State-owned lender Bank Rakyat Indonesia (BRI) is confident it can achieve double-digit growth in net profit this year despite a lackluster performance in the first quarter.

According to BRI finance director Haru Koesmahargyo, the bank hopes to see its net profit surge at least 10 percent year-on-year (yoy) in 2015. With such a growth rate, its bottom line is expected to amount to Rp 26.62 trillion (US$2.06 billion) by year-end.

Haru acknowledged that the full-year profit target would be lower than the 14.4 percent growth it posted in 2014.

'€œBut it will still be a positive and sustainable growth given the current economic situation,'€ he said on Thursday after the bank announced its first-quarter financial results.

In the first three months of 2015, BRI saw its bank-only net profits rise 3.4 percent yoy to Rp 6.1 trillion, down from an annual pace of 14.4 percent in the same period in 2014.

It attributed the result to a higher cost of funds (CoF) and slower loan disbursement.

The CoF '€” a measurement of expenses paid by the bank to depositors '€” climbed to 4.5 percent from 3.9 percent as BRI generated higher time deposits in the past year to secure liquidity.

Its financial report shows that its time deposit portfolio '€” also known as expensive funds '€” skyrocketed 42.5 percent on an annual basis and now accounts for almost half of its total customer deposits.

Paired with weak loan disbursement that increased only 9.4 percent yoy, BRI was left with a net interest margin (NIM) that fell to 7.6 percent from the previous level of 9.1 percent.

However, despite the mediocre result, BRI'€™s net profits remained the largest among all lenders in the January to March period and Haru said that it would maintain the NIM at between 7.7 and 8 percent for the whole year.

BRI president director Asmawi Syam said the bank would gradually slash the portfolio of its time deposits in an attempt to reduce CoF and improve NIM.

'€œWe are now refocusing ourselves to raise cheap funds from CASA [current accounts and savings accounts]. As CASA grows, we will also see an increase in fee-based income from various transactions,'€ he said.

This year, BRI seeks to boost its CASA portion to reach 55 percent of total customer deposits, including by mobilizing its branchless banking program. The overall deposits themselves are expected to climb between 13 and 15 percent.

BRI vice president director Sunarso said the lender would stick to its micro lending business to spur growth. '€œIt has provided us with the highest yield so far,'€ he said.

BRI'€™s financial statement reveals that micro lending came in second, after the non-state enterprise segment, in terms of growth with 16 percent in the first quarter.

The bank has not revised its loan outlook for this year and is sticking to its 15 to 17 percent lending growth target.

Meanwhile, Haru said the bank still planned to acquire a life insurance subsidiary, adding that it would soon appoint a financial advisor to realize the plan.

He acknowledged that BRI had its sights set on PT BRIngin Life, which is currently controlled by BRI'€™s pension fund. '€œWe are looking to obtain a majority stake in the life insurer and then find a strategic partner to develop the business,'€ he said.

Shares in BRI, traded on the Indonesia Stock Exchange (IDX) as BBRI, traded at Rp 11,625 apiece on Thursday, unchanged from the previous day. Indonesia'€™s stock market was closed on Friday for Labor Day holiday.

The stocks have dropped 0.21 percent so far this year, in line with the broader benchmark Jakarta Composite Index (JCI) which has slumped 2.69 percent during the same period.

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