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rivate lender PermataBank, owned by conglomerate Astra International and Standard Chartered Bank, saw its net profit squeezed last year despite lending growth.

The publicly listed lender posted Rp 1.58 trillion (US$122.81 million) in consolidated net profit between January and December last year, a 8.86 percent drop compared with Rp 1.72 trillion in the same period of 2013, according to its financial report published on Friday.

Lending grew 11 percent to Rp 132 trillion in outstanding last year versus Rp 119 trillion in 2013, driven by small and medium enterprise (SME) business as well as local and middle market corporations.

The net-profit decrease was mainly caused by a nearly 22 percent increase in non-interest operating expenses to Rp 5.85 trillion last year.

Part of the increase was prompted by the bank'€™s consolidated provision expenses, which rose 5.68 percent to Rp 64.56 billion last year.

According to the report, PermataBank'€™s provision rose due to an increase in gross non-performing loans (NPL) to 1.7 percent last year from Rp 1.02 percent in 2013, while its net NPL doubled to 0.63 percent in 2014 from 0.31 percent in the previous year.

PermataBank finance director Sandeep Jain acknowledged that the challenging macroeconomic environment in 2014 had impacted the bank'€™s asset quality mainly from the deterioration of a small number of wholesale bank accounts, resulting in the NPL-ratio increase.

'€œLast year, the banking industry faced higher cost of funds and slower business growth as a result of inflationary pressures and weakening of the rupiah. However, PermataBank remained healthy, well-capitalized and liquid,'€ Jain said in an official statement on Friday.

PermataBank had a 13.6 percent capital adequacy ratio (CAR) in 2014, versus 14.2 percent in 2013.

Last year, the bank bought 25 percent stake in Astra Sedaya Finance and raised Rp 1.5 trillion from a rights share offering and Rp 700 billion from subordinated debt issuances.

'€œFee-based income rose 35 percent year-on-year [yoy] to Rp 1.7 trillion on the back of strong performance in bancassurance, trade finance and profit contribution arising from equity participation multi-financing firm PT Astra Sedaya Finance,'€ he said.

Amid competition for funding and softening demand for loans, Jain said the bank had managed its liquidity by recording 11 percent growth in third-party funds (DPK) to Rp 148 trillion as of last year, resulting in a stable loan-to-deposit ratio (LDR) of 89.13 percent in 2014, a decrease from 89.24 percent in 2013.

PermataBank president director Roy Arfandy said the bank would remain cautiously optimistic in 2015 as the banking industry, regulatory landscape as well as technology continued to change and grow.

'€œBy sticking to our strategy, remaining true to our values and being innovative and adaptive, I am confident that we are well-positioned to continue growing even stronger,'€ Roy said.

In addition to relocations and refurbishments to existing branches, Roy said the lender had opened 18 new branches and sub-branches in 2014, bringing the total to 330 conventional and sharia branches, 22 mobile banking units, 283 sharia office channeling windows and three payment points in 63 cities nationwide supported by 1,005 proprietary ATMs nationwide.

PermataBank had Rp 185 trillion total assets as of end of 2014, up 12 percent from the previous year.