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tate-owned lender Bank Negara Indonesia (BNI) is developing its international banking division via services to help grow its fee-based income.

The bank posted Rp 10.7 trillion (US$847.04 million) in fee-based income last year, an increase of 13.5 percent from Rp 9.4 trillion in 2013, according to its financial report.

BNI, the owner of several branches and offices overseas, was preparing its New York branch to join local foreign exchange (forex) clearing members under the US Federal Reserve'€™s operation, which would reduce the time required in the process, its executive said.

Abdullah Firman Wibowo, a senior vice president and head of the international banking division at BNI, said the US'€™ local forex clearing, called '€œFedbuyer'€, would enable its customers in Indonesia to utilize US dollar clearing through BNI'€™s New York branch directly, without the need to connect with its correspondent banks in the US.

'€œWe see that the local forex clearing service offers a high potential of income, because there are a lot of customers from Indonesian second tier banks that conduct their business in the US dollar. We hope the permit will be issued in the first quarter,'€ he said on Wednesday.

BNI was a member of forex clearing houses in Tokyo for the Japanese yen, Hong Kong for Hong Kong dollar and Chinese yuan, as well as Singapore for the Singapore dollar, he said.

Firman said BNI planned to attract existing customers under itself as well as other banks with the New York forex clearing service, which was targeted to serve at least 100 transactions per month with a cost of around $10-$25 per transaction.

However, Firman said, the bank would not see large fees from the service in the first year.

Firman said BNI was also aiming for fee-based income from other services and products in its international banking division, such as hedging and trade finance.

According to Firman, the bank has calculated that the potential of fee-based income gained from hedging for its customers may reach at least Rp 300 billion in the first year, aiming for up to a 5 percent
contribution to the bank'€™s total fee-based income.

Recently, BNI has looked to seal more hedging transactions with fellow state-owned enterprises (SOEs) to help maintain the country'€™s external debt. The service was previously avoided by SOEs because of concerns that it would result in state losses.

However, both the State-Owned Enterprises Ministry and Bank Indonesia (BI) have issued their own hedging regulations and have called on the companies to carry out hedging through swaps and forwards.

Last month, BNI signed a Rp 250 billion-worth cross currency swap (CCS) facility with national air carrier Garuda Indonesia for a period of three and a half years. The deal was part of a larger CCS facility '€” worth Rp 1 trillion '€” between BNI, Garuda and private lenders CIMB Niaga and Standard Chartered Bank.

Firman said state oil and gas firm Pertamina and state electricity company PLN were among the SOEs expected to enter the hedging market soon, as both companies had always been in need of substantial amounts of US dollar to finance their operations.

'€œWe have adequate capacity in our capital for SOE hedging needs, while also cooperating with other banks if the amount required is very high,'€ he said.

Aside of hedging, Firman said the lender also expected to grow its forex loan this year through its overseas branches, even though he refused to mention its target.