PT Bank CIMB Niaga Tbk (BNGA) Earnings Call Transcript & Summary

Okay. Ladies and gentlemen, and all participants, good afternoon, and welcome to the CIMB Niaga conference call. I hope all of us are blessed with good health, especially in this very tiring situation. My name is Saut Saragih, and I will be your moderator for today's session. Our agenda today, 19th of February, 2021, is to disclose CIMB Niaga's full year 2020 financial results. The presentation material for this session was released half an hour ago in our website. So it's available for downloading from our website. The total time for this session, approximately 1 hour. We will begin with presentation from our CEO, Tigor and also our CFO, KK, and will be followed by brief Q&A session. And if you'd like to ask questions, please visit the chat room. You can send your name as well as your company name through the host, and we will open your line once the presentation is completed. You can actually chat right away without waiting for the presentation to be completed, but we will only open your line once the presentation is completed. Ladies and gentlemen, and all participants, we have here today with us Pak Tigor M. Siahaan as our President Director; Pak Lee Kai Kwong as our CFO and Finance and SPAPM Director; Ibu Vera Handajani as our Credit and Risk Management Director; Ibu Lani Darmawan, our Consumer Banking Director; John Simon, our Treasury and Capital Market Director; Pandji Djajanegara, our Sharia Banking Director; as well as members -- executive members of the bank. Ladies and gentlemen, before we proceed, I'd like to draw your attention to the disclaimer that some statements made during this conference call may be forward-looking in nature, and that actual results differ from projections during today's call. This presentation is not intended to form the basis of any investment decision with respect to CIMB Niaga, neither this presentation shall form the basis of any contract or commitment whatsoever. Now without further ado, I would like to turn this presentation over to Pak Tigor for his remarks. Pak Tigor, the time is yours.

Thank you, Saut. Good afternoon. [Foreign Language]. Ladies and gentlemen, thank you for joining us today to discuss our full year 2020 financial performance with the senior management of the bank. It's been almost a year since we had first COVID cases. I hope we're all blessed in good health even though we know that it's a very challenging time for all of us. We've seen some encouraging news on vaccine and roll out in Indonesia. I believe it will take time, but I believe we're on our way to economic recovery. Let me also take this opportunity to again express our gratitude and appreciation to all parties, especially the doctors, medical staff. We're still fighting to prevent the COVID-19 from spreading further in Indonesia and beyond. Let's move on to Page 4. On the macro side, ladies and gentlemen, we know that there's a little bit of an improvement quarter-by-quarter from the second quarter, third quarter, fourth quarter in the macroeconomic condition in Q4. However, it was still challenging as GDP contracted by about 2.19%. We do see some encouraging signs as the PMI index in November and December was above 50, which indicates there is business improvements in the manufacturing sectors. However, if we look at some of the data, demand is still soft, and we see this with some of the relevant indicators that we present here. On the banking sector, we see declining business activities due to COVID-19, both on the supply and demand. Hence, the loan demand was affected, and we can see that the loan growth was weak, especially in the second half of 2020. However, as you can see, the deposit increased significantly compared to last year, ending up at about 11% year-on-year. On the LDR side, it's down to about 82% as a result of this. And that's a significant difference to the 94% level that we saw at the end of 2019. The decline in business activities and the COVID-19 impact also affected the asset quality as the NPL increased throughout the year with a little bit of improvement in Q4 2020, but we also know that the loan at risk remains high throughout the industry. NIM also decreased, mainly affected by the decreasing LDR. However, CAR is significantly high since March 2020, mainly due to muted loan growth. So let's see in the next page on the 2020 financial performance. Ladies and gentlemen, we have successfully consistently grew our CASA. It has grown 14% year-on-year, and our CASA ratio went up from 55% level last year to about 60% by the end of 2020. And this CASA ratio has actually been maintained around 60% all throughout in 2020. If you recall, the previous page, there's a little bit of an uptick in the industry CASA from about 56% to 57%, but we've actually gained market share from the CASA looking at from 55% to 60% consistently in 2020. However, loans remain weak. Nevertheless, we see growth in select segments of consumer banking. We'll talk a little bit more about that later. Operating expense decreased actually by about 3%, and it brought our CIR, our cost-to-income ratio below 49%. NPL had a little bit of an uptick by 83 basis points. PBT dropped by about 44% attributed mostly because of the higher provision expenses. ROA and ROE stood at 73 basis points and 5%, respectively. CAR and liquidity, again, remains strong. CAR at close to 22%, with the LDR at 82%. And those are the highlights basically of 2020. And we can see again on next page, zoom in a little bit more on some of the stuff on the highlights here. I shared with you the year-to-year improvement in CASA. But as you can see, this journey is actually over the 5-year period from the -- so if you look actually beyond 2015, it was at about 40-plus percent level, going up to about 50%, 52%, 55%, now we're steady at about 60% level. A lot of initiatives and programs in this CASA focus between consumer business and transaction banking. A lot of bundling of product services, payrolls, cash management and basically optimizing our relationships with customers from different banking segments. Further, our rapid and consistent development of our digital capabilities have been proven instrumental in attracting all these current account and saving account funds. Efforts to improve business process and customer experience are also key in maintaining our customer base and customer loyalty. On a related note, you could see that the growing importance of our digital channels, especially during these times, as volumes from these channels have been growing very rapidly. I'd also like to highlight our discipline in cost management. It's key, especially in an unfavorable economic conditions. We do not stop investing in information technology, digital and robotics in order to automate business processes as well as high-volume and repetitive task. Other efficiency measures are also in optimizing our telecom costs, transportations, outsourcing, rents and so forth. In 2020, for example, we decreased our ATMs by close to 200 as part of our efforts to optimize our network footprint, while encouraging our customers to migrate to online banking. Although our overall loans decreased, we managed to increase some pockets of our key focus areas, and mortgage is one of them, and it will remain so. They will further grow alongside our other key products. If you go to the next page, you've seen this before, our strategic pillars. Playing to our strengths, we'll grow our consumer and SME segments, and we'll refine our corporate and commercial segments. Going forward, we'll expand our CASA franchise all across the segments, discipline in cost management. That's also a key for this year's strategy, preservation in capital and risk culture as well as leveraging our information technology. I think these are the key 5 pillars that we've been focusing on, and it becomes more relevant today as we embark in the Forward23+ strategy. With that, I now hand over to Pak KK to share our financial results. Pak KK?

Thank you, Pak Tigor, and a very good afternoon to everybody present here today on this call. I'll just jump right into the financial positions, on balance sheet first. Okay, loans. As Pak Tigor mentioned, loans contracted about 10% year-on-year, while the total asset grew 2.4%. So this is largely driven in our increased investments in largely government securities. You can see government bonds and marketable securities is up about 90% year-on-year to about IDR 65.16 trillion. On the deposit side, overall, we are up by 6.1%, and we are growing the CASA, both CA and SA is about 14%. While on the time deposit side, we contracted about 4%. Next page, please. Okay. On the P&L, right, interest income was weaker by 4.5% year-on-year. On the back of the reduced loans portfolio, our loans shrank by 10%, but the EBITDA income -- interest income is somehow cushioned by a lower interest expense. I've shown you earlier that deposit grew 6.1%. At the same time, the interest expense did come down because we've started to migrate more into the CASA. The CASA ratio stood at about at 60% right now. On the noninterest income side, it's contracted 8.7%, but the 2019 number included a onetime asset sale income that -- about 600 -- of about IDR 570 billion. Operating income-wise, it's about 2.8% below the year before. Now Pak Tigor did mention a little bit about operating expense, a lot of initiative and we're building a strong expense savings culture over the last year. So we are down 3% year-on-year, bringing the overall pre-provision operating profit to a level of IDR 8.3 trillion. So what really defines our financial position, our P&L is actually the provision expense. You'll see here that provision expense increased 65.9% or 66%. Also, this is the first year that we move into IFRS 9 accounting for provisions or expected credit loss. As the name suggests, expected credit loss is more forward looking, and it's also impacted by our views of the macroeconomic factors and also looking at the strength of some of the loans that we have. So it has increased quite significantly, and this is also attributed to what is in our provisioning models where macroeconomic do impact how we provide for the future as well as taking a little bit more of a conservative role in providing for loans that we may -- we foresee that may go into difficulties in 2021 as a result of the pandemic. So we begin to build up the provision coverage. It's about 194% right now expected. So this is just a graphical depiction about where the money went, right? So last year, our net profit was IDR 3.6 trillion. I did mention that our interest income, because of the slower loans growth or negative loans growth, offset by the lower cost of deposits, we had about IDR 100 billion impact on our NII. Fees and commissions, these are basically loans and deposit fees, syndication fees, our wealth management fees, they are down quite significantly at about IDR 222 billion. The next one, marketable securities and trading, actually, we are up approximately at IDR 800 billion but the other fee lines including bancassurance as well as recovery income has shrunk quite significantly. Operating expense were lower by IDR 248 billion. We didn't have MSS cost this year. Last year, we had that cost. And the big one, right, IDR 2.147 trillion in additional provisions compared to 1 year ago, and that is where all the money went, right? On NIM. NIM, slight improvement from a quarter ago. I believe that the NIM is now stabilized. In fact, it should be getting better because we have continuously tried to manage the cost of deposits to an optimum level. Overall, we are down 43 basis points year-on-year. Noninterest income, due to the weak fee and commission, is down 1.53% in the ratio. And overall, cost-to-income ratio remains quite healthy at about 49% level in spite of the weakness in the revenues. Next page, please. Yes, some key ratios. So ROA remains weak because of the increased provisions in the fourth quarter. ROA for the fourth quarter is 0.21% and for the full year is 0.73%, down from 1 year ago. Similar story with the ROE, again, because of the much higher provisions in the third and fourth quarter. NIM, I mentioned this. Fee income, cost to income ratio, I mentioned this earlier also. Now CASA ratio, Pak Tigor mentioned, it's about 60%. We also see a lot of liquidity. Loans to deposit ratio, we have been trending in the mid-90s for a number of years. So this year, it has dropped down to about 83% level. Gross NPL increased to 3.62%, where the cost of credit, as a result of the higher NPL as well as some movement in the macroeconomic factor in our provisioning model and also some overlays, has increased to 2.83%. Loan loss coverage because of the higher provisions, taking a more prudent stand in provision, we have -- our coverage is now at 194% on our NPLs. Next page, please. Some detail on the loans growth, generally lower across the nonretail segments with the retail segments gaining from mortgages and auto loans. The composition of our loan book has more -- has moved towards a higher percentage in consumer as well as in SME. These are the 2 areas for growth for CIMB Niaga going forward. Next page, please. Now from the end of the first quarter, we know that asset growth is going to be challenging. We know from then on that what we need to do is really start to grow our deposit or cheapen our deposits, right, to really maintain a decent level for interest income -- net interest or NIMs. So CASA, I mentioned earlier, grew -- CA grew 14.1%, SA grew 14.4%. Time deposit is down 4%, but this is very much a deliberate attempt on our part to flush out some of the expensive time deposits to try to keep our cost of funds at an optimum level. Pak Tigor also mentioned, our overall CASA ratio has been in the 50s, and this year, it is a real breakthrough for us, it's grown up to about 60% as at end of last year. Okay. Next page. Okay. A little bit on our yields as well as cost of funds. Yields, you can see that it's been trending down. From a year ago, loan yields has dropped about 81 basis points whereas deposit costs came out even faster at 102 basis points. And net-net, the overall NIMs has come down from 5.14% to 4.72%. Because of the lower -- slower loans growth, and the much higher deposit growth, the loan-to-deposit ratio has dropped to about 82.91%. Overall, pretty stable operating income. If you look across the 5 bars, the 5 different quarters, we're trending between IDR 4 trillion to IDR 4.2 trillion per quarter in operating income in spite of what is happening, amidst the pandemic, right? And also on the PPOP, our pre-provision operating profits, we're also trending at about IDR 2 trillion to IDR 2.1 trillion -- IDR 2.2 trillion every quarter. Expense is managed at about IDR 2 trillion every quarter. Next. Okay. A little bit more information on the noninterest income. I shared a little bit even on the charts earlier. So where we are gaining, it's on really the casual markets like FX and derivatives, up from IDR 522 billion to IDR 909 billion, that's a 72% (sic) [ 74.1% ] increase, gains and -- or losses -- or gains basically from marketable securities, that's up from IDR 445 billion to IDR 859 billion, that's a 93% gain. Now you'll see that a big difference in noninterest income is actually in recovery, right. Recovery income, which included NPL sales from the previous year was over IDR 1 trillion. This year, we did not have a similar exercise. Recovery income was IDR 382 billion, that's almost IDR 700 billion difference from a year ago. So that's where we are showing a weaker noninterest income year-on-year. Okay. Next. On cost efficiency, again, revenue was difficult. So what we really needed to do was really tighten the belt, start looking at expense. Sales promotions, that's an easy one. The top of the ones actually is personnel cost. We will try -- we continue to invest in talent. And that's why you can see that it's still a 5.1% increase in personnel costs. But where we are investing, we're also saving elsewhere for us, right? G&A expenses is down about 10% year-on-year. So overall, we are still about 3% better compared to a year ago, excluding the MSS cost. Next. Okay, asset quality. This is where the -- a snapshot of our NPLs as well as our loan loss coverage. NPLs increased by 108 basis points. We went as low as 1.51% in the first quarter pre-pandemic. And then slowly, it crept up, right, in June, in September, in December. Now it's at 2.83% levels. But in these numbers also, there were 2 macroeconomic variable adjustment to our provisioning models, one is in June and another one in December, that's impacted a lot of provisions, additional provisions that were required. And also in the fourth quarter, we do look at some of the loans and sectors and apply some from other overlays on the provisions. Hence it ended up at the 2.83% level. So on the NPL side, you will see that the ones that were impacted the most from the second quarter onwards, it's been the corporate banking side moving from 2.6% and ending at about 4.1%. And also the commercial banking moving from about 4.4% to 5.7% year-on-year. Where we are relatively stable from the first quarter was SME and consumer banking continued to remain healthy at 1.8% NPL. Next page, please. Okay, loan at risk, maybe I'll share a little bit about the context of this one. Okay, December '19, of course, is pre-COVID and then the 2 bars there up, that's post-COVID. So you can see that a big hike in the loan at risk from 9.5% to 23.5% and then 23% in December. These loans at risk ratios include loans that we have -- call it COVID-19 relief programs, all right? At the bottom right, you will see the percentages of the loans that have been COVID based and relief programs, about 14.6% of the loans here have been granted the relief program. So -- but we continue to maintain a high level of provision coverage. Even before the pandemic, our coverage was 32%. Even though with a much higher now LAR, the coverage will remain at the 30% level. So on the bottom right -- bottom left, you'll see where the loan at risk by segments lie. Last year, it was IDR 18.56 trillion in total loan at risk. With the COVID situation, we had at least IDR 20-some trillion in there. It's now at IDR 40.31 trillion. And the composition, you can see in that colored boxes. Okay. Next page, this is really self-explanatory. Liquidity, not an issue. In fact, we are highly liquid. Liquidity coverage ratio is at 235%. NSFR is 119%. Loans to deposits at 83%. And capital ratios, consolidated CA is about 22%. Pak Tigor mentioned about total equity, especially. Total equity is at IDR 42 trillion. Okay. Maybe just to share a little bit on the Sharia unit in the next page. Sharia unit somehow is less impacted in comparison to the overall or the conventional banking side. Yes, financing numbers did come down 3.6%, but not as high as 10% overall. Deposit number is down 8.6%. But what we really like about the deposit number is the growth in CASA by about 40%, switching out the expensive time deposit into low-cost CASA. Asset quality-wise have maintained pretty well, are toggling between 1% to 1.1% NPF. Right, hence you don't see a lot of big provisions from Sharia. So overall, Sharia unit is actually up 17.5% in PBT, right? It has been quite stable between IDR 300 billion to IDR 400 billion in profits every quarter in the last 5 quarters. Next page. So we continue to get recognition in our digital banking front. We continue to invest in digital enablement, digitalization for our clients and also internally for our employees, right? A lot more new features has been developed as we continue to deepen relationship with our customer through our digital channels. You will see that there is 20.3% increase in the total value of transactions from our mobile as well as our clicks. You can see also the migration lessened now the dependency or usage in the ATM as more and more of our customers move to the digital channel. Next. Okay, this will be my last slide to give analysts here a little bit of what we are expecting for 2021. Loans growth, it will still be a pretty challenging year ahead because looking at the -- Pak Tigor is pretty optimistic with the vaccination, and the economy expected to improve. Loans growth, we do foresee that it may turn around to growing to 3% to 5%, mainly driven by the consumer and SME segments. NIMs, we are pretty confident that we will be able to maintain the level that we are at right now, maybe between 4.8% to 5%. Of course, there was rate cut also yesterday. So we'll see. I believe that we will continue to achieve this NIMs. Cost of credit, right, on the high side in 2020, we believe 2021 will be slightly better because we are still uncertain, right, the impact of this pandemic, how long this will stretch. So we still believe that the cost of credit will range between 2.4% to 2.6%. Cost-to-income ratio. If the income comes back, I think I'm much more positive -- yes, much more positive in managing the cost side of this. So we do -- we can say that we are very comfortable below 49%. And ROE improving to 7.9% (sic) [ 7% to 9% ] depending on the outcome of the cost of credit. So that's the guidance for -- that we have for everybody as of now. Okay. Yes, that's it from me. I'll just pass this back to Pak Tigor.

Thank you, Pak KK. I guess, before we go to Q&A, just a few points as final remarks. One, and that's the most priority that the employee health and our customer business continuity remains full priority of ours. We know that our employees are also susceptible to this situation. From the health perspective, we are trying to get: a, the banking employees, especially those in the front line to get the priority because of the government vaccination program; and then b, trying as much as possible when there is a private sector privatization -- or a private vaccination program that we're going to be ahead there in terms of our employees and their families. So that's going to be a main priority for us in 2021. Our SME or the emerging business, banking and consumer segments will remain disproportionately higher focus for us as a growth engine. We do still maintain our corporate and commercial segments. However, given the asset quality, especially in the commercial segment, they are being recalibrated, and hopefully, under the Forward23+ program, they'll be ready to go by the end of the year. Our focus this year, obviously, on asset quality and cost as well as our continued CASA focus. Digital, we've seen how this has really gave us a lot of benefits over the years. And we'll continue to revamp the customer journeys and improve our productivities across all segments through our transformation programs all across the bank. So overall, I think 2021 will be a better year than last year. I don't think we're out of the woods yet, but we're hoping for the economic recovery to continue in the first, second, and hopefully, by the second half of this year, there will be a more significant improvement in the economy. That's it for me. And I guess, we're ready to take Q&A.

Thank you, Pak Tigor and Pak KK. So we are going to open Q&A session right now. We have already 3 parties actually questioning -- will ask questions now. The first one would be coming from Robert Kong from Citi. Let's open the line for Robert, host.

Can you hear me? It's Robert from Citi.

Yes, we can hear you.

Okay. Thank you very much for a very realistic assessment of the situation. I do have a few questions, if I may. So maybe I'll ask them one at a time. On the asset quality side, I know you've given the guidance that credit costs will be a little bit lower this year. But just looking at the math, your total loans at risk, you've got NPLs at 3.6%, special mention at 6.3%, restructured loans at 13%, so total is about 23%. And then your balance sheet loan loss provisions, if you divide that by total loans, it's about 7%. So it covers about 30% of loans at risk. So I guess the question is, what is a comfortable total coverage level that you'd want to achieve, looking at the current coverage is 30%? So what will be the current -- a comfortable coverage level? And based on your models, how much of that loans at risk ends up as being actual NPL? So what would you say is the peak NPL ratio that you might see based on your models in 2021? So that's the first question.

So let me take a stab at that, Robert. Thank you, and my colleagues, KK and Vera, please jump in. As you can see, before COVID, our coverage to the LAR ratio is around 31%, 32%, if I'm not mistaken, I don't have the numbers right in front of me, but we have it on page -- one of the pages.

Page 20, 32.6%.

So about 30%, 32%, right? And we're not actually far off. So if we look at the industry, Robert, actually, it's a whole industry. It's probably around a few points below us. Maybe it's about maybe 3, 4, 5 points below us, just because the LAR has been enlarged so fast over the past 9 months. So at this level, I think we are a bit better than the industry. However, is there room for us to put more? I think that's why the guideline for the provision level is still going to be elevated this year, even though it should be lower than last year. So I think -- I don't have the exact number, Robert, but somewhere little bit higher than the 30% will be something that we would be comfortable with. Now in terms of the -- how much NPL that we're going to see. We ended up at about 3.6% by the end of last year. We hope that this level should not be far off from this level to 4-ish percent level. We don't think it's going to get to the 5%. But it should be around this level or it might deteriorate a few dozen basis points further, depending, obviously -- depending on how the economy will recover in the next few quarters.

Okay. The second question is on the NIMs. So it's quite clear to me that your NIM compression is due to the fact that you've actually just got too much liquidity. Your NII is actually stable year-on-year. So it's the fact that you're basically blessed with a lot of liquidity. So my question is, if you're only going to have 3% to 5% loan growth this year, that would -- all else equal, your LDR would go from about 83% to about 88%. So why not be more aggressive in managing out your expensive deposits and bring your NIM higher? Because essentially, you're sitting on liquidity that you probably won't be able to use this year.

Yes. I think that's right, Robert. That's the balance that we're trying to achieve here. Part of our strategy, obviously, is trying to not only lower the deposits but lower the high cost deposits, right? So in terms of the quantum, we might not want to just chase everyone out. But in terms of the cost of funds, we hope to get further down on the curve in terms of the interest expenses. Second is, frankly, if you look at our balance sheet, we've been loading up on the bonds because of our liquidity. So our bond portfolio has increased quite nicely. And we think that there's opportunities also in the next few quarters that we could use some of the liquidity, even though with maybe lower NIM, but it's still accretive to our P&L.

Okay. And sorry, is the NIM guidance already includes the BI rate cut that happened yesterday?

Yes. So basically, I think everyone anticipated this was going to be cut, and it did yesterday, yes.

Okay. So the guidance includes BI. So how much of the -- how much is the impact of that BI rate cut on that NIM? Is it like 10 basis points? What's the impact?

KK, you want to help me on this?

Yes. I don't think it will have much of an impact because we are transmitting the rate cuts into the cost of deposits. So we have very quickly moved to a lower bond rate. We have also reduced that the delegation authority we grant to the channels to bring in new deposits. So overall, even though with the rate cuts, yes, the loan rates may be coming down a little bit, but the deposit risk will be coming on just as fast.

Okay. So 2 more small questions. One is on the costs, I think your cost fell 3% in 2020. Are you looking for costs to come down another few percent this year? Or is it a flat cost? I just want to get a sense of your absolute cost direction.

Yes. I think, obviously, we're trying to push down more our costs, but we do continue to invest, especially on some of the technology, some of the platforms, upgrading some of the systems and so forth. So most likely, it will not come down. It will be slightly up, maybe around inflation rates. So we think around -- give or take inflation rate this year, probably 2%, 3%, 4%, somewhere around those lines would be a reasonable sort of thinking.

Okay. And my final question is, I just wanted any thoughts that you may have on -- there's a lot of new digital banks coming in. Obviously, some very serious tech players are coming in. They're buying up the small banks. They obviously have quite a lot of ambition in Indonesia. I just want to get a sense from you how you're responding to that? What are you -- do you regard as your revenues at risk? Particularly, I think, retail and also fee income, I would imagine, would be the areas to watch.

Yes. Good point, Robert. I think all of us are kicking ourselves in the head not buying into on some of these stocks, right, when it multiplied significantly. But I think from the digital perspective, I think OJK themselves are very keen as well as BI, actually, to really push the digital agenda across all banks. So I think the idea of having digital banks only sort of proposition as part of the OJK sort of and BI plans, well, in terms of this business opportunities, we think that there should be some opportunities for them. We note that some of them are playing into the ecosystems, specific ecosystems, which should have a target market and a proposition on their own. However, I don't think we're sitting still. I think our base, our loyalty, in terms of the customer base, our ability to cross-sell all across, have been proven to be fairly decent in terms of getting the traction, right? So I think they are going to be, especially in the payment space, aside from the banks themselves, if you look at the nonbank players in the payment space have been in place for a while, and they've actually pushed us to be a bit better. So in a way, it is a competition. But I think the whole banking industry benefit from really pushing the digital transformation.

The next question coming from [ Nicholas Santoso ] from Verdhana.

This is [ Nicholas ] from Verdhana. I have some questions. My first question would be, what are your thoughts on the risk of the second run of loan restructuring? And how much of COVID-19 restructuring is high risk, given the high COC guidance for 2021? Additionally, do you have a big deferred interest income? My second question is you have an improvement in your loan yield. Is it due to repayments? What is your restructuring rate repayment at the moment? That's all from me.

Yes. So I'll take the last few questions first. In terms of loan yields, actually, it has come down, the loan yields.

It's up 2 basis points, I think.

The loan yields, right? From '19 at about 9.8% to about 9%.

Yes. Quarter-on-quarter, it's up 2 basis points.

Oh, yes, right, right. On a quarter-on-quarter, it's uppish -- flattish -- it's about flattish. But from 2019, it's actually gone down by about 80 basis points. But obviously, our cost of fund has also come down by about 100 basis points. So I think in terms of the restructuring rates, they -- most of them stick with the rates that they are under. However, some of them are deferred, some of them are pushed back and some of them have a little bit of a leniency in terms of the rates. But most of them, in terms of the rates, was not very different than otherwise it would have been. The COVID-19 [ pandemic, ] that's $64 million question, right? How many of these guys are going to be part of the healthy ones once these things come out, how many will continue and how many will be going down to the NPL? It's very, very fluid right now. But I can tell you in terms of the -- in the corporate sector, it's actually fairly strong. And SME, also not so bad. Commercial is probably a sector that we put a lot more attention in. And the consumer in the secured sector I think some of them need time, but we do have the security on the unsecured, probably, there's going to be more of a challenge. But however, if you look at it at an overall basis, it's about 14.6% of our portfolio. And as I mentioned before, we're going to continue to build our provisions against this, just to ensure that we have enough coverage to weather through the next few quarters.

Pak Tigor, if you don't mind, I can add something here.

Sure.

I think -- I'm sorry, I got dropped out earlier, but I think there may be some questions around this COVID restructuring as well as our book at loan average that we have here. And Robert did ask as well about this question that if you add the math, that number will be around 23.6% or -- 23% to 24%, of which we also have in our book 14.6% under this COVID R&R. I think the one that was clarifying here is this is actually ever. So it is those that have requested the R&R for COVID. Some of this have now, especially recently in the past 2 months, come back to us and say that they don't really need further COVID stimulus or COVID payment deferment. So the number is actually slightly lower than this one now at this stage in terms of the real active R&R. And we continue to monitor and, as Pak Tigor mentioned, differentiate customer that pay interest, whether it's actually high -- at certain threshold in order for us to start building further the provision or the overlay even if under IFRS 9 some of these customers remain to be allowed to stay in stage one.

The next question is coming from Ben Shane Lim from Macquarie.

Can you hear me?

Yes.

Great. I do have more follow-up questions on the asset quality side of things. I'd just like a little more color on how you're building to that 240 to 260 basis points. And really, what do you see as the swing factors even within your guidance? And just maybe a bit of a qualitative question. How confident are you with this range of guidance? And do you think there's downside risk to this guidance?