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

Good afternoon, everyone, and welcome to CIMB Niaga Fourth Quarter 2024 Earnings Conference Call. My name is Teguh, and I'm Investor Relations here at CIMB Niaga. Presenting to you this afternoon are our President, Director, & CEO, Ibu Lani Darmawan; and our Strategy, Finance & SPAPM Director, Bapak Lee Kai Kwong. Also present in this call to take question from all of you are our Treasury & Capital Market Director, Bapak John Simon; our Business Banking Director, Bapak Rusly Johannes; and our Risk Management Director, Bapak Henky Sulistyo. Now before handing this call over to Ibu Lani, let me first say that today's presentation may include forward-looking statement that are based on current management estimate and are subject to uncertainties and changes in circumstances. Actual results may differ materially from those projected in any forward-looking statement mentioned in this call. And with that, I'm pleased to turn the call over to our CEO, Ibu Lani Darmawan. Ibu Lani, over to you.

Thank you, Teguh. Very good afternoon and salam sahab, everybody and welcome to our Full Year 2024 Earning Call. I hope that you're all well. So ladies and gentlemen, let me share with you our brief updates -- yes, our brief updates on our presence, digital capabilities, and sustainability development. We are the second largest private bank in Indonesia, with our presence in more than 100 cities across Indonesia, 407 branches, more than 3,000 ATMs, and growing network of more than 600,000 EDC and tourist merchants. So we are consistent with our commitment in digital investment, so our digital capabilities are expanding to provide personalized and seamless experience. As of December 2024, we have 3.4 million mobile banking users, 1.9 million internet banking users, and 5.8 million e-wallet which we call OCTO Pay users. And on sustainability, our financing reached IDR 59 trillion by the end of the year last year, representing almost 26% of our loan portfolio. These expansions reflects our commitment to sustainable development and creating value for all our stakeholders. If we go into the next Slide #8. All right. So this slide shows the sustainable growth that we achieved across our key business segments in 2024. The number of retail customers expanded by 18%, so we are adding more than 800,000 new customers, driven by digital innovations, strategic partnerships that we have, and key growth initiatives, particularly in the consumer and retail SME area. And notably, our SME customer growth was also strong. We are growing 10.5% aligned with our strategy to expand SME market share in second-tier cities across Indonesia, and subsequently our customer deposit grew 10.5%. So this is more than twice the industry average. As a result, our CASA ratio improved to 66%, which also reflecting our strong retail funding base, which currently contributes 60% of our CASA. On the asset side, we recorded healthy loan growth of 6.9% or actually including Islamic financing Salam, we grew 7.4%, primarily driven by very strong growth in our auto loan or KKUB 26%, our SME loan growth net 9.1% and unsecured loan net growth of 8.3%. We have continued to see prudent growth in our business banking, corporate banking and commercial banking, which growing 7.3%. We continue to emphasis RAROC or risk adjusted return on capital as a key parameter for making credit decisions. Overall, we are strategically focusing on increasing our market share in retail and retail SME loans. So these are the segments where we have a competitive advantage, and we also see the biggest opportunities for future growth. So if we go into next page. Okay. So last year, 2024, marks the end of our long-term strategic plan. We know it as F23+, or Forward23+, which is actually the 5 pillar strategy aligned with Forward23+ strategic plan at CIMB group level. Now under the 5 pillar strategy, we have successfully shifted the capital allocations, as you see from the chart, to the area with the highest risk adjusted return. And then we also grew our CASA base, manage cost strategically, maintain a prudent approach in our capital and risk management. And also we are enhancing our digital capabilities, which also contribute to our efficiency. Through these efforts, we aim to deliver sustainable and profitable growth. Despite the challenging environment last year, which is actually tight liquidity, high cost of fund, muted consumer buying power, we achieved a good performance in 2024 with most of the key metrics showing improvement. Although the retail loan contributions to total loans remain relatively flat, we saw the significant improvement in our CASA ratio to 66%, also in our efficiency cost to income ratio and cost of credit or asset quality compared to year 2023. CASA ratio increased to 66% from 63.9%. Efficiency in CIR decreased to 44.3% from 44.8%. And asset quality, cost of credit, CoC, improved to below 1% or to be exact, 0.84%, from 1.03% in 2023. However, given the current market environment, as I mentioned earlier, and industry trend, our RoE experienced a modest decrease to 14.3% from 15% back then in 2023. So if you go to next page, yes, let's take a look at our financial performance during the implementations of our 5 pillar strategy from 2019 to 2024. This is part of our journey inside Forward23+. So this slide shows that our disciplined executions of strategy has led to healthy underlying pre-provisions operating profit growth despite the challenging business environment that we faced last year during this period between 2019 to 2024. Additionally, our ability to manage cost growth has proven to be very critical. We managed to keep our expense growth flat during the period despite our strategic decisions to continue to invest in our technology for digital capabilities. All those combined with the continuous improvement in asset quality, resulted in the lower cost of credit, has led to higher underlying net profit. So we record a net profit of CAGR 11.3% and our RoE or return on equity has shown an upward trajectory, as you can see from this chart. So this will enabling us to reach our RoE target actually 1 year ahead of time back then in 2023 of 15%. So as I mentioned earlier, there is a slight lower RoE in 2024 due to the market conditions, which we believe it is a common challenge that we face in banking industry. So if we go into the next page, moving to Slide 11. Yes. Our profitability continued its upward trajectory. ROA reached 2.5%, which is outperforming our KBMI 3 peers and also going to be near the industry ROA, supported by the excellent efficiency and a very good asset quality improvement. Our operational efficiency, as you can see from BOPO, this is the local domestic measurement in Indonesia, has improved significantly and also better if we compare ourselves with overall industry, including with our peers, KBMI 3. So we have also maintained a low gross NPL ratio, which is again better than the industry average, reflecting our prudent risk management approach, especially to navigate ourselves within a very challenging economic situation. Now the next page. All right. So we have demonstrated a strong result in this challenging environment. And more importantly, I think we are well positioned to deliver value through the cycle. One of the key factors enabling us to achieve the sustainable result is our commitment to deliver better and better in the area of customer experience, supported by our digital strategy and capabilities. So our investment in digital capabilities has resulted in higher digital penetration, as you can see from the chart, and better customer engagement. Let's see from the numbers. As shown here, digital penetrations increased substantially from 23.8% only back then in 2019 to 71% in 2024. Meanwhile, customer engagement through our mobile app, OCTO Mobile, as measured by transaction frequency and transaction value, have also increased. The transactions frequency grew 9x and transaction value grew 6x. Finally, that our continuous effort in this area have led to an improved customer experience and loyalty, which we measure with NPS. So we have the highest NPS score last year, especially in the consumer banking markets in Indonesia as ranked #1 NPS for consumer banking market. We go to the next page. Now looking ahead for 2025, we are targeting a loan growth between 5% to 7% because we think that the market will continue with the challenge with a net interest margin or NIM guidance between 3.9% to 4.2%. We aim to keep our cost of credit within 1% and maintain cost-to-income ratio or CIR below 45%. Now on ROE, we projected it between 14% to 15%. And lastly, our guidance for dividend payout ratio, we put it up to 60% coming from the bank only net profit. Okay. So with that, I will turn this over to our CFO, Pak KK for a more detailed financial review and 2024 results. Pak KK [Foreign Language]. Thank you.

Okay. Thank you, Ibu Lani, and a very good afternoon, ladies and gentlemen. Welcome to our results briefing. Okay. Slide #15 here. I'll begin with the balance sheet. All right. Our balance sheet really you can see here demonstrated quite a steady growth at about 1.7% in the fourth quarter and 7.7% year-on-year. This growth was primarily driven by a robust increase in loans in the fourth quarter, which grew 4.3% and pushed the loans growth to 6.9%. That's excluding Salam for the year. Additionally, you see that we have allocated a lot more of our assets, right, into fixed income securities. You'll see that it's up 17.3% year-on-year, representing about IDR 14 trillion increase with a significant portion of this investment in SRBI. As a result, and even though not shown in these numbers here, the total interest earnings asset grew about 8% on an aggregate basis during the year. And also to the liability side and throughout 2024, we competed very aggressively to grow both our current account and savings account, our saving balances. We are particularly pleased with the performance of our CA, which grew by 3.5% in the fourth quarter and a whopping 25.4% in the year, driven by strong contributions from our corporate and business segments. I think this growth rate is among the highest, if not the highest in the industry. However, there's some work to be done on savings balances. We face severe or fierce competition for savings deposits. We showed a decline for the quarter of 2.1% and a lot of it was actually due to migration to much higher-yielding time deposits offered by a lot of banks in Indonesia towards the close of 2024, particularly to the affluent segment who are a little bit more discerning when it comes to deposit interest. So despite this, our savings accounts still grew about 3.7% year-on-year. And also to manage funding costs, throughout the year, we adopted quite a disciplined approach on TD pricing, especially in the first 3 quarters, right? However, in the fourth quarter, we just said, okay, we need to grow funding strategically and ensure the sufficiency in liquidity to support the strong growth pipelines that we are seeing in the fourth quarter. So we kind of opened up the floodgates in the fourth quarter. We took in time deposits as well. This, as a consequence, brought total deposit growth to 10.5% for the year, but mainly driven by the strong growth in the current account deposits. Next to our P&L. Next page, please. Okay. NII grew by 0.5% in 4Q and was 11% higher compared to the same period last year, in the fourth quarter of last year. For the full year, NII increased by 8.6%. This is pretty much in line with what I've just explained earlier on the total interest earning asset growth by about 8%. However, intense competition for deposit drove interest expense up quite significantly, especially in the fourth quarter alone of 4.4%, resulting for the year, we saw an increase of 22.4% growth in the interest expense. So this is where this misalignment comes in. Total deposit was only up 10%, but the increase in the interest expense up 22%. So a lot of the increase in the interest expense was somehow nullified by the increase in the -- sorry, interest income was nullified by the increase in interest expense. So as a consequence, the higher cost of funding led to a 2.2% quarter-on-quarter decline in NII. And for the year, we saw NII declined or contracted by 0.6%. On noninterest income, we closed the quarter fairly better, right? Came in -- well, even though it came in 11.9% lower versus the third quarter, but third quarter in 2024 was pretty robust. So NOII was actually up 14.5% higher than the previous year -- fourth quarter of the previous year and showed a slight increase of 4% year-on-year. So operating income as a consequence of this lower NII and lower NOII versus the third quarter came down 5.6%, while for the year, right, summing up both NII and NOII operating income did inch up 0.7%. And also to overcome all these income challenges, right, we needed to have a much more rigorous cost control actually throughout the whole year of 2024. Expenses were up slightly by 2.1% in the fourth quarter. But for the year, we managed to bring down costs versus last year by 0.5%. That gave us a positive jaw of 1.2% for the year. And also lower cost of credit now become the key drivers for earnings. Our provision expense declined 33% in the fourth quarter and 10% compared to a year ago, contributing really quite a lot to the 4.4% increase in our pretax earnings, which hit IDR 8.7 trillion. And this also marks another historic high in our profitability. Over to the next page on ratios. I'll just break it down by its component. It's in various lines here. I'll start with the better news first, which is the asset quality. The asset quality metrics, more of it in the second -- bottom half of this table here, show improvement with NPLs now at 1.8% and to a larger extent, the loan at risk, right, which captures all the -- a lot of asset quality, is at 8.6%. Gross cost of credit, Ibu Lani mentioned in the start, 0.84%. And for consistency, I looked at the whole 12 months, every single month in 2024, we never once exceeded 1% in every single month. So that gave us an average of 0.84% for the year. And while even provisions were low, provision coverage remains high with NPL ratios coverage over 200%, impairment ratio above 100% and LaR coverage ratio of above 50%. And over to the top part of the table here, it's a little less pleasing because you'll see that ROA has come down from 2.6% to 2.5%. ROE has come down to -- from 15% to 14.3%. And then very evidently, if you just look at some of the other metrics, the weakening of the NIM is the main contributor to this and to a smaller extent, the flattish fee income contribution. I think over the next couple of pages, I'll give you a little bit more insight of why the ROE and ROA wasn't able to go up in the year 2024. Okay. Maybe to the next page. So this is the main challenge that we have right now. So 2023 versus 2024, you saw NIM contract 31 basis points to 4.09%, right? So with the contraction of the NIM despite our size of the balance sheet going up, we saw NII declined 0.6%. I believe we guided the market 4.1% NIMs, but we just fell short, closing at 4.09%. So where does the decline -- where did the decline come from, right? Loan yields, we started off the year pretty well, right? Loan yields kicked off increasing. We got some repricing of loans done. It went up and then it gradually came down also throughout the year. But the cost of deposit, it went up continuously and the biggest spike really came in the fourth quarter. I did mention earlier also, we kind of opened up the floodgates a little bit to take in deposits to ensure liquidity in the fourth quarter to support our loans growth. So this is -- I think I saw a question earlier in the chat room, why did our NII come down? And this is the primary reason why our NII came down, declining loan yields and also continuous increase in cost of deposits. So the other contributor to a lower ROA and ROE is really on the noninterest income. But I want to break down the components of the noninterest income. First of all, the fee and commission. These are basically financial products and services that we offer to the client, right? That is going very well, up in the quarter, up 8.6% for the year. And then there's the treasury and markets business strategy, including bonds, derivatives, FX, and so forth. So there's a sales component, which is what I call the customer franchise component. That is going well, right? Sales of bonds, FX, derivatives, these are all going well, up 10.7%. What has not -- what has been a bit volatile, I wouldn't say not good was the risk-taking business cost us about IDR 200 billion year-on-year income, IDR 673 billion the year before, IDR 470 billion this year. So that's down 30%. So this became a major drag in our noninterest income business. And the other fee component that we look at is the loans recovery, basically the bad debt recovery. Quite a good year that we had, we improved 7.6%. If I look at every single line of this fee component, you'll see that, I'm quite encouraged actually, those that are more product and services related, franchise related, we are growing nicely. So the much more volatile risk-taking business, which is the smallest component of our fee contribution, right? And we are relying less on that for our fee contribution. So that one, in a good year, we can make a lot more money in this risk-taking business. But what we want to see is really on the customer franchise and also the core fee and commission moving up. Next, please. This one, this is a good story year-on-year, and this is the second consecutive year that we saw OpEx coming down year-on-year. Last year, we were down 0.6%. This year, down again 0.5% or a CAGR of 0.5% decline over the last 2 years. And I look back over the last 5 years, CAGR for OpEx is actually less than 0.2%. So we have been able to maintain expenses very, very tightly. We saw personnel costs increased by 3.8%. That is very manageable given the talent we want to continue to keep and reward going into our next strategic trust. While the non-personnel related costs, we saw tech expenses gaining 8.1%. This is clearly evident that we are continuing to invest in technology to build the franchise for the future. And what is more important is the other expenses, which is in relation to establishment costs, general expenses, admin expenses. We saw a lot of the structural cost takeout has helped us in really affording growth in other areas that required our investment. So overall, expenses down 0.5%. We continue our pursuit for more structural cost takeout. You see at the bottom there, how do we take out costs. We reduced unproductive branches. We reduced unproductive ATMs, EDCs, rely more on QRIS for our transactions and drive really a lot of this transaction digitally, relying less on the branches or the physical presence. So maybe over to the next page, please. Yes. So back to the balance sheet, right, loans. Loans were quite challenging in the first half of the year, but second half of the year began to gain a lot of momentum, especially on the SME and the corporate banking side. In the fourth quarter, we saw the biggest improvement in loans at 4.3%, driving year-on-year loans to close to 7% -- loans growth to 7%. All 4 key segments experienced growth for the quarter and for the year. On a year-on-year basis, segmental breakdown, SME led the way with 9.1%, followed closely behind by corporate bank at 8.3%, right? Commercial banking, we have always been very prudent, and we have a prudent growth of 4%. Consumer banking recorded 5.4% growth, but you see that there's a drag by mortgage. We are still navigating through that. The higher cost of funding and the low cost of -- low pricing for mortgage right now has not made it possible for us to compete very efficiently in mortgages in the retail space. Next, over to balances. Yes, deposits, I mentioned earlier, current accounts, right, the story of a quarter, really the highlight of the quarter is really the growth of current account, 3.5%, 25.4% for the year, right? Savings account declined 2.1%. Again, I think that this may be some seasonality here because the attractiveness of the time deposits towards the end of the year took away some of this savings account, which we are trying to win back as early as the first quarter of this year. Yes, so this is a good slide, asset quality. Asset quality, the trend looks good, right? From a year ago, 11.2% loan at risk, today is 8.6%. And within these numbers, you see that NPLs are down, the special mentions are down. Category 1 restructured loans are down. And for each of the 4 quarters, we have the credit cost remained low at below 1%. And in spite of these low provisions, you see that our coverage remained up because the quality of asset has become better, 270% NPL coverage, 115% impairment coverage and close to 55% on LaR coverage. Again, very comfortable here when it comes to liquidity and also capital. So the surge in the fourth quarter loans growth saw a little bit of our LCR coming down, NSFR coming down, but still at a very, very comfortable level above 100% loan-to-deposit ratio. I think while liquidity is high, but I think for us in CIMB Niaga, we can find liquidity as long as we pay up. So we don't have much issue with the loans-to-deposit ratio actually. It's whether we want to price it up or not. So we ended the year pretty strongly with 23.3% capital adequacy ratio with a Tier 1 or CET1 ratio of 22.3%. Okay. This is the last slide for me. I'll hand this back over to Ibu Lani before we take questions after that.

Okay. Well, thank you, Pak KK. So my final remarks before we start the Q&A. Number one, we are very committed to fostering sustainable business growth across key segments, ensuring that we bring in value creation for all stakeholders. Number two, our focus to profitable and prudent growth has resulted in significant improvement in profitability and efficiency. Number three, prioritizing the sound asset quality and operational resilience remains our top priorities, including 2025. We are looking at the conditions and macro and micro that we face 2025. Number four, we continue to invest in digital capabilities to increase productivity, also efficiency, save cost -- saving cost and enhance, most of all, is enhancing the customer experience. And finally, having met our F30+ 2019-2024 strategic goals, we are now fully committed to our 2025-2030 strategic plans, which we call Forward30 or F30, which we will announce in due course. So that brings the presentation to the end. So I will hand over back to Pak Teguh before we go to Q&A. Thank you.

All right. Thank you, Ibu Lani and Pak KK for the presentation. Now before we take question, I would like to remind everyone that on this call, you can actually, if you want to ask question, please type your name and your company name in the chat box to the host. Or maybe you can use also the raise hand function in your Zoom application. And then we will then open your line so that you can speak directly to our management to ask question. Okay. I think we have a few questions from the chat box here. Let me start with question from Pak Andrey from RHB Securities. So his question is; number one1, what caused CIMB Niaga NIM to decline to 3.88% in the fourth quarter from 4.07% in the third quarter? Was this primarily due to a higher cost of fund or lower loan yield? Additionally, how does the liquidity situation in the first quarter 2025 compare to the previous quarter? And then the second question from Pak Andrey is what were the key factors behind the increase in CIR to 46.5% in the fourth quarter 2024?

Okay. So I think let me take that as well. Thank you for the questions, Andrey. Number one, I think mostly being answered by Pak KK during his presentation. But particularly is that majority, particularly because of the NIM, as we know, quarter 4, especially ending 2024, there are still window dressing within the banking industry. As you see, market LDR liquidity is quite tight. So that's one of the area, which is cost of fund. And we also a little bit of ramping up in term of loans because of opportunity that we have in the market in the area of corporate. So there's slightly NIM coming down. However, those deposit or there was a little bit more expensive deposit, especially in the retail SME area, some of it is actually being churned into fee income within wealth and majority is coming from the wealth. So you can see the fee and commission is still increasing year-on-year about 8.6%. So sometimes we trade it off, we are ending up with LDRs quite healthy, around 86% to 87%. And then we turn some of the expensive deposit as well to fee income. Now probably Pak KK want to add more on the second question. What are the key factors behind the increase on CIR, definitely within the Q4? I think that's a balance between costs that we accrued in Q4. Pak KK, you want to add?

So CIR has 2 components; one is the C which is the cost, one is the I which is the expenses part, right, sorry, cost and the income part, right? So the cost part is not a concern. Quarter-on-quarter, we still see costs coming down in spite of the cost already low in the previous quarter. But in the I part, the income part, right, Ibu Lani explained a little bit about the NIM compression already. So that's part of the income. And also quarter-on-quarter, I showed the number earlier on Page 19, right? On the fee and commissions, we did pretty well, but we were hit by a lower loan recovery compared to the third quarter. We also had a lower trading income. So some parts of the fee income business did not deliver. Hence we had almost a 12% decline in the fee income NOII. So coupled with a lower NII, that contributed to the higher cost-to-income ratio. So it's a combination of both the fee and commission as well as the NII, not so much on the expenses. Expenses, I think we have managed it pretty tightly. I hope that answers your question, Andrey.

Thank you, Pak KK and Ibu Lani. We have -- the next question is from Kresna. Kresna has 3 questions here. Let me try to invite Kresna here so he can ask questions directly.

Congrats on another year of consistent earnings growth in full year 2024. I have 3 questions. The first question is actually on the impact from the consolidated highest data. Can we expect some positive impact to CIMB Niaga from the implementation of the new export proceeds funds regulation? And how big is the [indiscernible] balance at CIMB Niaga as of full year 2024? And how should the bank capitalize on this trend because we expect quite a chunky FX deposits growth potential from this regulation? That's my first question. My second question is on the impaired coverage ratio. If you look at the gross impairment ratio has been improving well. So is there any case to lower the impaired coverage closer to 100% to 110% range in full year 2025? My final question is actually on the current account balance trend. How much of the strong current account balance in 2024 was driven by the special rate current account deposits? And how should we expect current account pricing and volume trend in 2025? And again, coming back to the first question, can the [indiscernible] regulation help with more -- with capturing more growth funds from CIMB Niaga's export the clients? Or do you think the current account cost and pricing will depend more on SRBI rate movements and bond yield -- bond price movements as well?

Thank you, Pak Kresna, for the questions. I will invite Pak Rusly to respond to you related to [indiscernible] because I think there's also new regulations in this part where actually tightening the deposit on the high [indiscernible] Pak Kresna. Okay. And then probably Pak Henky, if you want to take the questions on gross impairment ratio for 2025. But I think on CA itself, we are happy to see that the growth of our CA. But frankly, market CA is also growing faster rather than CA last year market, right? And we are taking the ride on those. But I think I'm happy to report that majority of CA is actually is a good CA, not 100% is actually a good CA. Some of it is actually you are paying out. But majority is coming from the throughput from transaction banking, cash management that for this couple of 2 to 3 years, we have been enhancing, including our capabilities on digital through BizChannels and et cetera. That's the part. So I think we are looking forward to continue to grow this. In fact, this morning, we just have another [indiscernible] sessions with corporate banking back then a couple of days ago with commercial banking and SME that now we're even more convinced that this is the drive related to the maximization of liquidity coming from CA. But to be honest, there's also some percentage that the CA that we paid, especially related to the quarter 4. And I think that's quite normal. Each bank is doing it, but it's only not even 1/4 of the book on CA. Probably I will just continue with Pak Rusly related to the [indiscernible] and impact to CA.

Okay. I think this is a new regulation in terms of extending the tenure, right? In the past, the fund is kept for 3 months, now it's extended to 12 months. Obviously, how big is the impact is yet to be seen because it's going to be rolled out. But we are really enhancing our approach because of this extended tenure. I think that we have already provided the various instruments to allow the customer to hold their funds with the bank, right, either in terms of the current accounts or in terms of time deposits, in terms of maybe even longer treasury instruments to enhance the yield for the customers. I think what's more important is really how can we allow our customers to access their liquidity if they need it for their operation or for their expansion. So we are preparing with various instruments in terms of swaps, liabilities if they can take it from Rupiah perspective or we also can offer them back to back in terms of, if they want to access to their liquidity. So the key is really to make it frictionless, right, for our customers to be able to get hold of the funds that they place with us. This is, I think, in terms of our approach in terms of the high FDR. I think the size, it varies up and down towards the year -- last year. But at the end of the year, I think the amount is about IDR 2 trillion for us the FDR. I think I want to add in terms of your question regarding the current account. I think as I alluded earlier, I think Ibu Lani alluded earlier, we've seen -- we pivoted to our corporate and commercial banking, the non-retail businesses towards funding at the top of the mind. I think that we already communicated in the past 2, 3 years in terms of our discipline. And this year, I can share the growth of current account is spread across the non-retail businesses. I think -- across the board, I think the CASA growth across the SME, commercial banking, corporate banking is very close to 20% and up. So it's not like we're dependent on the big depositors in corporate bank, but you can see this is across the businesses. And I think it's also alluded to the various initiatives that we roll out. One is we call it the current account initiative that the intention is really how we increase transaction bank -- transaction-based current account and also transaction-based fee income. So we installed this initiative across our non-retail businesses that include, as well Ibu Lani alluded earlier, enhancing the digitalization through our internet base, we call it BizChannel, right, how we increase the activation of our customers to use this internet banking BizChannel. The other one really, we look at increasing the product holding because we see the multiplication once our customers use more products, the current account automatically will go up, right? The third one is really, I think, is something that we are really more disciplined this year with the help of the network, it has really improved alignment how to serve our non-retail customers through our network branches to branches. So that really enhances the stickiness and recurring current account with the bank. So if you ask how much is the year-end, we all know the liquidity award. Really, I'm very careful to this because different banks define high-cost current account differently, right? So I would just say that we've seen significant increase on some of our businesses because there are some corporate action that we take advantage is really enhancing our ecosystem, right? Once we are closer to our customers, any corporate action they do, we make sure that we get the benefit also of the current account. So -- but again, I will share to you the sustainable growth across businesses on current account is about 20%. So this is very encouraging. If you see the CASA growth is 14.2%, is a bit more increase is on the current account. And we expect the high FDR will improve our U.S. dollar liquidity, obviously. So this is something that we are taking very seriously to tap into this new regulation.

Okay. Maybe I'll answer Pak Kresna question on the impairment coverage ratio. So as we know, impairment coverage ratio, there are 2 numbers there, the numerator and the denominator. On the numerator, basically, we will continue maintaining and keep improving our -- I mean, impairment ratio. Of course, while we still keep growing, but we will still do it prudently. On the denominator side, of course, this is a percentage. So basically, in essence, we have an appetite or we have a strategy that we always want to have above 100% impairment coverage ratio. So whether is it 110% or 115%, then we will basically still be within that range that we will do. Of course, then we will all be depending on the quality of the collateral, the forward-looking of the collateral of the impaired accounts. I hope that answers your question, Pak Kresna.

Let me take another question from the chat box, [indiscernible]. We have a question from [ Rahman Tauf ] from [ Stockbit Sekuritas ]. I think he has 3 questions, but one of it has been answered by Rusly before regarding the HA. So let me read the question; #1, BI has announced more KLM incentive to boost the mortgage. However, we see the mortgage loan in CIMB Niaga has declined. Is this incentive you are looking forward for better liquidity or you will still focusing on the profitability for mortgage? That's the first question. The second question is regarding the update on CIMB Niaga Syariah spin-off, how will this impact on the OpEx efficiency since the efficiency has been one of the focus of CIMB Niaga in the past?

Yes. Let me take that. [indiscernible] has already been answered by Rusly. So related to KLM, I think this is a very good approach by regulators. We practically took the advantage of KLM. As we all see that inside the KLM, there are many things, incentives given to SMEs, Syariah deposits and et cetera. On mortgage, well, pretty sharp, you're right. So this is the area that we need to balance between the incentives that will be taken in from KLM by growing mortgage. And the other part is actually on RAROC, right? Market is pretty much dominated by 1 or 2 banks in the market with main strategy, which is actually [indiscernible]. Now we calculated it last year that it will not be beneficial to take the KLM when we have to erode the RAROC up to some level. Now -- but however, for 2025, we took the task last year, in 2024, when we went into secondary cities, Tier 2 cities, smaller cities apparently, we were still able to compete in mortgage. You are right, KLM given the bank quite a good incentive coming from mortgage. So 2025, we changed a little bit of the strategy for mortgage. So we will grow back mortgage, but we will be focusing on secondary cities, the area that we will still be able to win the competition. Yes. So in terms of profitability, we expect that coming from practically a little bit better in terms of return RAROC as well as incentive from KLM through mortgage. Number two, the update on Syariah spin-off. So Syariah spin-off will start day 1 in 2026. So this year, we are preparing. Again, this is law, not only regulations because our assets already hit more than IDR 50 trillion. So your questions, will this be impacting our OpEx efficiency? Well, at the end of the day, efficiency, which we measure mostly on CIR is actually a balance between revenue and OpEx. Whether with Syariah spin-off, OpEx will increase? The answer is yes. But of course, we also expect along the way and including the longer plan that revenue will increase much more than OpEx, right? So the other part in terms of OpEx, this is not -- so this is the area that we are discussing with regulators, both Bank Indonesia and OJK that we still implement DBLM or dual banking leveraging model for back office. So front office, it will be separated. So as much as is allowed by regulations, so we will combine the back-office support from CIMB Niaga. For example, HR system, right? And several non-specific operating system, risk management, for example, they have assistance on risk management and et cetera. So it will not be a full-blown spin-off, which actually will inflate the cost a bit. Okay. So I think that would be responding and answering your question [Foreign Language].

It's from the chat box. So I think, yes, it answer the question.

Yes, already -- yes.

Yes. I think answer all question from Rahman Tauf. Let's move on to the next question. I think the next question is from [ Pak Madi ] from [indiscernible]. Yes. Pak Madi would like to ask the question directly.

[indiscernible] I would like to ask, with the [indiscernible] asset quality because [indiscernible] looking for guidance [indiscernible].

Okay. So I think let me answer the second question because I think your voice is not really that clear. So probably, Teguh, yes, you can help us on the first one, but probably Pak Henky can answer on asset quality. But our guidelines for loan growth for 2025 is between 5% to 7%. And for NPL will be around -- currently, we are ending NPL 2024 at 1.8%, but I think we do have the appetite in between 1.8% to 2.2% to 2.3% because we will add the portfolio related to retail and retail SME, which is actually naturally will have a little bit higher in terms of NPL. All right. So probably Pak Henky would like to answer related to the -- which segment on asset quality -- did you get right the question?

Yes. I think the asset quality outlook and strategy for 2025, if I got Pak Madi correctly. So just maybe just a little addition to what Ibu Lani has alluded. So in terms of -- I mean, overall, we will maintain our prudent lending to ensure our good asset quality and good CoC and also coverage ratio. However, there is a reshaping or we want to focus a bit more -- put a bit more on the consumer, including retail SME and also on the unsecured consumer lending, whereby, of course, within the consumer unsecured lending, we have a bit higher in terms of NPL impairment flow rate and also, of course, a bit of CoC. But that is, I mean, the portion will still be quite minimal to the whole bank, and we will still balancing that with still the prudent lending on the wholesale banking side. I hope that answers your question, Pak Madi.

Yes. Pak Madi, just like I explained earlier that on NPL guidance itself will still be hovering around 1%.

Yes. Also may I ask about the biggest quality improvement segment, which has the biggest quality improvement among others like [indiscernible] or consumer or SME?

Okay. So I think for 2024 in terms of NPL and et cetera, almost all segments is actually improving related to -- from 2023 to 2024. Say for example, on NPL ratio, business banking. Business banking is actually ending NPL last 0.9%, right? EBB also improving from 445 to 407. Yes. Consumer is a little bit increasing. Mortgage is a little bit of increasing because of the balances. As we know, the growth is a little bit negative. But other businesses is actually okay and flattish. Unsecured loan from credit card and personal loan is slightly increasing. So in overall total consolidated, we are actually improving. Back then, NPL ratio in 2023 is actually is 1.96. So we end up at 1.76. That's for 2024. You're asking for 2024, right, by segment?

Yes.

Okay.

[indiscernible].

I think we still have a few more questions to answer from the chat box. Let me take another one from -- this is from [ Lang Samin ]. The question is, I see that provisioning is higher in fourth quarter, both year-on-year and quarter-to-quarter. Which sector of the loan book do you still see some weakness in 2025?

Yes. Well, looking back that our ending 2024 for asset quality is actually good. If we are looking at each of the segment as well compared to market and our peers, we are good. So we don't really see an issue for asset quality even if we would like to plan it for 2025. As I mentioned earlier, we are willing to put more in terms of asset quality, a little bit more relaxed in that area because we want to capture the opportunity in the market. So to us, it's actually financially if the provisioning slightly a little bit more, but if we can really increase the revenue coming of it. So net-net, yes, coming from [indiscernible]. We continue to be vigilant and good in terms of cost management. And then we did the best is actually is to grow for our revenue, including NII, so loan -- coming from loans, but we also put the significant focus a little bit higher in terms of NIM, NIM lending. So the way we look at it from a financial point of view, from a bottom line point of view, we are still able to take a little bit more on provisioning.

I think this will be the last question from today's call. Next question is from [indiscernible]. Let me read the question. For your NIM guidance of 3.9% to 4.2%, what is the implied BI rate? How are you thinking about asset yield and cost of fund? That's the first question. The second question is improvement in NPL ratio. How much is driven by legacy exposure that were fully provided for? How much more life on your books? That's second question on NPL. The last one is on loan growth. Are you expecting loan growth structurally to come slower? Or are you running down your excess capital when considering to raise payout ratio?

Yes. We are basing our NIM guidance based on the fact that cost of fund will not be coming down practically, but we also don't see that the cost of fund will be coming up based on the efforts that we will put to increase the CASA -- low cost on CASA like Pak Rusly mentioning earlier. I think the effort on CA that we did for non-retail has been very, very good. SA is still growing ahead of the market, but a little bit of a challenge because of the SA market itself. So the NIM is basically basing on the cost of fund will remain high. Yes. But then yield also, we don't really think that we are able to increase yield by segment, but we will try to rebalancing the portfolio into a little bit of a higher NIM lending. Yes, we put it a little bit, I should say, moderate in terms of our calculations, on NIM. Yes. And second one is actually asset, yes, asset yield and cost of funding. That's the one that I explained. NPL ratio, how much is driven by legacy exposures? Okay. I think legacy has been -- it's almost gone, yes, because we have fully provided all the legacy loans right now. So how much more in the book? I don't think it's significant. So say for example, in the past, I think majority is on commercial and corporate. Currently in corporate, NPL is almost 0 and only 0-point-something percent, COC, I mean. So not really -- we don't really see any issue in the legacy loans within our book. And then the last one on expecting loans growth, actually to come slower. Well, our guidelines on loan growth will still be around 5.5% to 7%. Last year we grew 6.9%. So we still expect loan growth to be steady like we did in 2024. Pak Henky, anything that you want to add, or Pak KK?

Yes, probably on the legacy, like what Ibu Lani has mentioned. Actually, I can say, I think right now, I mean, in the last 1 year, we are operating -- I mean, our credit underwriting, our credit risk management portfolio monitoring unlike -- I mean, it's like there is no more like compete or legacy anymore, which just like BAU, and we forgot about this legacy [indiscernible] because like what Ibu Lani said, basically, we have passed that phase. And yes, there is nothing significant about the legacy issues. That's, yes, from me.

Okay. Maybe just to add a little bit to what Ibu Lani has answered on the NIMs. You have made kind of sweeping assumption that, yes, we do not expect deposit rates to come down, but we do expect the policy rate to come down, right? So in November and in January this year, November last year and January this year, BI cut rates twice, right, 50 basis point cut. While the BI rate came down, we did not see it transmit to the cost of deposits. So there's no reason for us to believe that even with the further 1 or 2 more cuts, deposit rates will come down. So then how do we accrete our NIMs then, right? We closed the year with NIMs at 3.88%. How do we move from 3.8% to a range between 3.9% to 4.2%? So we have a lot of things that we are working on, especially in driving CA, right? Pak Rusly talked about CA a little earlier. We are trying to really grow the core CA deposits, focusing on the corporate ecosystem. So over -- that one takes time. And we believe that over time, the cost of deposit from this ecosystem play from the corporate segment will help derive a larger percentage, a larger proportion of our deposits from this core deposit. So that's one thing. On the loan side, I believe either Ibu Lani or Pak Henky may have mentioned this. We are taking a little bit more risk on the retail segment, growing this SME segment. Retail segment, we are -- in the past where we have taken -- we have funded loans with fintech on a guaranteed or buyback basis. Right now, we have understand a little bit better on the risk side of things. We are actually now ready to take those risks on our own. So that will give us a big uplift on our yields. So again, we are going to do this judiciously and along the way, learn from credit, learn from the delinquencies and the quality of the asset to build another franchise or another revenue stream that is much more -- that provide a much more bigger spread for us. So that's how we can see, we have put quite a big range, right, 3.9% to 4.2%. On the conservative side, maybe 3.9%, but we can actually capitalize on what we can do with cheaper funding from CASA and also extract value from the higher yielding, it can move back up to the 4%.

Thank you, Pak KK. I think that was the final question in today's call. Now before we conclude the call, I would like to hand over again to Ibu Lani for closing remarks. Ibu?

Okay. [Foreign Language] Ladies and gentlemen, again, thank you so much for attending our sessions today and for all your supports and also reviews in 2024. So looking forward for 2025. Stay healthy and happy. Thank you.

Thank you very much, Ibu Lani. With that, we conclude today's call. If you have any further questions, please contact our Investor Relations team. Thank you so much for your participation and have a good day. Bye-bye.