Woori Financial Group said on Thursday its first-quarter net profit fell 2.1 percent from a year earlier to 603.8 billion won.

It said securities and foreign exchange-related gains declined as market volatility increased due to conflict in the Middle East. It also reflected one-off provisions related to overseas units.

Net operating revenue in the first quarter rose 5.6 percent from a year earlier to 2.76 trillion won. Interest income increased 2.3 percent to 2.30 trillion won, and non-interest income rose 26.7 percent to 454.6 billion won.

Interest income was driven by growth in corporate finance and an improvement in net interest margin (NIM). The bank's NIM rose 0.02 percentage point to 1.51 percent in the first quarter from 1.49 percent in the fourth quarter of last year.

Non-interest income rose sharply as contributions from non-bank units such as securities and insurance increased. Fee income, in particular, was 576.8 billion won, a quarterly record high.

Cost burdens increased. Selling and administrative expenses in the first quarter rose 9.0 percent from a year earlier to 1.42 trillion won, including 183.0 billion won in early retirement costs, and credit loss expenses rose 20.9 percent to 526.8 billion won. Woori Bank built about 100.0 billion won in provisions related to its overseas units.

Asset quality indicators worsened slightly. The group's ratio of substandard or lower loans rose 0.05 percentage point to 0.68 percent at the end of the first quarter from 0.63 percent at the end of last year. The bank delinquency ratio rose 0.04 percentage point to 0.38 percent and the card delinquency ratio climbed 0.27 percentage point to 1.80 percent.

Capital adequacy improved. Its common equity tier 1 (CET1) ratio stood at 13.6 percent at the end of the first quarter, up 0.7 percentage point from 12.9 percent at the end of last year, marking a record high. It achieved its medium- to long-term goal of 13 percent earlier than planned through asset rebalancing and revaluation of tangible assets without a capital increase.

Results at affiliates also improved overall. Woori Card posted 43.9 billion won, up 33.8 percent, and Woori Financial Capital recorded 40.0 billion won, up 30.7 percent. Tongyang Life posted net profit of 25.0 billion won, while Woori Investment & Securities recorded 14.0 billion won, up 976.9 percent from a year earlier due to a strong stock market.

Woori Financial said it will push ahead with a capital increase of about 1.0 trillion won for Woori Investment & Securities to expand total capital to around 2.20 trillion won and strengthen its venture capital investment function, as it steps up its strategy to boost competitiveness in non-bank businesses. It said it will bring Tongyang Life in as a wholly owned subsidiary through a comprehensive share exchange with the holding company, retain 100 percent of profits within the group and increase business synergy.

A Woori Financial official said the group will work to have bank and non-bank units evenly drive group growth based on a balanced business portfolio. The official said it will, over the medium to long term, complete a virtuous cycle structure of improving ROE and expanding shareholder returns.