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BRI boosts fee-based income to offset slower lending growth
State-owned lender Bank Rakyat Indonesia (BRI) plans to boost its fee-based income (FBI) to help offset expected slower growth in the bankâs interest income
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State-owned lender Bank Rakyat Indonesia (BRI) plans to boost its fee-based income (FBI) to help offset expected slower growth in the bank's interest income.
BRI vice president director Sunarso said on Tuesday that the bank expected to book at least Rp 8.1 trillion (US$623.41 million) in fee-based income by year-end.
The target is 32.8 percent higher than the Rp 6.1 trillion it reaped in 2014. If met, it will be BRI's highest achievement rate in six years.
The bank's data show that the annual rate previously hovered between 14 and 25 percent from 2010 to 2014. 'We are looking to capitalize on our earlier investments, especially in electronic banking services,' he said.
Electronic banking, according to the data, already accounts for almost 20 percent, or Rp 335.2 billion, of the bank's fee-based income, becoming the second-largest contributor in March.
This year, BRI plans on setting up an additional 1,200 new ATMs across the country, bringing the total number to 22,000. The new machines are hoped to jack up BRI's income from electronic banking services to Rp 1.8 trillion, a 50 percent rise from 2014.
'Part of the growth in electronic banking will come from our BRI Link program as well, as certain fees will be charged for BRILink services,' Sunarso said.
As previously reported, the BRILink program was launched in December and aims to provide branchless banking services to rural communities. At present, BRI has more than 27,000 BRILink agents and is looking to expand the number to 50,000 by the end of 2015.
Meanwhile, the lender expects to book a 52 percent increase year-on-year to Rp 4.4 trillion in deposit administration fees, again relying on BRILink to achieve the fee target. 'We will get new savings customers from BRILink agents. Higher third-party funds will generate higher administration fees,' he added.
In the first quarter, deposit administration was listed as the biggest contributor to the bank's fee-based income with Rp 913.1 billion.
BRI was optimistic, Sunarso went on, that its fee-based income would gradually balance its overall income portfolio, especially when net interest income slowed on weak lending, as is the case now.
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 of 2014. It attributed the result to higher costs of funds and slower loan disbursement.
BRI was able to post only 9.4 percent year-on-year growth in lending in the first quarter, eventually resulting in 8.2 percent annual growth in net interest income.
The results were a contrast compared with a year ago, when BRI's lending surged 19.7 percent and net interest income soared 25.2 percent.
However, despite the ongoing slowdown, BRI finance director Haru Koesmahargyo said that it had no plan to revise its business targets, either in lending or customer deposits.
While overall lending growth has been set at 15 to 17 percent, the deposits target is pinned at 13 to 15 percent.
