Shinhan Financial Group's headquarters in central Seoul (Shinhan Financial Group)

Shinhan Financial Group, one of the country's top financial providers, posted lower-than-expected earnings for the July-September quarter, hit by the derivative fiasco from its brokerage arm.

The financial group announced Friday that its net profit for the third quarter recorded 1.23 trillion won ($885 million), marking a 3.9 percent increase year-on-year.

The figure, however, is slightly lower than the market forecast of around 1.3 trillion won. It also lost 186.9 billion won or 13.1 percent on-quarter.

With the figure, its accumulated net profit for this year stood at 3.98 trillion won, up 4.4 percent year-on-year.

Interest profits contributed to the on-year increase in net profit. Shinhan Financial Group’s interest income for the quarter stood at 2.85 trillion won, surging by 3.3 percent from the previous year. The rise in interest profit was led by the increase in household loans taken out at Shinhan Bank, especially sparked by home mortgages.

But Shinhan Financial Group’s non-interest margin dropped to 827.8 billion won, plunging 9.4 percent on-year. The group attributed the loss to its brokerage affiliate Shinhan Securities. The brokerage house posted a 135.7 billion won loss caused by unauthorized futures trading of an exchange-traded fund in August.

"Reminded that the essence of its business lies in customers' trust and strong internal control, the group will look into the internal control system again and fix it," an official from Shinhan Financial Group said.

Shinhan Bank, a key affiliate of the group, posted 1.04 trillion won net profit in the third quarter, marking a 14.2 percent gain from the same period last year. It posted a 6.7 percent loss from the 75.5 billion won earnings of the previous quarter.

Meanwhile, the board settled for a 540 won dividend paid per share for the third quarter. It agreed to acquire and cancel treasury shares worth 400 billion won. Of the 400 billion won, shares worth 250 billion won will be acquired until the end of 2024 and the remaining 150 billion won will be secured in early-2025.