Hana Financial Group, the country's third-largest financial group, said Friday its first quarter net income fell more than 30 percent  on-year due mainly to losses from a state-led micro loan and its implication in an illegal lending scheme.

Net profit stood at 207.8 billion won ($200 million) in the January-March period, compared with 311.8 billion won a year earlier, the group said in a regulatory filing. From three months earlier, profit jumped almost 200 percent. 

The bottom line, however, was weakened by a 65 billion won loss reserved for the debt relief fund, the National Happiness Fund, the company said. It also set aside 65.5 billion won in provision for bad loans as the banking group is embroiled in an illegal loan scandal involving an affiliate of KT Corp., the country's second-biggest mobile operator.

The group's net interest margin (NIM), a gauge of profitability, stood at 1.91 percent in the first quarter, down 0.01 percentage point from the last quarter, amid the central bank's stance to maintain low interest rates.

Hana financial said its total assets climbed 4 percent on-quarter to reach 383.2 trillion won in the first quarter.

The group's flagship Hana Bank posted a net profit of 167 billion won in the first quarter, down 35.44 percent from 258.7 billion won a year earlier.

By Bae Hyun-jung and news reports (tellme@heraldcorp.com)