its subsidiary for over 40 days.

Woori Financial said the move was due to the increasing number of nonperforming loans from Woori Bank, which had the highest bad-loan ratio at 1.88 percent as of end of March.

The average among Korean banks is 1.45 percent.

The group’s flagship firm is reportedly displeased about the audit as it found no legitimate reason to be investigated.

The recent audit is the first in nearly two years. The holdings company audited its bank affiliate for bad project financing loans in 2010 and for poor investments in derivative products credit default swap and collateralized debt obligations in 2009.

Many speculate that the audit is part of a power struggle between Woori Group Chairman Lee Pal-seung and Woori Bank President Lee Soon-woo.

The two heads have clashed over an issue of separation of Woori Card from Woori Bank earlier this year. The power struggle comes as the banking subsidiary’s asset is near equal that of the holding company’s, causing a continuous internal struggle between the two.

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