PT Bank CIMB Niaga Tbk (BNGA.JK) Q2 FY2025 Earnings Call Transcript & Summary

Welcome to CIMB Niaga First Quarter -- sorry, First Half 2025 Earnings Conference Call. My name is Teguh, Investor Relations Head here at CIMB Niaga, and I will be your moderator for today's session. Joining us and presenting to you this afternoon are our President Director and CEO, Ibu Lani Darmawan, our Strategy, Finance and SPAPM Director; Bapak Lee Kai Kwong. Also presenting and to address questions during the Q&A session are Bapak John Simon, our Treasury and Capital Market Director; Bapak Henky Sulistyo, our Risk Management Director. As usual, before we begin, please note that today's presentation material may include forward-looking statements based on current management expectations. These are subject to risks and uncertainties, and the actual results may differ materially from those expressed and implied in this session. With that, I'm pleased to hand the call over to Ibu Lani Darmawan, our CEO. Over to you, Ibu Lani.

Thank you, Teguh. Hi, everyone. Good afternoon and thank you for joining our call today. So it's a pleasure to welcome you to our H1 2025 financial results presentation. I appreciate your continued interest and support. And I'm pleased to share how we have navigated the first half of this year, delivering positive earnings growth despite the challenging economic situations that we all know. So to be honest, it's rather tough, particularly. So I'd like to start by highlighting CIMB Niaga's strong market positions as Indonesia's second largest privately owned bank by total assets. We -- with over 9.1 million customers served across 12 cities, our extensive network includes 395 branches and around 3,000 ATMs. Digital adoptions remain strong with 3.6 million mobile banking users and 2.1 million Internet banking users and over 6 million OCTOPay or e-wallet users that reinforce our commitment to innovation. And financially, our total assets reached IDR 358 trillion, supported by customer deposits of IDR 262 trillion. So our profitability remains healthy with an ROE in half 1 of 13.5% or 13.5%, maintaining our strong capital adequacy ratio of 24%. And finally, sustainability is also our -- part of our integral growth with sustainable financing now reaching IDR 58 trillion or comprising about almost 25% of our total financing portfolio. So if we go into the next Page 8, [Foreign Language], ladies and gentlemen, I'm pleased to share our financial results for the first half of 2025, reflecting continued resilience and our discipline of execution. We delivered strong CASA growth, providing a solid foundation of healthy loan expansions that is fully aligned with our risk appetite. And with NII or net interest income under pressure, mainly majority due to the very high cost of funds from tightened liquidity and rising competition, we continue our revenue diversification strategy with our fee-based income or fee-to-income ratio now reaching 30.3% of total revenues. Our asset quality remains sound and stable with a gross NPL of 1.88%. I think this one is actually outperforming industry averages and reflecting our discipline in risk management. We maintain a strong capital and liquidity position, reinforcing our balance sheet strength and stability. And strategically, we continue to reposition our portfolio towards the segments that offer attractive risk-adjusted returns and also sustainable growth. And collectively, this achievement led us to a net profit of IDR 3.5 trillion or year-on-year up by 1.4%, deliver ROE of 13.5%. Now the results also, I think, underscore our effective strategy and solid fundamentals positioning us to strongly continue for sustainable growth. If we go into this slide, we are committed to enhancing our revenue stability through diversified and recurring fee income. So this practically to reduce too much dependency towards NII. As you can see here, we have consistently grown our NOII ratio currently at the level of 30.3% of total revenue by the first half of this year. And importantly, if we can see from our recurring NOII, if excluding one-offs like loan sale is also steadily increasing to 28%. So this reflects a sustainable and reliable income sources for us. We are achieving this growth through continued innovations in our banking products as well as the services. And also most important part is actually building a deeper relationship with our customers, whether it's retail and non-retail and leveraging strategic partnerships as well. This action ensures that we maintain a resilient customer-centric franchise to capable to grow sustainably. We continue to enhance our customer service approach into more customer centricity rather than a product push model. So ultimately, our focus remains clear, delivering consistent, diversified and high-quality revenue streams to create sustainable value to all our stakeholders. So we go into asset quality. Now this is the area of strong asset quality and prudent risk management continues to be one of our key focus for sustainable profitability. I'd like to highlight several points here. As shown on the left side, our overall NPL on nonperforming loan remains sound at 1.88% or 1.9% by half 1 2025, which is actually well below the industry average NPL. We have been able to consistently improve the asset quality in our non-retail portfolio, reducing NPL ratio significantly from 3.2% back then in 2019 to only 90 basis points in June 2025. Meanwhile, as expected with our strategic shift, retail NPL is actually slightly rises, reflecting our move toward higher yield segments such as in auto loans are, unsecured CCPL as well as the SME loans. However, it remains manageable and also healthy level. Similarly, on the right side, it demonstrates our special mention loans under close watch. We expect the overall special mention ratio to remain well within the area of 4.4%. The slight increase in retail segment is anticipated. And actually, this is aligned with our deliberate capital allocation strategy towards higher-margin areas. And it mainly -- if you are looking at the increase from consumer or retail areas, merely the majority of it is actually coming from mortgage balances, which is not really growing due to the fact that the price war and challenges in the market. But rest assured, we maintain robust monitoring and proactive risk mitigation processes to effectively manage this area of exposures. So overall, I think we remain fully committed to disciplined risk management practices. Ensuring that asset quality will remain healthy even as we strategically position ourselves for stronger growth and higher returns. So we pick and choose practically the product solutions for growth. But at the same time, you also put into the account the relevances regarding the return or profitabilities. On the next page, okay, I'd like to share with you about our approach to capital allocations and portfolio management, where our strategy is clearly aligned to build an attractive and profitable loan portfolio for future growth. Our goal is to strategically allocate capital towards segments which offer the higher risk-adjusted returns as well as growth potential and earnings stabilities. So as you can see from the illustration here, we are focusing our growth on 2 priority segments, consumer and SME, which offer higher returns and stronger long-term growth potentials compared to traditional corporate and commercial segments. Specifically within consumer banking, our priority is to accelerate growth in certain areas of business such as auto loans again in unsecured loans CCPL, capturing the robust market opportunities as well as attractive margins. So we would like to gain market shares in this area. Meanwhile, in the SME segment, we aim to expand primarily in the area of medium-sized SME. So we will not go into all subsegments of SME. This needs to be a balanced risk and return, effectively. So we are leveraging our strategic focus on second-tier cities across Indonesia to further expand our market share in SME retail loans, deposit as well as other retail products as well. The result of our testing period for almost about a year within the secondary cities resulting quite well. We are practically gaining market shares in these secondary cities. These targeted moves reflect our concentrated effort to offset macroeconomic headwinds and also to ensure continued income growth for us. So in summary, our clear focus on the high potential segments positions us well enough to sustain our growth for good healthy profitability as well as delivering shareholders value. Now we go to -- okay. You can see from this page that digital transformation remain a critical priority for us. I think this is one of the best that we have to invest in the area of digitalization, which contribute into more efficient operating cost. Yes. So digital transformations remain, again, a priority continue for us to deliver a simpler, better as well as faster processes to our customers and our operations, whether it's internal or external customers. First, we have seen a very good growth in our mobile banking financial transactions with a year-on-year growth or increase about 37.4%. This highlights how our efforts to create simpler and faster mobile experience to customers reflect strongly with our customers driving deeper digital engagement. Hence, again, just like I said previously, for better cost of transactions. And the next effort is actually to streamline customer onboarding through all the digital channels that we have, which we can see it resulted in almost 62% of all the saving accounts being opened is actually digital, up by 12.6 points from the same period last year. Customer clearly appreciates a simplified and quicker account opening process which further demonstrating our commitment to deliver a better customer experience overall. So finally, in addition to improving customer experience, we have achieved a higher operational efficiency by reducing our e-channel operating cost per transaction by 21.5%. So this underscores our ability to leverage our digital platforms coming from OCTO Mobile, OCTO Clicks, OCTO Biz office channels and OCTOPay, our e-wallet to deliver faster service at actually lower cost. So I think overall, I think our investment in digitalization show a positive result, both within the customer experience, whether it's external and internal as well as financially contributes to more efficiency in terms of transaction costs. So I think with that, I will hand over to Pak KK, our CFO, to walk you through into detailed financials elaborations. Pak KK [Foreign Language]

[Foreign Language] and a very good afternoon, ladies and gentlemen. Welcome once again to our results briefing. Let's go to Page 14, again, starting with the balance sheet. Let's look at the total assets. First, our balance sheet shrank by 3.5% in the quarter. And you'll notice that a big part of it is really the contraction on the government bonds and marketable securities, where we had IDR 5.7 trillion SRBI maturing and another IDR 4 trillion of government bonds matured as well. So in spite of the overall asset overall shrinkage of the asset in the second quarter, we still saw total assets grew 3.2% year-on-year. So in the same period in the second quarter, we saw loans grow -- continue its growth actually by about 1%, lifting the year-on-year growth to 6.8%. On the deposit side of things, we are beginning to see competition for deposits showing some signs of easing already. Total deposits did very well, up 3% in the quarter, delivering a 4.8% year-on-year growth. The big part of it is really on the CASA growth with a significant lift of 5.4% in Q2, taking total growth to 10.9%. Now TD ended the quarter with a decline of 1.9% versus the previous quarter. And versus the previous year, it was down 6.6%. Here, we are trying to balance between taking alternative funding as well as a cheaper -- lowering the funding cost. Total equity, you see that it is lower. This was largely attributed to a dividend payout. We went up and paid 60% again in April of this year. Next page. So the quarter-on-quarter numbers first, NII was lower by 0.4%. And you see here that the interest income showing a decline of 1.2%. While in the second quarter, we are beginning to see a bit of a silver lining on interest expense where the interest expense eased by 2.1%, right? But when you compare it year-on-year, you still see that interest income was up 4.6%, but overall interest expense was up 11%, bringing down the NII by 0.5%. Noninterest income gained 1.9% in the quarter. However, still recorded a decline of 1.9% versus last year. And if you remember, last year, we did have quite a sizable loan sale in the first quarter of 2024. So in the second quarter, we ended with an operating income improvement of 0.3%, but year-on-year still trail 0.9% against 2024. Next, on expense. The discipline remains strong. We managed to lower our expense by 1.9% versus the previous quarter, delivering a year-on-year increase of only 2.7%. With that, we had a PPOP gain of 2.1% quarter-on-quarter, but ended the first half PPOP 3.8% lower versus last year. And once again, also this quarter, credit cost was the key driver for earnings. Provision expense did increase by 33% after a very low first quarter, right? Despite the second quarter increase, provision levels were still close to 25% lower in the first half versus last year. In the second quarter, provisions also included a sizable charge for NBV adjustments, right? Given the lower provisions and also the tight expense control, we managed to add 1% to our PBT versus the first half of 2024. And maybe to some key ratios, next. Now profitability ratios first, they were a bit weaker compared to the first quarter with ROA inch down slightly from 2.5% to 2.4%. And also a consequence of that, we saw ROE coming in lower at 13.1%, ending the first half at -- sorry, 13.5%. Now the two main contributing factor, you can also clearly see in this slide here are really the lower NIMs. NIMs contracted from 3.99% to 3.93%, ending the first half at 3.96%. And also, we did put in a little bit more buffer on the -- sorry, adjustments on the provisions with the NBV ending the provision at 0.86%. So in spite of the NIM challenges, higher fee income did help us and lower expense have lowered the cost-to-income ratio by 1% to 45%. Ibu Lani alluded to this earlier, the CASA growth remains steady as we saw CASA ratio improved to 69% and LDR, the liquidity ratio improving to 87.3% as we are now really beginning to see the easing of some of the liquidity issues we had maybe over the last 2 to 3 quarters. Credit risk or asset quality ratio remains sound with loan at risk ratios, gross impaired loans and NPL now at 0.8% -- sorry, 1.8%. Coverage ratio on the NPL, loan at risk impairments continue to stay strong at a comfortable levels right now. Maybe to the next page. Now okay. So a little bit more time on this then. So NII, what are we doing here, right? So this is the trend we see NII remains flat, right, 6,655 to 6,624 really with the size of the balance sheet growing, we saw also the NIMs coming down from 4.21% to 3.96%. So if you go to the right side of this slide, you see that a large part of it is attributed to the loan yields, right, finally maybe catching up to the 3 rate cuts we saw earlier part of -- late third quarter last year and all the way to May this year and more recently in July. So the loan yields are going to come down. So a little bit of silver lining you see here is that maybe with the cost of deposit peaking at 3.61%, we are seeing some easing right now with cost of deposits coming down to 3.46%. And with the recent rate cut a couple of weeks ago, we do foresee the transmission of some of these rate cuts will be realized in our cost of deposits in the coming months. Okay. Maybe to the next slide, please, on the fee income performance. This is a rather mixed performance with total NII gaining 1.9% quarter-on-quarter. But in Q2, we did see the fee and commission closing lower by 1.5%. Treasury and markets, especially on the risk-taking side, we were down by 25.4%. However, we had a very strong month for bad debt recoveries and that helped take the NOI up by 1.9% for the quarter. So -- but the year-on-year number was quite the opposite where we saw year-on-year, we did see the fee and commission going up 4.1% with treasury and markets up quite significantly. But that recovery versus last year, I mentioned earlier, we did not have a sizable loan sale at this time. Bad debt recovery was down 24.3% so that we drive a reversal of NOI of 1.9%. Over to expenses. I'm just going to take you through the year-on-year numbers more some of the noises between the quarters. Our personnel costs, which represented 60% of our expense base was up 3.6%. This is also very much in line with our personnel cost control measures. Tech cost is still trending above 10%. I mentioned this earlier. We expect this trend to continue in the foreseeable future as we continue to invest in tech and digital enablement. Ibu Lani also mentioned our drive towards getting more digital. A lot of the costs really will be funded by the reduction of other expenses. Other expenses here include establishment costs, general services and admin costs. And now all this combining to derive a 4.3% reduction year-on-year. So we will continue to pursue more structural cost takeout. You see here that we are reshaping the branches and ATMs, branches reduction continues. EDC continues ATM, the reduction continues as well as we continue to drive a lot of our transactions to the digital space. Next page, please. Very quickly then on loan performance. It's still rather robust. I think the pipelines are still strong, actually led by corporate banking and SME growing 9.3% and 7.3%, respectively, year-on-year. Commercial Banking continued its steady trend of growing cautiously at the 4.6% level, while Consumer Bank -- in Consumer Bank actually, auto loans continue to grow from strength to strength, gaining almost 27%. Mortgage remains the only challenge for us. Pricing is one of the reasons, but the good news is we have kind of stopped the decline in the second quarter with a slight gain, but for the year, we're still down 2.5%. The composition of retail loans, we want to allocate a lot of our capital to still not ideal at this stage at 44.8%, but we would like to move this number, maybe to the high 40s level that is growing at a pace of 5.4%. Next page, focusing more on CASA, where we closed the quarter very strongly, taking a year-on-year growth up by 10.9%. CA growth, primarily from corporate banking and the business banking segment continues to be strong, improving 15.7%, while in consumer, SA saw kind of a mini resurgence, gaining 2.1% in the quarter and 5.9% year-on-year. TD went down in the quarter by 1.9%, 6.6% year-on-year, again, as we balance the TD pricing growth and along with better sourcing for alternative for cheaper funding. Next, please. Yes, on asset quality, starting with Loans at Risk LaR. LaR, actually, if you look into the different bars there, different color bars, you see that I think 2 of the 3 key LaR components did show a slight decline with NPLs increased to 1.88%, not shown here, show 1.9% -- 1.85% to 1.88%, 3 basis point increase in NPLs. And then special mention was higher by 6 basis points to 4.36% while the Cat-1 restructured loans had a significant improvement from a big recovery, improving 32 basis points. That actually overall drove the LaR ratio down to 8.36%, an improvement over the last quarter. So the health of our portfolio remains strong, delivering a COC of 0.8% for the quarter and for the first half of this year, 0.65%. So in spite of lower provisions compared to last year, our coverage remains strong over NPLs, impaired ratio -- impairments as well as loan at risk. Next, finally, on the liquidity. Liquidity position remains strong. You see that yes, our LCR has come down from a year ago. But overall, this is well above the regulatory requirement with sufficient buffer. NSFR improved slightly, but the loan-to-deposit ratio, you see that has begun to come down already after a few quarters of inching up. Capital remains strong. We paid a dividend in April. So we've seen a little bit of a dip on the capital with Tier 1 or CET1 at close to 23%. I think that was the last slide. That's all from me before we take any questions, I'll just hand it back over to Ibu Lani. Thank you.

Well, thank you. Thank you, Pak KK. So let me conclude by highlighting several points on our H1 2025 performance and results. Despite a challenging macroeconomic environment, we continue to deliver positive earnings growth in H1, supported by healthy loan growth and improved asset quality. The second one is actually the strong CASA growth across all segments, which enables us to prudently grow lending in our key targeted segments. We continue to invest in innovations, driving a higher quality recurring noninterest income stream to ensure a sustainable revenue growth, including efficiency in operations. We remain agile, executing the deposit-led strategy focus on efficiency and resilience, positioning us well to manage the industry dynamic. And finally, our disciplined and strategic capital allocation approach will ensure that we are building a profitable, risk-adjusted portfolio to maximize our long-term return. So looking forward, we are aiming to achieve a full year 2025 target with guidance for loan growth maintaining between 5% to 7%. NIM, we would like to maintain it between 3.9% to 4.2%. We have revised our cost of credit guidance from previously within 1%. We revised it down a little bit to a range between 0.6% to 0.8%, reflecting a better-than-expected outlook for asset quality management. And finally, we retain our cost-to-income ratio guidance to below 45% by the end of 2025 as well as ROE guidance between 14% to 15%. So we remain fully committed to delivering sustainable growth for our stakeholders and investors. So that concludes the presentation [Foreign Language]. So, I hand this back to you for Q&A.

Right. Thank you, Ibu Lani and Pak KK for the presentation. [Operator Instructions] We will take further questions first from the line and then we have enough time. I think we can take questions from the chat box. I think we have the first question here from Kresna Hutabarat with Mandiri Sekuritas.

Can you hear me okay?

Yes. Go ahead, Kresna.

Just 2 questions from me. Firstly, congratulations on maintaining the positive earnings growth in first half 2025. I understand that macro pressures were quite challenging. And several of your peers actually have fallen into negative growth territory. So we appreciate the positive earnings momentum. Just 2 questions. The first one is actually on the auto loans business. It is one of the fastest-growing segments on a year-to-date basis at CIMB Niaga. But can we get some color on the sequential asset quality trends on the segments in second quarter versus first quarter in 2025? And how does management view the segment's asset quality trend in second half 2025? My second question is more about the customer demographics that have been acquired over the past 1 to 2 years. Yes, basically just any comment on whether management is very happy with the customer performance on a year-to-date basis. And again, in the context of investing in capacity for a stronger fee-to-income ratio over the next few years, how would CIMB Niaga use the digitalization and also the product portfolio enhancements in order to further strengthen that fee-to-income ratio over the next few years? And again, I think we also noticed that many of the small and mid-sized banks have rather irrelevant, right, given the investments in product innovation. So how does CIMB Niaga strategize market share gains from these names?

I will take this question. Thank you, Pak Kresna. There are 3 questions that I jot it down here. First, on auto. Yes, you're right that the growth from auto business for CIMB Niaga [Foreign Language] is about 25% to 26% continues to grow. But again, if you are looking at the market on a new vehicle, especially 4-wheelers, for example, we don't go to 2-wheelers currently. We're only focusing on 4-wheelers passengers. So we don't even go to [Foreign Language] heavy equipment, et cetera, not yet. So the growth is currently coming from passengers, 4-wheelers. Market is not really that great. Practically, it's almost flattish and some is actually minus. But our business model in auto is actually very diversified. There are 3 streams in auto businesses that we grow. One is new car 4-wheelers, which very much impacted with the industry growth, not very good. But the second is actually used car, which is in terms of business growth in the market is actually very, very positive. The third one is actually refinancing. Very good, very profitable in terms of return and RAROC is actually is the highest. Composition is about 30%, 30%, 30%. So currently, we are moving towards the last 2, which is the used car as well as the refinancing. So we are looking at these balances on a rigorous basis even on a quarterly basis to take a look at the profitability. So that's why we are particularly quite comfortable to grow this segment. Related to the asset quality, it is pretty much under control, particularly. So if you are looking at the asset quality in terms of COC and NPL within auto businesses, yes, within quarter 2 this year, we can see a little bit of uptick within auto industry for -- especially coming for certain customer segments, lower ticket size as well as new car. But that one, again, is only about 27% to 28% of the portfolio. So in overall asset quality, NPL COC is still very much under control. And in fact, we are still way below the industry. So if you're looking at the ratio, for example, let me see NPL for automotive is only about 1.6% in June. NPL for automotive loan consolidated within CIMB Niaga with 25% to 26% growth is 1.6%. So very much way below the industry. You want to add something on auto first?

No, I actually just want to help you on the ratio 1.6%.

Ratio, I'm trying to talk about [Foreign Language] because Kresna is very sharp [Foreign Language] Okay. The second one is that on demography. So I just want to know exactly what your question is, Kresna. Demographic, you mean is that are we going into a certain segment that we are not before? Or are we still comfortable with the demographic segment that we are a right now?

Yes. And also perhaps there were several banks actually now targeting over the younger kind of younger generations the mobile banking and these applications. So you're basically investing for the future growth. Just wondering whether you have a different strategy from that because I think that strategy that most banks are going after right now. But if we look at your pivot into -- I would say pivot the priority towards consumer and SME, I reckon that the segments that are more focused on the more affluent households, I would say that 30-year-old and above. So I just want to understand like how you're strategizing the market share gains in the lending business versus in the deposit business.

Yes. Well, thank you for the question, Pak Kresna. Again, I think aligned with our progress on providing digital, simple, better, faster services and solutions to the customers, that attracts -- particularly that attracts the much younger generations. So if we can see the growth of number of customers actually in CIMB Niaga, the fastest and the highest growth in terms of number of customers is actually younger generations, even going on Gen Z. We put specific programs towards universities and then towards parents, towards schools, even SMB, some even SE through our CSR programs as well. So in fact, in actual year-on-year growth and even quarter-to-quarter growth of number of customers actually toward younger generations. So I think they are also a source of much lower cost of fund liquidity or deposit through SA. But of course, it's -- in terms of ticket size is actually much smaller, but this is one of the stable liquidity for us. But then in the other demographic, the real fee income and then the real revenue per customer still, whether we like it or not, come from more in the middle segment and above because we can do a cross-sell where we can see even in CIMB Niaga, product for customers naturally is actually much larger, especially toward fee income within the middle and upper customer segment. So particularly in overall in terms of demographic, the first stage of acquisitions is actually definitely for younger generations for them to stay because we believe with OCTO Mobile and then good UI/UX that we provide, the younger generation will stick to CIMB Niaga for next generations. But of course, we do not -- definitely, we do not neglect the middle and upper, which we provide more and more solutions wealth management and even SME. We realize that middle segment and above is actually an SME players majority, right, except in several big cities. So that's why as I mentioned in my explanation earlier, we also tested secondary cities, which provide actually a better opportunities for us rather than only focusing on the first tier cities. So in terms of -- I think pretty much the same, almost the same with the other big banks. Again, we should not forget that we are universal banks. So we will not be focusing only a certain segment first. And the third one is actually on fee-to-income ratio. What will be the impact? Digital definitely bring us a positive impact on fee income. For example, currently, the OCTO Mobile, OCTO Clicks actually are able to serve the customers even for wealth management products like bonds, right, sukuk and et cetera. And we are currently expanding the coverage of other products as well through digital. So that is definitely impacting the faster penetration for fee income for us. But the other fee income from non-retail is also becoming more important for us right now. This is again consolidated results, including our subsidiaries. We have CIMB Niaga Sekuritas as well, which we can see starting to contribute in terms of fee income to us definitely. And the other part is actually related to transactions. And FX is one of the one. I think in terms of fee income, probably later, John Simon from Treasury can also add. Actually, we are quite happy with the progress of fee income coming from treasury, especially FX across the businesses. Will that be answering your question, Pak Kresna?

Yes, very much. Very useful color. And I think we can notice that Treasury markets income has done very well in 2025 compared to last year. So congrats on that.

Our next question is from Andrey Wijaya with RHB Sekuritas Indonesia.

I have a few questions on the -- regarding the first half results. First on the first question, may be on the forward view on the liquidity, what do you see the liquidity situation in the third quarter 2025? And the second question, this is related to the cost of fund because we see that there is a very significant improvement in terms of the CASA ratio in the first half. But if we look at the cost of fund, cost of fund is still increasing -- slightly increased in the first half this year compared to the last year. So what is the reason behind that? And then on the CASA ratio, CASA what is the main reason of the CASA growth in the first half 2025? Maybe for the fourth question more on the loan yield. So what is the main reason of the loan yield is declining in the first half this year compared to the last year?

Okay. Thank you. I'll take this, Andrey. [Foreign Language] the forecast on Q3 2025. We think that we can -- we start to see that liquidity is actually easing up a little bit. And looking at the probably within the next couple of weeks and months as well, the bonds maturing. So meaning is that liquidity will fall into the market as long as there is nothing coming in from regulators to absorb the liquidity. But I think positively, we are looking at liquidity is actually easing up. So it means that hopefully, bank will also be more rational in terms of lowering down the cost of fund. In fact, if deposits only, we can see from one-on-one basis, cost of funds start to be a little bit longer. It's not only that. That's the way that I look at it probably later, but John from treasury can also add. And the other one is that your question is that if CASA ratio is increasing to 68%, but why cost of fund is actually increasing, okay? So if I am using the analogy, we are practically there are 2 parts CASA grow significantly. And if we are looking at the growth, the biggest growth is actually coming from CA or current account. The current account growth is actually -- I think it's about 16% -- 16% on CA and SA is actually about 6%, right? But CA is actually more coming from corporate and commercial, some is actually from SME, but much lower ticket size. The bigger ticket size is actually coming from corporate. So dealing with CFO and et cetera. So price has been always been the #1 discussions with the companies, whether it's commercial or corporate. But looking at the analogy is that we shape the much more expensive cost of fund coming from time deposits. So if you are looking at time deposits, it's still depleting about 6.6%. This is the area that we would like to gain back in Q2, Q3 and Q4. But our simulation saying is that if we don't really ramp up on CASA, the fact is that market CASA is actually still expensive. Market cost of fund is still expensive. If you can see from market LDR it's actually increasing. I think market LDR now is already 88% to 89%. Ours is 87%. But some of the big players is already above 92% to 93%. So the competition on rate is there. So that's why even though the CASA ratio is high, but it does not automatically reduce the cost of fund because of competition. But if we don't increase focus on CASA and it means that the cost of fund might be even higher [Foreign Language]. Now your questions loan yield [Foreign Language] Andrey. Okay. So overall consolidated loan yield actually is coming down because if you can see the contributions coming from non-retail, especially if you are looking at the loan growth, we see loan growth page, Teguh. Right. If you can see from the loan growth, corporate loan growth is actually quite high, 9.3%, right? Commercial, okay, 4.7%, SME 7.2%. But because of the composition of the non-retail loan is actually higher and then yield is actually lower. As you can see, the yield for consumer, especially auto loan and CC, PL is higher, but we have a little bit more composition toward loan of non-retail. So that's why in overall loan yield is down. It does not mean that we reduce the loan yield by segment.

So our next question is from Yong Hong from Citi.

Just 3 questions. Number one, when you talk about liquidity easing for your deposits, can you give us some color on how much you have repriced lower across your CASA and your fixed deposits?

Okay. All right. So on liquidity, it's questions.

Yes. I can take this.

[Foreign Language] questions. But KK, you want to add on this one?

Yes. So thanks for the question Yong Hong. Yes, we're seeing a change, right? The overall liquidity in the industry is actually easing. So we saw in the months of May and June substantial maturity of SRB. We are no stranger to that. We invested close to IDR 14 trillion in SRBI, of which close to IDR 6 trillion matured. That gave us back the liquidity we needed. And then we do not really have to go in there and bid for deposits, whether it's for time deposits or CA on the corporate side to really fund our growth. So at the same time, also, we did have some maturity in our bonds, giving us a little bit more breathing space as we really took stock towards the end of the quarter to see how well -- what's next for us to invest to get the yields back because we did yield pretty well on the SRBI at over 7%. So this is something that we deliberately did. So not competing going all out for deposits, and we also saw our deposit growth even without bidding. So that was -- and that actually lend some comfort to us that maybe finally, we perhaps have turned the corner on reaching the peak and now it's coming down already, right? We did see the loans, Ibu Lani alluded to this also loan yields coming down and loan yields coming down also attributed to more than one factor. Corporate banking was growing much faster -- that's one. But also 3 rate cuts, we were trying to hold a lot of loan pricing, but then maybe it just came all at one time. So by then, I think that the loan repricing has kind of completed already. Of course, July, there was another rate cut. And I think that would help us even more on the deposit pricing right, with, again, a lot more liquidity in the market. I don't think banks will really go out really outbidding each other as became quite irrational in the first quarter, even at the end of the fourth quarter last year. So I think this time, I have much more confident that the cost of deposit will continue and perhaps release on the pressures on our NIMs.

Okay. Maybe just to summarize, basically, for the second quarter, your cost of funds benefit from some -- the maturity of SRBI, but you haven't really basically brought the deposit pricing down, and that could be an opportunity in the second half. Is that how we should be thinking about?

In a nutshell, yes.

Yes, it's correct. So practically, we put some of a program already, particularly there are several fronts. One, making use of the bonds maturing, which we think that liquidity is actually will be more ample. The second, we are actually starting to price down the deposit even in June. And then even in the next one in July as well. So I think there's also a little bit of consensus as well from the bigger bank. In fact, if you are looking at the industry, many of the banks reduced the target for loans as well. So, yes. [Foreign Language] D

If I may add a bit to Yong Hong. I guess we cannot forget the overall market dynamics of which although BI seems to be lowering the rate or keeping rate somewhat steady until recently they cut it lower. SRBI is another factor altogether, right? Fortunately, now the comfort level for rupiah to be hovering at around this level, although DXY recently jumped up again and hence, dollar rupee also spiked up a bit. But the kind of comfort to let rupiah be at around this level and maybe if it get up by DXY, so be it. And hence, the lowering on the reduction of SRBI outstanding and also the lowering of SRBI yield from above 6% to only about 5.5% as can be seen, also it's affecting the bond yield, right? But all in all, with the reduction of SRBI outstanding plus BI also willingness to continue supporting government bond issuance to ensure that government bond yield remains low should provide this going forward as far as liquidity is concerned.

Just a follow-up on this. Basically, looking at your credit cost guidance, the second half should be a bit higher than the first half, but you're also expecting ROE to be higher in the second half. And you talked about easing cost of funds, but would that be enough to bring that ROE in the second half higher to meet your guidance?

Yes. So the improvement in the guidance, right, today, we at 13.5%. So we did guide a lower cost of funds, I think 0.6 to -- can you go to that page, please? Yes. So we ended the first half 0.65%, right? So we're guiding 0.6% to 0.8%. So this is got to improve, right, for it to go to 14% to 15%. So we did also give a range of 3.9% to 4.2% on NIMs from 3.9. That has to improve also. And I have much more confident that we will improve. And the loan score is still on the higher side of this 5% to 7%. I think we can maintain that. And we know cost will continue to be under scrutiny under control, and we will probably see this 45.5% dipping down to below the 45% very soon. So if you look at all these levers here, right? So that will help contribute that additional 0.5% to 1% increase on the ROE.

I think there are several. I think costs will be better. And then the other one is actually higher NIM lending will be able start to contribute more as our portfolio. As I mentioned earlier, secondary cities looks good in our testing, so we will continue. The cost of fund, we expect to be lower as well as COC and -- also COC will be lower. So as well that we hope that, that will contribute to a better ROE.

So what is not shown there also is that I think we are seeing a lot more momentum in the fee income side. So fee income actually is coming from loan-related fee as well as loan-related fee. The corporate finance side actually doing very well, right? Even though the NIMs are low, but the corporate finance arranger fee, syndication fee, these are adding up to the overall income as well as the subsidiaries, Ibu Lani mentioned this, right? Our investment bank, right, I think they have been operational almost 5 years now is actually they are gaining more momentum. The auto finance business carries with it also the insurance business. So that is also growing very well. So this fee income business, no capital requirement, no RWA and these are the ones that are helping us drive towards the better CIR and also revenues in the second half.

Okay. Okay. And you didn't mention NPL sale this quarter. Basically, should that be also another driver for the second half?

There is some -- there is some definitely towards Q3 and Q4. But again, usually, we don't really rely on those. But yes, in reality, there will be.

Our next question is from Ilham Firdaus from BNI Securities.

I have 2 questions. The first one is following up on your auto car financing business. You mentioned earlier that the used car financings actually performed very well. Could you elaborate more on this, such as what were the key drivers behind the growth? Was it primarily due to the stronger demand, lower rejection rates or perhaps a more relaxed LTV policy? The reason I ask this is because if we look at the car price trends recently, it appears to be much more under pressure. The recent -- the price war, particularly from the Chinese EV players has also weighed on the ICE car prices as well. And we've also heard from several used car market players that the prices in the segment have started to decline partly because of this and the softer demand. And how do you feel the outlook for this segment? And are you still confident to growth sustainably in this segment? My second question is actually on the loan growth. Which segment do you think will be the main driver in the second half to achieve the 5% to 7% guidance? I think that's all my questions.

Okay. [Foreign Language] On auto, why we are confident that the used car segment is actually still good. There are 2 [Foreign Language] one used car segment. The second one is actually refinancing. Now both of those segments of subproducts is actually giving us more return practically in terms of RAROC. Why use is actually still there? One thing is that we are playing in the game of market share because in terms of national opportunities and pull is still large. And we are not #1 or #2 multifinance in this area in the market. So particularly, there is still much room for us to fight in a market where price is not really that cut in the area of used car. So that's why in terms of customer segment, price is actually getting lower. You're right. But we are not lowering down the customer segment focus or target that we have. particularly the one that we see in the market is that when the customer is actually having a budget to purchase used car with the ticket size of, say, for example, IDR 300 million. The one that they choose particularly is actually moving up the type of a car, but they don't really lowering down the ticket size particularly. And for us, in terms of NPL, in terms of asset quality, our focus is actually not on the collateral. It's not collateral at all, but madly focusing on the customer segment itself. But you're right, we anticipate on this one it's other way around, actually [Foreign Language]. It is not lowering down the risk appetite, but we even take a look at which customer segment that we have to go in. So it is not about the collateral. And in fact, the market for used car is still large. Our market share is not that big. It's only about 5% to 7%, right? So our aim is that how to take 8% to 9% in the market. And about loan growth, main driver will be, I think, to be realistic forward Q3 and Q4, there will be a balance coming from all. Definitely, SME is one of the area. Currently, SME grew nicely about 8% to 9%. And then we would like SME about with write-off and et cetera, about 8%, particularly. But we are aiming SME to grow continuously about 8% to 9% by the end of the year. And the rest is actually auto loan will continue to be about 27%. And we hope CCPL will grow about 6%. Yes. Mortgage, we try to be flattish by the end of the year. Again, if you're looking at the consumer, majority is still coming from mortgage because of the large ticket size. But commercial, I think we are still targeting about 4.5% to 5%. So again, I think the majority of growth will still be within SME and then auto loans and some is actually on corporate.

If I may add Ibu Lani on auto loan to Ilham question. Yes, you asked whether we're loosening up our credit underwriting. Actually, the answer is no to grow our auto loan. And I think like what Ibu Lani said, the key here is actually optimizing the portfolio composition, the 30%, 35% on those 3, what mentioned by Ibu Lani. And just one indicator, for example, we monitor very closely is like on the credit loss. I mean on the credit loss in used car that you asked, we monitor since 2023 till today, we could mean it stable around 3-plus percent, 3.5%. So that's why we are quite confident and we will keep maintaining the optimization of the portfolio composition.

Let's move on to the final question for days. I think the final question will be coming from Achmadi Hangradhika from Binaartha Sekuritas. I think we cannot hear you. Okay, while for waiting for Pak Achmadi, I think let's us read question from the chat box. I think we -- hello, there. Okay, Achmadi have go ahead with your question. Achmadi, I think we lost. Let's move on to the question from the chat box from [indiscernible] Chandra from CGS. Here is the question on the NPL of a mortgage. What is the trend in the past quarter? And then the following question is, I might have missed it, but which segment is dragging down the loan yield? I think Ibu Lani has answered this earlier. This is...

Yes. I will answer the mortgages, okay. So I think mortgage, again, as I mentioned earlier, mortgage is the one which actually balances start growing and depleting. So our mortgage balances year-on-year is actually depleting by 2.5% because again, this is not -- if it's not profitable, we will not go in particularly because the price war and it just -- it doesn't make sense, so we're just not going. In terms of asset quality, mortgage, there are the deteriorations on a quarter-on-quarter basis. So currently, NPL for mortgage is 3.1%. And then if we are looking at 3.19% to be exact, in last quarter in March, it is 3.12. So there is a deterioration of about 7 basis points mortgage. If you're looking at the -- will that be systemic for mortgage, I don't think so because if you are looking at inside of the portfolio itself, mainly the drag down is because of the ENI of balances. So in terms of quality and overall for mortgage, we don't see any significant deterioration within our current portfolio. Now related to what dragging down, the loan yield as overall, again, because of the composition of non-retail, especially of corporate -- from corporate banking is actually slightly higher, where we know the loan yield for corporate is actually lower compared to the other segment, especially in retail, where we have auto, where we have unsecured loans and et cetera, and including outside of EEB. Is that answering the questions, over?

Yes. It's from the chat box, Ibu Lani. I think you answered the question. Let's go to the last question from the chat box. This question is from Jason from Aberdeen. What drove deposit funding cost down this quarter? Some of the other bigger banks have not seen such improvement yet. That's the first question. And the second question is how do you get the confidence to get good quality customer and maintain credit cost despite growing into consumer loans? And what differentiates CIMB Niaga from other banks that are trying to go into the same segments?

Okay. So Jason from Aberdeen. What drove the deposit funding cost down quarter is actually we are lowering down the rate being offered to customers, one. And the second one is also we continue to grow our CASA, especially including SA. SA is still growing about 6%, even though the growth rate is actually is not really that much, but the balances is actually is quite large. So that's one of the areas why the overall cost of fund slightly lower towards June. And then the confidence on good quality customers, okay, we think that, this is one of our key benefits of doing a rigorous robust risk management, including credit risk within. So even though the overall consolidated, we don't see any deterioration. Currently, we have an NPL of 1.8% and COC 0.65%. Our guidance until the end of the year is between 0.6% to 0.8%. So we are not saying that we will be going even going better than 0.6%. I think that's already low enough. So that's why within the 0.6% to 0.8% we want to take a chance more, which is to the area which have provided us with a bigger return, bigger which is consumer and SME. In terms of consumer and SME, COC higher, NPL higher. So that's why we are putting on the guidance of within higher from current 0.65% to between 6% to 0.8%.

Thank you, Ibu Lani. That was our last question. So probably now is the time for the closing remark, Ibu Lani.

Okay. Thank you. So everybody, thank you so much for today, for attending our today's call. I appreciate that very, very much. So I think it's a little bit of a heads-up to you all. We will have a session and then we would like to invite you all to our CIMB Niaga Investor Day 2025. That will be between mid to end-of-September. So we will just stay tuned. So we will inform you and we'll send you the invitations. Please do come if you have time. All right. So again, thank you so much. Let's stay healthy, happy and positive [Foreign Language]. Good day, everybody. Thank you.

Thank you, Ibu Lani. With that, we conclude today's call. For any further questions, please contact our Investor Relations team. Thank you for joining us today and have a good day ahead. Thank you.