PT Bank CIMB Niaga Tbk ($BNGA)

Okay. Good afternoon, everyone, and welcome to CIMB Niaga First Quarter 2026 Earnings Conference Call. My name is Teguh. I'm Head of Strategy and Investor Relations here at CIMB Niaga, and I will be your moderator for today's session. Joining with me and presenting to you this afternoon, Ibu Lani Darmawan, our President Director and CEO; Bapak Lee Kai Kwong, our Strategy and Finance Director. Also present here to address questions during the Q&A session, Bapak John Simon, our President and Capital Market Director; Bapak Henky Sulistyo, Risk Management Director; and Bapak Rusly Johannes, our Business Banking Director. Ladies and gentlemen, please note that today's presentation may include forward-looking statements based on current management expectations -- these are subject to risks and uncertainties, and the actual results may differ significantly from those expressed and implied in this session here. And with that, I'm pleased to hand over the call to our CEO, Ibu Lani Darmawan, Surakarta Ibu?

Yes. Thank you, Teguh. So good afternoon, everyone, and thank you for joining us today. It's a pleasure again to reconnect with you for our -- beginning 2026 for our Q1 performance as well as our priorities information going forward. So if we can go straight to the next page, please. All right. Okay. I think we just go straight through. One more... Yes. Okay. So moving to our Q1 2026 performance. We delivered a steady start to the year, underpinned by resilient earnings and also solid fundamentals. Loan growth remained very selective, while strong CASA growth continued with 12.2% CASA growth year-on-year. So it lift up our funding mix to a record CASA ratio of almost 74%. So revenue growth was supported mainly by continued strength in our fee-based income. This is in line with my explanation in the previous quarter, among others, by our wealth management businesses, reflecting our strategic focus on building more sustainable and recurring income stream despite the more challenging environment that we all face today. Asset quality remained very good. and well managed, relatively stable in terms of NPL. COC continued to be reflecting a good asset quality below 1%. We also sustained our healthy return with ROE at 12.7% or practically around 13% on a pro forma basis if we exclude the cash dividend to be paid on the 13th of May 2026, while maintaining a strong capital position to support our future growth. So if we go into the next page. So this is our profitability trend. We saw a sequential improvement in the first quarter actually. Our net profit recovered to be IDR 1.76 trillion following the softer performance in the previous quarter in your quarter 4 last year. Profitability metrics also improved with ROE increasing to 12.7% and ROA in the first quarter returning back to 2.5%. Just for a little bit of a context, the first quarter 2025, we again included a one-off provision impact around IDR 292 billion, so lifting our net profit. So overall, it reflects our underlying resilience of the earnings and the stability of our core profitability. We go to the next page. On our revenue composition, we continue to see a sustained momentum in our core recurring revenues. So NII is actually moderated, which most of it due to the rather lower loan growth, but it's traded off by a good asset quality and some also offset by the strong growth in NII or fee income, which increased in terms of year-on-year basis to about 29%, supported by continued strength in fee-based income activities, as I mentioned earlier, one of it is actually wealth management. Recurring fee and commissions income showed steady growth, reflecting strategic focus on building more sustainable and diversified income streams. One of the contributor of the recurring income come from wealth, again, I will explain later. Overall, operating income increased by 6.6% year-on-year basis, highlighting the resilience of our revenue profile. If we go into the -- right, okay, this page, this is -- I would like to specify on consumer retail segment that we have as an explanation of my information earlier. Turning to the funding and fee income drivers. We continue to make good progress in scaling our CASA franchise with accelerating growth in wealth-related fee income. We can see the traction here from consumer segment, which provide a cheaper liquidity coming from CASA. On the funding side, consumer CASA grew around 5%. So it's reached about IDR 81 trillion in Q1 with the CASA ratio improving to 69% for consumer, while cost of funds actually declined or actually smaller to 1.55% only, which is around 31 basis points better. This reflects our continued focus on granular low-cost consumer deposits. More importantly, the strength in fee-based income is increasing, which is driven by wealth management and insurance franchise. Wealth AUM grew around 14% on a year-on-year basis. So we have about IDR 54 trillion now. translating into 30% increase in wealth, including insurance fee income. Overall, this will reinforce our strategy going forward of growing high-quality recurring fee income while maintaining a strong and efficient funding base. So practically, while loan opportunity currently is more into non-retail, unfortunately, which is actually lower in terms of NIM, we are weathering it with our focus more on consumer and retail fee income to ensure asset quality will also remain sound. The next page. So we see here as well a strong growth in both transactions as well as sales volume driven by digital channel penetration. You can see that foreign exchange volume grew by 61% that represents about 93% of transactions is actually done digitally versus last year, it's about 92%. So continue to increase. Similar as well for bonds, mutual funds, they grew more than double, mostly also coming from digital channels. So overall, we see a continued good growth coming from digital, contributing more cheaper transactions per cost for us. And it's also a proof that even our wealth segment, middle and upper segment choose a digital channel rather than the traditional branch channel. So it means that our RM will be more efficient and effective going forward. So we have further strengthened our position on the next page. Yes. Okay. Right. We have strengthened our position as well here with the launch of CIMB Private Wealth in December 2025. These initiatives, I think we can go into the -- we have further strengthened our position with the launch of CIMB Private Wealth in December 2025, which is the initiative reflects our strategy to capture a structural growth in Indonesia's affluent segment, as I mentioned as well on the last quarter during the call, that we can see the middle upper segment is actually one of the biggest opportunity, which is not very much impacted in terms of the AUM, where wealth creation continued to outpace regional average while maintaining a disciplined focus on profitability as well as customer experience for our customers. So CIMB Private Wealth is designed to serve high net worth customers with more holistic and differentiated offerings, anchored by five key benefits for customers, which is, number one is special privileges and benefits as overall part of customer experience for our private wealth customers. Number two is actually relationship-based pricing for both lending or even non-lending. And number three is dedicated private wealth service team based on the AUM that the customers has a prospect on. Number four, based on the customer engagement, we provide 0% medical installment in Indonesia, Malaysia and Singapore. Again, these are all based on the information that I got from our survey to the customer segment. And last but not least, the regional connectivity that we have, especially related to MIST, Malaysia, Indonesia, Singapore, Thailand and the rest of the ASEAN countries, but which majority is actually beneficial for our private wealth customers and private banking customers for Indonesia, Singapore and Malaysia corridor. So -- and early results have been quite encouraging, actually. As you can see here, we recorded 56% in wealth fee income growth by coming up from RM Private Wealth and significant uplift as well, about 18% growth coming from bancassurance and APEs. So this shows how effective the segmentation and then the creation of private wealth to derive and then to further improve our fee-based income, which is recurring and more sustainable. So overall, this reinforce our strategy of building stronger and more sustainable fee income engine anchored on deeper client engagement and higher value relationship and value creation for our customers. On the next page, now this is our digital platform, both retail and nonretail. OCTO continue to contribute growth through increasing engagement and ecosystem expansion. On the retail side, on the left side, we continue to see higher engagement, traction growth, about 28.3% year-on-year and steady increase in both our web users as well as mobile users. On the corporate side, the other side is actually, as you might know, we just launched the new versions of our Biz channel, which is OCTOBIZ, which has gained traction since its launch with rising transaction volumes and expanding corporate onboarding, especially in terms of customer experience supported by integrated digital ecosystem. And again, I think this reflects our continued focus on strengthening our digital capabilities to make our digital investments is actually monetized as well as to enhance our customer experience. If we go into the next page, Okay. So this is about shareholder return. So we continue to deliver sustainable value through a consistent and disciplined approach to our strategy. We maintain our dividend payout ratio of 60%, in line with our established dividend policy. So cash dividend per share increased to IDR 161.77, reflecting steady growth over time. So in parallel, we strengthened our capital base with book value per share growing at a CAGR of 13.9% if you're looking back from 2021. This underscore our commitment to have a balancing shareholders -- balancing between shareholder returns with long-term value creation. The next page. I think you are quite familiar with this page. So our Q1 performance reflects continued progress towards our 2030 aspirations. Of course, with the caveat that there is something that we might not see for the next quarters and et cetera, but we remain positive, while several metrics have exceeded our target range, such as CASA ratio, for example, that we hit almost 74% and COC as well below 0.8%, so practically 79 basis points. We acknowledge that there is still some work to be done, especially if we look at our CIR to be honest, which hit from 46.9% towards achieving our ROE aspirations by 2030 below 40%. So we practically looking at the challenge on revenue, especially on NII, but we try to weather it with fee income, but we are also looking at some cost efficiency furthermore coming from the data that customers actually prefer to use digital rather than using ADM, for example, with transactions coming down all the way. We remain focused on disciplined execution and encouraged by the trajectory as we work to close these gaps over time. So I think I will hand over to Pak KK for further explanations about the performance. Thank you. Pak KK Surakarta.

You are still on mute.

Okay. Thank you.

Thank you.

Thank you, Ibu Lani, and a very good afternoon, ladies and gentlemen. Welcome once again to our results briefing. Just move to Page 17 then, beginning with the balance sheet. Starting with loans again, not really an ideal start to the year for us. We saw the first quarter loans number ended with a contraction of 1.3%. That took the full year year-on-year increase of 2.2%. Our asset growth really you can see shifted towards bonds where we added 9.7% to our bond portfolio, both in the shareholders' funds investment as well as the banking book investment, right, taking us back to very similar levels where we were back in March 2025. right? Overall, total assets actually were down 1.2% quarter-to-quarter and then for the year lower by just slightly 0.7%. On the liability side, CASA remains to show some momentum, gaining 1.2%, driven by 4.2% retail savings growth. But for the year, the start is really on the non-retail side, current account gaining 15.5%, driving the CASA ratio to 12.2%. We you also noticed that there's quite a significant drop in our TD in the maybe mid- to high teens on quarter-on-quarter to year-on-year. So we have not competed aggressively for time deposits as and when we see that momentum on the loan growth side or asset growth side, that we will become a little bit more aggressive on taking time deposits, we feel that it's still priced quite high this structure. Okay. Overall, you see that equity also gained 1.6% quarter-on-quarter and also increasing year-on-year by 6.4%. Next, I'll walk you through the P&L, right? Starting with net interest income. Net interest income was down 5.5%, right? You see that the interest income side, right, with a very flattish asset growth, interest income did fall 6.2%, a result of really a rate compression on the interest-earning asset side, including bonds as well. Interest expense, we try to manage it as aggressively down as possible. It's actually down 7.5% for the quarter. But in this quarter, there's also some noise in there. We did take an accounting change in interest would cost us another IDR 140 billion. So all in all, interest expense did come down for the year, 15%, but not enough to offset the rate compression that we saw on the loan side. But what we have done very well on the noninterest income side, Ibu Lani did a little bit of time explaining the growth of our wealth proposition. Our noninterest income was really driven by loans as well as treasury product sales, which is to a large extent our loan also wealth products to some of the more sophisticated investors and also a growth in the risk-taking business in the treasury or bonds trading. Operating expense was lower by 0.5% for the quarter. But year-on-year, you see an increase of 8.6%. That's because in the prior year in the first quarter, we did have on some tax provision and also for some admin and general accruals. So that [ showed 6% ] increase. Provision expense also is the reverse, right? So an increase of 97% because in the fourth quarter and first quarter of last year, we did have one-off in those. But in the first quarter, it was much lower. In the first quarter, we didn't have those reversals, but at 20 per quarter or 0.79 79 basis point provision, this is a very encouraging number for us already. So that gave us a PBT increase of 8.9% for the quarter, a good bounce back for us. And for the year, we gained exactly 1% versus our profits last year. So maybe over to some key ratios. Now key ratio is a little mixed, right? So we had a little bit of a bounce back on the strength of the NOI, right? ROE increased back to 2.4%, ROE back to 12.7%. But ROE compared to last year, is still down because our equity was growing so much faster than our profits for the NIM you see that it's 3.83% continue to contract, but I did mention that we did have IDR 140 billion of one-off adjustment on interest income. Normalized that, our NIM will stay almost the same. We were probably closer to 4%, which is kind of flattish to what we started off in the first quarter of 2025. On other asset on the asset quality side, we are very, very happy with what we are seeing right now in spite of some of these macro headwinds that we are seeing challenges in actually retail as well as SME loans. Gross NPL remain at 1.88%, net NPL so still below 0.8%. Impairments continue to come down to 2.9%. Total loan at risk maintaining below 7% [ of month ] so coverage remains sufficient at 176% on our NPLs and on the impaired loans over 100%. So I said the low base profitability number looks good. NIM number doesn't look as good. But overall, right, we are quite happy with the results that we especially on the asset quality side, therefore, the resiliency in spite of our market challenges. Okay. So maybe I'll share a little bit more insight on the NIM. Go to the next page, please. So you see NIM came down from 3.99% to 3.83%. We guided the market that we will be between 3.9% to 4%, 4.1%, seeing maybe an increase in our NIM. So what has happened here is that we did a onetime adjustment of IDR 140 billion on interest expense, it will hit us in the first quarter. It will not recur in the second, third or fourth quarter. So normalized that the NIMs actually go back to about 4%. But what's more interesting is that if you look at the cost of funds, this is deposit cost of funds only purely on third-party or customer deposit cost has been steadily coming down to 3.09%. And this 3.09% already included IDR 140 billion that we took in the first quarter, which will not recur. So the normalized cost of funds would have been 2.88%. That is a 73% reduction from where we were a year ago at 3.61%. But we're also seeing just as much of a compression in yields, loan yields. Loan yields, like I said, 73 basis points down in the deposit cost, but we are seeing loan yields come down by 70 basis points. right? We were able to hold on to a lot of this loan pricing in spite of the I think five rate cuts in 2025. But really, I think the big drop really started in the fourth quarter and more in the first quarter of 2026. Now with some indication of rates stabilizing, maybe even going up, we do feel that maybe we have come to the trough of this loan yields already. Okay. And over to the next page, [ NOII ]. So more encouraging stories on NOII versus the first quarter of last year, we were at 29% better versus the previous quarter. the fourth quarter you look at the category fee and commission. Fee and commission is really the core what refer to as recurring income. Fee income is up versus the first quarter last year we are at 15%, it was just last quarter have them at 14%. Fee and commission really coming from our customers. Wealth management fees are in there and mutual fund fees and the bank assurance fees are in the structuring the fees -- at the same time also, right, with some market volatility, interest rate movement, our treasurer did also make, I would say, a very strategic investment during this time or trading decision during this time compared to the first quarter of last year and the last quarter of 2025, we did see increase of close to 40% and 60% on both the customer franchise, which is sales of products as well as the risk-taking business, right? Loan recovery were rather flat compared to a year ago. Fourth quarter, we did not have the loan recovery because we did a reclass of the loan recovery to [ ECL ]. So it's not a good comparison between the fourth quarter. So all in all, you see that we have big hikes in noninterest income. In fact, our noninterest income contribution to our revenue has reached almost more than 36% already, gaining 43.8% and 29% quarter-on-quarter and year-on-year. Okay. Next on operating income. So the thing that we continue to work on is really trying to build more structural cost takeout, right? We know personnel costs will continue to go up. annual merit increase already, we are expecting 3% to 5% every year. So we are growing at 3.3%, which is right about where we want to be right now. Tech costs, we've put in a lot of smart tech expenses, renewing a lot of contracts with our vendors, bringing -- trying to direct the columns subscale for all the things that we want to do on tax expenses. So we are seeing it. It has been growing about 10%. Now it's at a flattish level already. Now other expenses, maybe I go to focus on the quarter-on-quarter, which shows that we are down -- but year-on-year 3% increase that's because a couple of things. We have a tax provision released last year and also some G&A accrual released in the same quarter last year. So that distorted the number. On the other expenses, neutralize that one, it's actually very flattish also across all the marketing establishment as well as general admin ones. Okay. So on the bottom right, you see that how do we do continue to have structural cost takeouts and when we get more engagement with our OCTO Mobile, OCTOBIZ, OCTO we have, trying to see that the reliance on branches is getting lower and lower. We closed another 7 branches in the last 12 months. We reduced 750 more ATMs already. These are the ones that carried a lot of recurring costs for us. And we see that once it's taken out, right, it's going to be nonrecurring. Cost-to-income ratio is higher not because of, I would say, expense, but really we need to drive up our revenues continue to see an improved cost-to-income ratio. So income may be the thing that we need to push a lot more of to get this number going down. Okay. Next, please. Now on the loan side, right, very pretty picture. So year-on-year, we see loans grow at 2.2%, right? And the growth is really coming from the corporate segment. And that also explains why you see so much of a yield compression, about 70 basis point compression because the lowest yielding segment is growing the fastest for us. So where we are still seeing pressure is really on the auto loan side, but the mortgage continue to stay flat. SME softened, I would say, towards the end of last year, and now we're seeing that also in the first quarter of this year. Commercial has been relatively flat, right? So quarter-on-quarter, most of our loan segments has actually shown a little bit of a decrease. So next page. customer deposits. Now with the loans and the asset remaining pretty much as it is, there is also not much of a big motivation for us to go and price and bring in deposits. What we are more focused on is really on CASA, building a CASA franchise that is more operational in nature and taking on the customer transaction as the main operating account. So CASA remains the focus. CASA grew 12.2%, as mentioned earlier, really coming from very strong showing from the non-retail current account. Savings account showing a lot of momentum, perhaps more in the last two to three quarters, right? TD as and when we see there's a momentum or there's a demand for loans and there's opportunities for us to take on or invest, we will be starting to take in more -- we go a bit more aggressively on time deposits. So at this juncture, the main focus is still very much on CASA and the demand for time deposits, we will price it to compete to get the time deposit. Okay. Next page, please. So I think these are all the things I've said earlier, I think our pillars of strength really in our asset quality. I look at the LAR at risk, it's at 6.9%. I think this is one of the lowest levels that we have seen. I think even pre-COVID, it was higher than this right? The cost of credit at 0.8% for the quarter without any one-off, actually a very, very encouraging number for us starting the year. Coverage ratio, we are quite happy with the coverage ratio at this juncture for NPLs and for impairment. So overall, I would say, right, a lot of what we have missed out on NIM or NII has been translated to much controlled asset quality, much more controlled cost of credit in the future. Okay. Next page, please. So liquidity remains strong, LCR and SFR LDR all looking -- LCR and SFR definitely way above the regulatory requirement. LDR at 89%, maybe better to price a little bit more time deposit, bringing it back to the 86% to 88% level, that would be good. Capital ratio already pass 25% for total shareholders' fund. But on Tier 1 capital, we are 24.2% right? RW consumption is down a little because the loans were a little low.

Is there another?

I think this is the last one for me, right? Yes. Okay. So that's it for me. I'll hand the session back to Ibu Lani for her closing remarks and [Foreign Language].

Yes. Thank you, Pak KK. Let me close by highlighting a few takeaways for 2026. First, in a very uncertain macro conditions currently, we will remain agile. Pursuing disciplined loan growth with a clear focus on asset quality and portfolio resilience. The second one, we will continue to strengthen our revenue resilience by growing fee-based income to complement our core income, particularly in the current margin environment. Number three, we remain focused on improving our funding mix to stronger CASA growth and disciplined funding to help mitigate margin pressure. Number four, recent regulatory development also especially in the area of multifinance industry may cause a temporary adjustment to select financial ratio which impacting us in the next quarter, while fundamental and long-term prospect of asset quality, I think, remains good and intact. And finally, we remain committed to delivering sustainable long-term value through consistent execution of our F30 Strategy. So with that, we again reaffirm our commitment to deliver sustainable value to our shareholders. So thank you, and that concludes the presentation. I give it back to Teguh.

Thank you, Ibu Lani and Pak KK for the presentation. Before we start the Q&A. [Operator Instructions] We will take the verbal question first then from the chat box it can permit there. I think we have the first question here from Harsh Modi from JPMorgan.

A couple of questions. Ibu Lani, you made an interesting comment at the end that there are certain changes on the multifinance industry, which may impact ratios. Could you elaborate a bit on that? And I have a couple of questions on the numbers.

Okay. Let me address the first one first, yes. So what change will be in the multifinance area? So there is a new regulation for multifinance that all the repo vehicles needs to put it back into the balance sheet. So -- but that's not only happening to us to the industry. So there are two types of accounting treatment in the industry of multifinance. Those who are already putting it back into the balance sheet and into the what is delinquent portfolio and the other multifinance who actually excluded outside of the delinquent portfolio. So for us, it's actually this will impact Q2 asset quality for our CNAF, this impact for CNAF only, but it will be normalized towards the end of quarter three and quarter four. So that will be a timely impact only for several months. And then that will be flushed out and going back to normal by the end of the year.

A couple of other questions on the numbers. First on NIM, very impressive cost of fund decline. And as explained, there will be further cost of fund normalization. So core NIM is better. But getting into next couple of quarters with weaker rupiah, higher SRPI balances and yields, do you expect cost of funds to stay at these levels? Or should we start expecting cost of funds to move up? And a related note is at what point do you expect the [ MOF ] time deposits kept with SOE banks to go away? And to what extent it will impact the broader industry cost of fund then? And I have one final question after that.

Yes. Yes. So yes, just like what Pak KK mentioned, actually, our core NIM is already above 4% to be exact 4.04%, so keep increasing. But again, on your question, whether the environment of lower cost of fund will remain? Well, honestly, no because, again, I think we can really start to see Bank Indonesia increasing the SRBI. I think 12-month SBI is already more than 6% currently, yes. So I don't think so. But first, we need to continue to focus on CASA ratio. Currently, we have about 74% CASA ratio. But we cannot neglect time deposit as well. So in terms of cost of fund, I don't really think that, that will continue to go down significantly, but our effort will be if we can really sustain the cost of fund. But the other part, which is important is actually on the loan side. But again, that will create the NIM, right? So just like I explained earlier, and Pak KK, specially earlier explained that in terms of composition, it goes to non-retail composition, which is actually lower lending. But during this couple of weeks, we found out -- we enhanced our strategy on loans, which is actually focusing more to ETB, existing customers, including those coming from SME as well as retail, which give us more yield, more NIM lending as well. Yes. So I don't think that NIM will continue to improve first, to be honest. But there is also the other focus and challenge for us on the next quarter to remain disciplined in terms of CASA strategy focus and coming to grow loan because again, our budget for loan this year is actually our guidance is only about 4.5%. Currently, in quarter one, we grew only 2.2%. Our calculation on Q2 will be around 3% to 3.2% increasing. So we're still quite comfortable with 4.5% budget that we have right now. Yes.

Okay. So NIM should go down and loan growth steadily up. Okay. And the final question is on the noninterest income, very strong quarter, especially wealth management, as you explained. Also trading income was particularly strong. But going forward, both of these trends, how much is sustainable for both of these lines, wealth management as well as trading income? And how much of this is more one-off because on wealth management, you launched new products and trading income because it just allowed some opportunities?

Yes. So again, NII, our trajectory has been very, very good. We just launched private wealth as additional because we realized that the NII will continue to be challenged. And our early scan looks super good actually in the area of wealth management. Trading, again, I think we are very cautious and careful on those as well. It depends on the situations and the opportunity available in the market. Now on sustainability of those fee income, we believe the wealth and the transaction-related income is actually very sustainable. We can see the trajectory from month-on-month basis. And then not only based on the product suites that we have, the approach is also different with private wealth segment focus that we have right now. And the operating model in a branch as well with RM concept also create a better revenue per customer, especially fee revenue per customer income, which is in upward trajectory. Again, I think trading that will be based on the opportunity, but we put a very much faith on our wealth and the transactions, our fee income as well.

Right. So basically, we should extrapolate the fee strength, but not the trading, which is understandable. Is that...

Yes. Somehow, yes. Pak KK, you want to...

Yes. I think very comfortable with what we are doing on the customer franchise side. We are seeing those momentum in sales of let's say, treasury products as well as wealth products, structured deposits, bonds, bond linked investment, those are the ones that are driving sales right now. We step inside, it's up to the skills of our traders, right? But we do have a good hedging mechanism also against the bonds holding that we have about close to IDR 90 trillion bonds right now, right, managing this portfolio and volatility of the interest rates are very, very important because I think in any 1 month, there will be swings between IDR 500 to IDR 1 trillion in mark-to-market movements. So market has been on our side. We do look at the risk components together with [indiscernible] the position that we are interest rate do we gain more than that depending on our [indiscernible] so these are all very measured risk taking that we have so far, it has worked out very well for us. So we hope that to continue into the second quarter, so that trajectory can continue to be there.

Our second question is from [indiscernible].

I would like to ask regarding about provisioning. The first one is provision expense have increased quite notably this quarter. Could you elaborate on the main drivers and how much of this already incorporates current macro uncertainties? And going forward, should we expect further provision adjustment, particularly considering the recent IDR weakness? Would this also extend to other financial assets such as financing and mortgage securities [indiscernible]. The second question is regarding sustainable financing. Could you share how credit quality has been evolving within this portfolio? And in terms of growth, what are your targets for 2026 under the current macro environment? Should we expect a meaningful expansion and a higher share of sustainable financing in the overall portfolio?

Maybe on the question of provisioning, I can take the first one first and maybe on the sustainable financing, maybe Pak [indiscernible], can help me out there. So on provisioning, you see that maybe you just move to that slide on the provision numbers. Yes, you have seen the increase right from 40 basis points to 79 basis points. Now I did mention there was a one-off in the first quarter and one-off in the second quarter -- in the fourth quarter last year by any measure, gross provisions and NII. The provision of gross provision of 79 basis points is a very, very strong number because if you look at the recoveries that we got IDR 200-some billion, you net off against the provision, the provision number, actually provision cost or cost of credit really dropped down to below 50 basis points or even 40 basis points. So that's where we are at right now. So that you see here, cost of credit 0.8% is the gross provisions that we have, right? This showed you a recovery numbers of -- so you take that half of the provision goes away. So cost of 0.4%. So we are not too alarmed with the provisions right now. We are still getting good recoveries, right? I read provisions COC here together with what kind of recoveries that we are getting. So the more vulnerable segment right now, I would say, maybe some part of the mortgage portfolio and maybe some part of the auto portfolio. Our SME has stayed relatively stable, which is very, very encouraging. So would we -- have we put on anything extra for macroeconomic variables or factors in the first quarter? We have not. This is something we have planned in the second quarter. So we may put in some buffers there depending on whether the current macro backdrop shows any improvement or deterioration. So that's where we are at that right now.

Sorry, my connection is actually gone. Related to it as well, we don't -- Q1 impact, especially for retail and SME, just like what mentioned in terms of asset quality and ECL is actually due to short collections days. As you know, regulatory-wise, we cannot collect during holidays. So that impacts as well in terms of asset quality and provisioning. But we believe coming on to the next quarter because we don't see any particular intrinsic issues within the portfolio. But of course, we put cautious related to auto mortgage. But mortgage practically mostly due to the balance sheet, which is not growing. Auto, yes, we put a cautious here and there, but we're also balancing it with the indirect auto in that sense. On the other part is actually which is -- you will see continued deterioration is actually on personal loan. Is that because of the current portfolio? No, because personal loans, we exit the fintech lending loan, fintech lending indirect loans this year, starting January. So we can really see the deterioration of balance sheet coming from it. But that's a conscious decision, looking at the forward-looking asset quality, which might not be impacting us positively. So there's also -- you will see the asset quality deterioration not because of the intrinsic issues, but particularly on personal loan because of the balances, some of the segment that we exit. Your second question about sustainable financing. Currently, about 25%, 26% of our portfolio financing is actually on sustainable financing. We don't put any particular numbers on green loan and et cetera, because we believe sustainability or ESG is not only comprising of a green loan, but also comprising of many several ideas like community empowerment, CSR and et cetera. So quality-wise, in terms of sustainable financing, we don't see that higher or lower in terms of quality. So we are very comfortable with this majority is actually within the nonretail in terms of balances.

Just to add... I, we have Page 31 to give a snapshot of what Ibu Lani mentioned of our presentation. Yes. So this is the one you mentioned, Ibu Lani, 26%.

Yes, hopefully that answered the question, finally.

I think we got question from the chat box. Let me read for you. We got a question from [indiscernible] Capital. The first question is related to free growth. What strategies or steps takes to follow the 15% requirement? The second question is, is the Q-on-Q decline in Syariah financing related to the ongoing spinoff process? And when might we see growth returning in the Syariah segments?

Okay. I'll just go to number one first. What strategy of steps to follow the 15% free float? Yes. Well, regulation says that we need to comply with 12.5% free float minimum free float by March 2027 and 15% by March 2028. So we'll comply to it. Currently, we are still taking some of the options on which one that we will take, but we will comply to it. Number two is actually on Q-on-Q decline in Syariah financing. Yes, that's related to the ongoing spin-off process. Again, after spin-off within [indiscernible] Syariah, our strategy will be more focusing on retail and retail SMEs. So it is different with the overall conventional bank, universal bank that we have right now. So this is also known by regulators that by the time that we do the spin-off, a majority of our portfolio will only be -- majority will only be in retail and retail SME. So in terms of balances, it will go down. And then what will be going up. So we put 3 years to 5 years projection for our boost after spin-off. So normalization will come in within the next 2 years after the spin-off.

Okay. Thank you, Ian, for the answer. I think that will be our last question in today's session, Ibu Lani. Lee, I will hand it back to you, Ibu Lani, to convey your closing remarks. You are still on mute.

So again, thank you so much, [indiscernible] ladies and gentlemen, for attending today's session. Again, I think we all know we are facing still the uncertainty, especially in terms of geopolitics, but we believe we remain positive and we're cautiously optimistic as well for Indonesian market since the overall domestic market and consumption is still quite high. So again, thank you so much. Stay healthy and happy. Bye-bye.

Thank you.

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