Publicly listed lender CIMB Niaga, the country'€™s fifth-largest bank by assets, posted flat net profits in 2013 as costs of funds soared.

The lender'€™s latest financial report said that its net profits stood at Rp 4.3 trillion (US$362.93 million) by December 2013, creeping only slightly by 1.1 percent. This accomplishment was a stark contrast to what it recorded in 2012, when its bottom line jumped 33 percent to Rp 4.23 trillion.

During a press briefing on Tuesday, CIMB Niaga strategy and financial director Wan Razly Abdullah said that following several increases in Bank Indonesia'€™s (BI) benchmark interest rates, the lender was forced to bear higher costs on its part.

'€œIn total, BI increased its rates by 175 bps [basis points]. We then recorded a 90 bps hike in our costs of funds, but could only pass as many as 50 bps onto our customers. The remaining 40 bps were on us,'€ he said.

Paired with slower lending growth, the higher costs of funds led to a decline in its net interest margin (NIM) '€” which was down to 5.3 percent from the previous 5.9 percent '€” and to a lower net interest income growth.

According to the financial report, CIMB Niaga'€™s net interest income only climbed 4.2 percent to Rp 10.12 trillion, whereas in 2012, the figure rose by 22 percent.

Razly said, however, that the lender'€™s slower lending growth was part of the bank'€™s strategy in preparation for the slowdown in the economy last year.

'€œWith higher inflation, weakening rupiah and tight liquidity, we decided to put brakes on our loans. That was part of our effort to maintain healthy NPL [non-performing loans] ratio,'€ he added.

By the end of 2013, CIMB Niaga'€™s outstanding loans had reached Rp 156.98 trillion, 8 percent higher compared to the previous year. Consumer loans '€” consisting of mortgage, auto loans, credit cards and others '€” replaced commercial loans as the most dominant segment in the bank'€™s lending portfolio.

Consumer made up 30 percent of the total loans, followed by corporate with 28 percent, commercial with 22 percent, and small, medium, micro enterprises (SMME) with the remaining 20 percent.

Corporate became the segment that posted the lowest growth among others, increasing 1 percent to Rp 43.92 trillion.

Meanwhile, in funding, the bank '€” which is 97.9 percent controlled by Malaysia'€™s CIMB Group '€” reported a total of Rp 163.74 trillion in third-party funds (DPK). The DPK increased 8 percent from 2012.

More than half of the DPK were placed in time deposits and structured deposits, making '€œhigh-cost funds'€ the major contributor to the bank'€™s funding segment.

'€œThe time deposits are dominant in our portfolio. So when four of the biggest lenders increased their time deposits'€™ interests, we had to compete with them and that translated into costs,'€ CIMB Niaga president director Arwin Rasyid said.

In 2014, according to Razly, the bank focus on the SMME and consumer loans segments to help it reach its growth target of around 15 percent.

'€œThis is slightly below the industry'€™s expected growth. However, if later we feel that the market is comfortable enough for us, we may increase our target,'€ he said, adding that CIMB Niaga expected its funding to grow at around the same pace as its lending.