The five largest financial groups in South Korea achieved an unprecedented aggregate net profit of KRW6.2 trillion ($4.2bn) in the first quarter, according to industry data released on April 27, The Korea Times reports. The figure represents a 9.8% year-on-year increase from KRW5.6 trillion ($3.8bn), marking the first time quarterly returns for the group, comprising KB, Shinhan, Hana, Woori and NH, have crossed the KRW6 trillion ($4.1bn) line.

The record-breaking performance masks a deepening fracture in the Korean financial landscape: while parent groups are thriving on the back of a stock market rally that boosted their securities arms, the core banking units are hitting a wall. This shift suggests that the traditional bank-heavy profit model is reaching its limit, forcing a pivot toward more volatile non-banking income streams.

While the conglomerates celebrated, their banking subsidiaries struggled with flat or declining earnings. Woori Bank reported a net profit of KRW522bn ($355mn), down 17.8% y/y. Industrial Bank of Korea (IBK) saw a 12.4% y/y retreat to KRW666.3bn ($453mn), while NH NongHyup Bank posted a near-flat 0.6% y/y rise to KRW557.7bn ($379mn).

The divergence in performance highlights a specific set of headwinds for the lenders. Woori Bank's bottom line was hit by early retirement expenses and general overheads, while its Indonesian subsidiary, Woori Saudara Bank, required KRW130bn ($88mn) in provisions. Furthermore, currency fluctuations and shifting interest rates weighed on net interest margins.

“Net profit came in below market expectations due to provisions at overseas units and the impact of exchange rates and interest rates,” said a Woori official on April 27.

The results underscore a structural vulnerability as Korean banks remain heavily reliant on interest margins at a time when administrative costs and credit risks are climbing. Critics argue the current model is unsustainable. To maintain momentum, these groups are now under pressure to diversify by improving branch efficiency and aggressively scaling up wealth management services to reduce their exposure to interest rate cycles. As one industry official noted, it will be difficult for banks to sustain earnings through interest margins alone for the time being.