Private lender Bank KEB Hana Indonesia, part of the South Korean Hana Financial Group, is digging deeper into the wealth management business in anticipation of a rise in its status.

The bank is looking to upgrade its status as a BUKU III lender, with core capital between Rp 5 trillion (US$375 million) and Rp 30 trillion.

At present, it is still listed as a BUKU II lender, with core capital between Rp 1 trillion and Rp 5 trillion. It issued subordinated bonds worth Rp 1.4 trillion in December last year to increase its capital and by the end of January, it had generated 60 percent of the targeted funds.

A higher status will allow KEB Hana to offer more services to its customers. However, at the same time, it will face limitations in its time deposit interest rate and time deposits are generally regarded as an important funding source.

“Being a BUKU III bank means we will be affected by interest capping rules,” KEB Hana funding and wealth management business head Gempur Widiansyah said on Wednesday.

An existing regulation issued by the Financial Services Authority (OJK) stipulates that BUKU III lenders can only offer time deposit rates at a maximum 100 basis points above Bank Indonesia’s (BI) 12-month certificate rate.

The 12-month rate currently sits at 6 percent, meaning that KEB Hana can only offer a maximum rate of 7 percent.

Such a limited interest rate will affect the attractiveness of its time deposits and the bank is stepping up its efforts to diversify services for its customers.

One option is through investment products.

It signed on Wednesday a partnership agreement with investment manager PT Schroeder Investment Management Indonesia to sell the latter’s mutual funds at its branches.

The partnership follows an earlier agreement with life insurer PT Tokio Marine Life Insurance Indonesia to market Tokio’s unit-linked insurance products.

“We must anticipate the BUKU III status and condition by shifting into the wealth business. Among Korean banks in Indonesia, we are the first to introduce this service to customers,” Gempur said.

Supported by the partnerships, KEB Hana targets boosting its fee-based income by 20 percent to Rp 25 billion in 2017 and to double the amount of assets under management in its wealth business segment to Rp 4 trillion.

The lender has catered to South Korean individuals and businesses since before its official launch as KEB Hana in 2014. Prior to 2014, Korea Exchange Bank (KEB) and Bank Hana operated as separate entities.

Korean customers make up 55 percent of its total customer deposits even though they only account for 30 percent in terms of number of accounts. Data from the bank shows that it manages Rp 18.8 trillion in customer deposits as of 2016.

The funds are disbursed mainly for manufacturing, trading and mortgage loans.

Meanwhile, KEB Hana president director Lee Hwa-soo said he expected to see a 20 percent rise in total lending this year, taking the lending portfolio toRp 32.4 trillion.

“The growth rate is relatively lower than last year but we are still pursuing high growth,” Lee said.

In 2016, its outstanding loans stood at Rp 27 trillion, up 26 percent from the previous year.

KEB Hana’s target is higher than the banking industry’s predicted average because a BI survey published in January said the industry expected loan growth of just 13.1 percent throughout 2017.

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