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haria lender Bank Syariah Mandiri (BSM), a subsidiary of state-owned Bank Mandiri, aims to rebound this year after suffering from poor performance in 2014.

BSM finance and strategy director Agus Dwi Handaya said on Monday that it expected things to improve this year and that it had put measures in place to solve past problems.

Agus was referring to the high non-performing financing (NPF) that BSM recorded last year, when its NPF ratio reached 6.8 percent, way above the 5 percent benchmark for soundness set by financial regulators. The growing NPF forced the lender to allocate higher financing provision within its balance sheet.

The high provision eventually ate away its net profit in 2014, falling 89 percent to Rp 71.78 billion from the previous year, as shown by its unaudited financial report that was submitted to the Financial Services Authority (OJK).

According to Agus, the lender has established a restructuring unit at every regional office to better monitor potential bad financing and it is planning to offer incentives as well for its staff to manage the NPF.

'€œWe also plan to take legal action to deal with uncooperative debtors and to put up the debtors'€™ bad assets for auction,'€ he said, adding that the moves were expected to clean up its balance sheet.

Agus said that last year'€™s economic growth deceleration contributed to the rising NPF, but he acknowledged that BSM'€™s weak underwriting capacity had also played a part in the problem. '€œWith these measures in place, we hope to book better performance compared to last year and reduce our gross NPF to around 5 percent,'€ he added.

BSM '€” currently the largest sharia lender by asset size '€” now seeks to post double-digit growth in its financing and funding portfolios in 2015.

It has set its financing growth target at 14 to 16 percent and its third-party deposits (DPK) growth target at 10 to 12 percent. Financing is estimated to reach at least Rp 55.98 trillion and DPK Rp 65.78 trillion.

The lender expected the retail segment to be its growth engine for the next two to three years, adding that retail would probably make up for 75 percent of its total financing in 2018. The remaining 25 percent would come from wholesale segment, according to Agus.

BSM treasury and international banking group head Rahmat Syukri said that with the financing and DPK targets, its financing-to-deposit ratio (FDR) '€” which indicates a bank'€™s liquidity '€” would increase to 85 to 86 percent by year-end from 81.8 percent in 2014, meaning it expected to disburse more loans than net deposits.

BSM is also looking to increase its coverage in the sharia capital market this year by managing more sharia portfolios, namely sharia securities, sukuk and sharia mutual funds. '€œWe want to see our portfolio grow to Rp 2.7 trillion within the next 10 months from Rp 1.8 trillion in January,'€ Rahmat said.

One way to achieve that, he added, was to directly manage the next initial sukuk offering. '€œOur involvement in the offering has always been with our parent company Bank Mandiri. We want to be involved directly in hopes of establishing a name for ourselves,'€ he added.