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

Very good afternoon, everyone, and welcome to CIMB Niaga Second Quarter 2026 Earnings Conference Call. My name is [ Erwin Reynold ], Investor Relations here at CIMB Niaga, and I'll be your moderator for today's session. Joining us and presenting to you this afternoon are our very own President, Director and CEO, Ibu Lani Darmawan; our Strategy and Finance Director, Bapak Lee Kai Kwong. Also present to address questions during the Q&A session are Bapak John Simon, Treasury and Capital Markets Director; Bapak Henky Sulistyo, Risk Management Director; Bapak Rusly Johannes, Business Banking Director. Before we begin, please note that today's presentation may include forward-looking statements based on current management expectations. These are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. With that, I'm pleased to hand the call over to our CEO, Ibu Lani Darmawan. Over to you, Ibu Lani.

Thank you, [ Erwin ]. Good afternoon, everyone. And for those who are joining us from outside Indonesia, good morning, and good evening, wherever you are. So thank you for making the time to be with us today, appreciate much. So I think we go straight to the highlights. I will not go through the macroeconomic because I think we're all aware, but we provide some data on where we are in terms of the ratios versus the market, banking industry as a whole, as well as versus the [ KBMI 3 ], where we are right now. So I think on this page, let me begin with straightforward with you about the environment. So the first half has been very demanding and very challenging for us as well as I think as we all know, for the banking industry, both globally and domestically. Margin pressure across the industry has been persistent, driven principally by, again, cost of deposit. And the macro backdrop has required all of us to think very carefully about expanding our credit. Against the backdrop, this is how I would summarize our first half. So first, the core franchise kept growing, and it grew in a balanced way that loans were up by 6.6% year-on-year to -- by the end of June to IDR 247 trillion, while CASA, our low-cost funding, sticky transactional funding grew by 6.9% to IDR 193 trillion, which actually balance really matters. We are not buying growth with expensive funding. So our CASA ratio was 71.7% in H1. So that's within our forward F '30 aspirations. And the second, on revenue, so the revenues actually was pacing within the balance sheet. The operating income grew 6.8% to IDR 10.1 trillion and pre-provision operation profit or PPOP grew at a similar rate. So top line continued to grow. That happened despite there's a compression in NIM, and it happened because noninterest income did the work, increasing by 25% year-on-year, NOII, now contributing about 35.4% of total revenue coming from fee income. So revenue diversification is no longer an ambition for us. It is showing in our P&L. As I shared with you as one of our key focus during several quarterly review with the analysts to weather some of the NII pressure that we see nowadays. So the third one is on the asset quality. As I want to be direct that cost of credit up by 33 basis points to 0.98%. The largest single driver is a one-off coming from the new regulatory treatment, which I also explained to you in the last quarter explanation coming from auto business repossessed asset at our CNAF auto business multi-finance subsidiary. So we also took additional provisioning to reflect the macro outlook. But the underlying book continue to be healthy. the gross NPL actually improved from around 5 basis points to 1.83% and remain better than both our private peers as well as the industry. So I'll come back to this one in more detail later. And finally, we continue to deliver the shareholders while staying strongly capitalized, our ROE of 12.6% with CAR at 23.5%. So if we go into the next page, this slide is important to provide actual picture on two separate operating engine. from our one-offs, yes. So if we look at the top 2 bars, operating income grew 6.8% from IDR 9.5 trillion to IDR 10.1 trillion. So PPOP grew 6.5% from IDR 5.2 trillion to IDR 5.5 trillion. Those two lines are the real measure of how the business is actually performing, what we earn from customers after what it costs us to serve them. So before any provisioning judgment. So both grew close to 7% in this first half, where net interest income, NII was slightly down, again, because of the high cost of fund and margin. That shows that the underlying franchise is actually working good. And net profit came to IDR 3.436 trillion, marginally lower, about 0.5% compared to last year. So the entire gap and more is explained by provisions, which was up by 60% year-on-year to IDR 1.2 trillion. So Pak KK take you through the composition shortly in financial, and I'll set out some drivers on the asset quality side, yes. So I make one observation. a business whose top line and PPOP are both compounding and whose bottom line is flat only because of provisioning. So it's a fundamentally different proposition from one where the earning power itself is eroding, we are firmly in the former category. So top line business fundamental is really good, but we had the provision because of one of the regulatory on our auto business as well as some provisioning that we took in our ECL. So you can see that reflected in return and strength metric on -- continue to be strong on ROA, ROE as well as NPL and capital, all in the territory that you would expect from a healthy stage franchise and portfolio. So if we go to the next page, this slide shows you the 2 levers that have held our return up through the compressing margin environment in the banking industry right now. So on the left side, fee and commission income growth, you can see the trajectory from essentially flat in the second quarter last year. Now we have now put together 4 consecutive quarter of solid growth. You see the 28.8% to 7.4% on a quarterly basis, continue to be positively growing, 13.6%, 9.4% in the second quarter of this year. So what matters here is not a single quarter, but the consistent whole quarter. So this is a recurring customer-driven income, not a one-off trading. So our focus when we reported it to you a couple of quarters ago works and we delivered. So in the middle, our efficiency ratio. Cost-to-income ratio improved to 44.5% in the second quarter from 46.9% in the first one. So we have kept cost discipline without cutting into the investment that generates future revenue. So I'll show you how -- the next slide, right? But put those 2 together and you get the chart on the right, ROE of 12.5% in the second quarter and 12.6% for half 1. So I want to be straightforward and honest with you on what we are not satisfied with. But in a half where margins compression is there and we absorb regulatory changes in provisioning in auto, return at this level reflects a franchise, which is still generating real earning power. Fee income and cost discipline are what made us where we are right now. And both are the levers that we are trying to control the best that we can. And this is on the back of the continuous healthy asset quality, both NPL as well as COC. So if you go into the next page, let me spend a little bit more time here because this is where our diversification strategy is actually most visible. Fee and commission income grew 11.4% year-on-year to IDR 1.48 trillion and now represent 41% of our total NOII. So that proportion to us matters a lot. So noninterest income as a whole grew 25%, but a rising share of it is actually recurring. customer transaction-driven fee income, the kind that is repeatable quarter-to-quarter rather than dependent on market conditions. Let me walk you through the component that are accelerating. So bancassurance is our largest fee line at 21% of the total, and it grew 29% year-on-year in the second quarter. So that is the direct result of the sustained momentum in wealth management focus that we have, deeper conversations with our affluent and preferred customers, better advisory capability and a broader product sales. This is also a result of the introductions of our private wealth segment offers, the segment that we launched early this year, which we updated to you in the last quarter. So currently, that one works quite well. So funding and administration fee, that's 11% of the total growth was about 9%. These lines looks very ordinary, but this is also the most recurring income that we have. It follows directly from the active account and the transactions volume that continue to grow. We have to note that it is -- it has improved in every single quarter that we see here from minus 7% a year ago to 9% today. So that [indiscernible] decline in CASA and transaction banking, it seems that all the points in TB is actually working, which is a complement by our digital capability as well as our drive on SBF, yes. If we go to the next page -- sorry. And the other part is also the last point in the -- previous one, please. And the last part, the one for you to -- for the key takeaway, the savings are not being banked as a margin. So they are being redirected into our growth engine and customer experience. So this is very deliberate for us. You go back to the page. Hold on. I am referring to Page -- Page 6, please. Next. Sorry, Okay. So if we go to page the underlying asset quality. Yes. So let me now address the credit cost properly, right? So just to show you what is really going on. So cost of credit for the half was 0.98%. It is up by 33 basis points in terms of year-on-year. So there are 2 drivers, and they are of -- the very different characters. So the first one, the larger of the 2 is a one-off. So again, this is [ OJK ] has introduced a new regulatory to our auto, repossessed auto, and this applied to our subsidiaries. In practical term, it changes how repossessed vehicle are recognized and provided for the ECL. So it is a change in accounting treatment as part of regulatory change, not a change in credit performance or the underlying portfolio. So you can see the effect clearly in the chart at the bottom left. Our consolidated cost of credit sits meaningfully above our bank on the figure, and that difference is from subsidiary. So we just -- we choose to comply -- this is another information is that we choose to comply right away, taking it more conservatively while we know that the market -- some of the market players prefer not to implement it first. But I think we choose to implement it to take it more disciplined in the area. The second driver is our own judgment call. So we refreshed the macroeconomic factors, the MEF in our ECL models and took additional provisioning to reflect more cautious view of the operating environment in Indonesia. This was, again, prudential and very forward-looking, yes. And so this is the smaller of the 2 components. What has not changed is the quality of book. So we should not really look at it as a separate one. So this is again because of 2 main points, which we need to increase the ECL. But one thing which has not changed is actually the quality of the book. Look at the segment chart on the right side. NPL trend are stable across the 3 segments, business banking at 0.95%, consumer at 2.84% and EBB or SME at 3.61%, which actually improved over the year. Loans at risk, LAR, have come down to 8.4% -- from 8.4% to 6.4% over the past year, 12 months. And our gross impairment ratio improved from 3.9% to 2.6%. This, again, shows that our asset quality remained very healthy as a fundamental. And the headline number remains best-in-class. Our gross NPL was 1.83% in H1 against 2% for our private peers and 2.1% in industry. We have held the advantage consistently as the chart on the left shows. This discipline has been a DNA for CIMB Niaga for a long time. So I think this is part of the positive result. We go to the next one. Let me close my section by reaffirming where we are right now. So Forward30 remains our strategy, and we are executing it, optimizing capital allocations, driving our CASA through a transaction-led approach, deepening our cross-sell and building the capabilities behind SBF, simpler, better, faster for customer experience. Against 2030 aspirations, CASA and cost of credit are already where we want. Cost-to-income and ROE are the 2 that require sustained work. And I don't want to pretend otherwise. Both are multiyear tasks and both depends on the levers that we have discussed and I disclosed today. Again, it's a challenging half and precisely when we strategy gets tested. Our response has not been to defer divestment or reach for growth in places that we shouldn't be or not within our capacity. So the environment will improve at some time, I think. When it does, we intend to position ourselves in the benefit from it rather than preparing it. So our focus on loan growth on really the area that we are good at and focus to enhance fee income because our plan works quite well and continue our cost discipline. So with that, I think let me hand this over to Pak KK to go through some financial detail. Pak KK.

[Foreign Language] Ibu Lani, and a very good afternoon, ladies and gentlemen. Welcome once again to our results briefing. I'll start -- move to Page 15, please. Okay, start with the balance sheet. quite an eventful first half in 2026, right? CASA growth got challenging. Our deposits got -- starting to get a little bit more expensive now as we start retapping the TD market for funding. So just breaking down the deposit components. CASA growth was marginal, just a plus 0.4% quarter-on-quarter, closing the first half with a 6.9% year-on-year increase. Time deposit, we started getting more aggressive in the time deposits was up 12.4% in the quarter, but still trailed our prior year number by 6.2%. In total, deposit was up 3.5% in the second quarter and for year-on-year increased 2.8%. Loans, on the other hand, right, continued its strong growth momentum, gaining 5.1% in the second quarter alone, driven primarily by a double-digit growth in our corporate banking segment. I'll share a little bit more detail of that a little later. Year-on-year, we achieved a 6.6% increase in our loans receivables. Overall, total assets were up 3.7% quarter-on-quarter, taking the year higher by 6.7%. Maybe go to the next page, P&L, please. Let's start with our net interest income performance. So a little bit encouraging to see that we are up 4% on interest income in the second quarter. However, with the BI rate hike in late May and all the way to June, it created massive deposit competition and started driving interest expense higher. Interest expense was very high by 4.5% in the quarter. And I think the third and fourth quarter, we will see a trend that's going to continue to go up. As a result, our net interest income improved 3.5% in the quarter, but still like last year by 1.1%. Now noninterest income remained very strong. Ibu Lani did share a little bit more detail on it a little while ago. Even though it declined 4.3% on a quarter-on-quarter on an overall year-on-year, you see noninterest income is a rate up 25.1%. The weaker quarter-on-quarter number were mainly attributed to weaker trading income. A little more detail will be shared later. Operating expense was managed lower by 4.3% in the quarter, leading to a PPOP increase of 5.1%. However, OpEx, you will see that year-on-year number still shows 7.2%. I have a little bit more explanation on that a little later as well, and that derived a PPOP growth of 6.5% year-on-year. Now loan loss provision or ECL was high by 81.3% quarter-on-quarter. There was a one-off, in the later section, I'll share with you why this one-off occurred and how much it really cost us. And overall, net profit was down 9 -- sorry, profit before tax was down 9%, deriving a net profit decline of 2.4% year-on-year and the net profit decline of 0.5%. So essentially, the bottom line results. Top line showed some resiliency with fee income being the core driver of -- for our operating income. Operating expenses, we managed to bring it down 4.3%, but our loan loss provision took a significant uptick, right? PBT as a whole did get impacted in the second quarter. Next, over to some key ratios. Key ratios, again, there's some mixed numbers in here. The PBT decline or reversal lowered our ROA to 2.2% and ROE to 12.5% in the second quarter. NIMs actually ended slightly improved, taking our NIMs year-to-date number to 3.84%. Fee income still hovering at the 35% level of our total income. Cost-to-income ratio was lower by 2.5%, now coming down to 44.5% in the quarter and 45.7% for the year. On asset quality, NPL gross impairments in the few lines below, including LAR ratio, they all show improvement. So the quality of our assets has not deteriorated. In fact, it has continued to improve. However, the new challenge has emerged, which is the higher cost of credit. You can see that it's 1.16% just for this quarter and bringing the total credit losses for this year to close to 1% or 98 basis points. So the sudden spike in the cost of credit is really largely attributable to an accounting change in our subsidiary, CNAF, which now has to comply to OJK enforce accounting policy. CASA ratio was lower. It is because also we started rebuilding our time deposit where we have slipped quite a bit in the last 2 quarters. Then moving over to the next page. On NII and NIMs, right, NII was down 1.1%. This is in spite of our balance sheet going up by about growing about 7%, and this is largely attributable to the compressing NIMs that we are seeing all the way to the second quarter, which was down 12 basis points. On the loans and deposit yields, coincidentally, everything, quarter-on-quarter, year-on-year, loan yields and cost of deposits were down 11 basis points and for loan yields and -- for the year-on-year, it's down 48 basis points. So what has happened is that we are still repricing based on the last 4 to 5 BI rate cuts from 2025. So the rate hike came in the month of May and June. So the loan has not been repriced yet. The deposit hasn't caught up to the increasing sloping curve yet. So you still see that the deposit and loan yields are still coming down. Hence, also the overall NIMs are maintained at about 3.85% level. I think really for us, what to watch out for is how do we reprice our loans and see how much we can afford to price our deposits to maintain the NIMs that we have right now. Okay. Next to Page 19. So Ibu Lani shared quite a bit of detail on this, even breaking down the components of the fee and commission line. You'll see here year-on-year, we are growing 25.1%, but breaking down by the fee component, fee and commission, these are sales and services we provide to our customers. This was down 5.2%. Two things here. One is Banca, which grew tremendously in the first quarter, still continues to grow, but not as hard as in the first quarter. So we saw a decline in the banca fees that we got compared to the first quarter. The card fees was also lower in the second quarter. So these are the main changes that caused this number to come down 5.2% but the big change is really in treasury and markets, right? Just to break it down also 2 components here, the customer franchise, which includes the sale of bonds, structured products, derivatives, FX, that was down marginally to 2.7%. But the risk-taking business, including trading and open position in derivatives, right, these declined 71.4%. We did take quite a bit of a profit when the yields were coming down from our trading side. But in the second quarter, those opportunities did not appear to us again. So that's why the risk taking side took a big reversal. Now you see a big improvement also on loan recoveries. Overall, recoveries were better but as Ibu Lani mentioned, because of the accounting change, we did take a lot of provisions and write-offs on the auto book. But what we have written off in the second quarter is now slowly coming back to us on the recovery. Hence, a big part of this increase in recovery also was coming from the written-off book from the auto segment. So overall recoveries were up over 140% and taking the recoveries year-on-year up 25%. So all in all, still a very good showing on the NOII, which basically forms the core of our income forward. Next to operating expense. Maybe a couple of things here I would need to explain. What we have done well really, just looking at the table is on personnel costs. Personnel cost on a year-on-year basis, it's managed very well at 2.5% increase. Tech expenses is down 2.3% for the quarter, is up 4.6%. These other expenses is up 27%. I would say there will be perhaps 3 one-offs that have caused this. The total number -- the total amount of expenses in the previous year, we did take a provision -- tax provision really after winning a tax case against the Director General of Tax. This year, the reverse happened. We had to provide for a separate tax audit. On top of that also, there were also audit adjustments in the auto CNAF multi-finance book last year. This year, we did not get the same. So these are some of the things that have caused the other expense lines to increase 27.1%. We also did a year-on-year normalized comparison for the first half last year versus first half this year, it would have ended very flat to what we did last year. At the same time also, we are still managing all the structural cost takeouts. We shared this slide -- this visual with you. Branches, ATM continued to be optimized, down another 11 branches. ATMs, which was a big expense for us in the past now, we cut almost 800-plus ATM in the course of the last 12 months. Next, please. Loan performance. Maybe just a few numbers that sticks out here. I look at total loans, a year-on-year number at the bottom right, up 6.9%. You will see that a big part of the loans really 13.8%. In the last quarter alone, right, demand for credit on the corporate side remained to be strong, up 10.1%. Looking at the other segment, consumer, a couple of things here. Consumer auto loans still continue to show growth at 4.7%. Mortgage after some reversals are beginning to show some traction, again, small little wins here and there for mortgages. But you see a big part of the credit card personal loans is coming down already. We also decided to exit the, what we call BNPL, buy now, pay later fintech channeling business. You will see that this number of this balance sheet coming down in the second quarter as well as we exit and some of these loans get repaid or written off. So that became the drag for the consumer bank business. SME, relatively strong performance, showing a 2.9% increase where the industry is showing a decline. Commercial banking as well affect fairly well at 4.6%. So overall, the composition of the loan now has actually gravitated or moved towards corporate banks right now representing close to 43% of our portfolio, whereas retail, which comprises of [indiscernible] consumer and SME now stood at 42%. Next page. Now on deposits and CASA ratio, I said it was eventful. Actually, it was quite chaotic in the second half, especially in the late June, last 2 weeks of June, where there was some new announcement coming from [indiscernible] then growing CASA very nicely until some irrational pricing started appearing. So we went all in on time deposit, time deposit for the quarter jumped 12.4%, whereas CASA, we wanted to continue to maintain a high level of CASA or high CASA ratio. We still end the CASA ratio at 71.7%. So overall, I think for the deposit story is more towards the third and fourth quarter, how can we retain or grow CASA as the cost of funding is expected to move up even higher. Next. Asset quality, this is really our pillar of strength, right, starting with the LAR 3 components of LAR. If you look at NPLs, it's lower by 10 basis points. Special mentioned by 20 basis points. The restructured loans are also lower by 30 basis points. But why is the cost of credit coming up and this is coming down? Because we took a IDR 420 billion charge for the auto reclassification. So what has -- maybe I gave a little bit of explanation [indiscernible] Ibu Lani mentioned earlier. So auto, when we repossessed in the past, we put it as an inventory right, it's no longer represents a loan. So the accounting change basically says that, okay, you have to repark or reclassify this inventory as a loan. So that's what we have to do. But also at the same time, if those inventory were more than 180 days old, we have to -- under our policy, we write it off. That write-off cost us IDR 420 billion, and hence, you see the spike in the COC. So when we write it off, of course, we also recover it back. And hence, when I mentioned earlier, we saw a recoveries getting higher. Some part of it is really the recoveries from the mortgage. So when we write off, we don't recover it immediately in the same month or the following month. It takes a little bit of time to recover from those written-off auto vehicles. So yes, this elevation -- elevated cost of credit did happen in the second quarter. We will continue to manage our cost of credit very tightly. On the coverage side, you see that the coverage ratio also came down a little. For NPL coverage, even though we're comfortable at 150%, impairment at 106% and a LAR coverage at 42.9%. This is also largely attributed to the strength of our corporate banking book. The impairments from the corporate banking book is getting lower and lower. And when the -- for the impairments for retail bank at a slightly elevated level. And the coverage for this secured lending like auto and mortgage are typically not 100%. Hence, when one book improves, the other one deteriorates a little, you see the coverage come down to this [indiscernible] but our intention really for the second half of this year is to continue to build on provisions because we are not really certain the economic conditions will continue to improve. We will look at doing some macroeconomic adjustments to relook at some of our provisioning models to see how well we can buffer up in our provisions in the second half of this year. Lastly, on the liquidity and capital ratios. Now liquidity ratios declined a little bit. Competition for deposits is very high. Liquidity can come in many forms, right? It can come in deposits, interbank borrowing, repos and all that. So we are still very comfortable in liquidity, LCR, NSFR. What we are very mindful of is the LDR, which is pure deposit versus loans. So that has come up to 90% already. We will be more comfortable with below the 90% mark. And capital ratios, you see a little bit of a decline. That's because we paid up IDR 4.1 trillion of dividend in the month of May, hence, the card ticket dip, but this will continue to trend up in the second half of this year as we add on more retained earnings. So that's it for me. I'll hand the session back to Ibu Lani for closing remarks.

Yes. Thank you, Pak KK. So we go to -- right. Okay. Let me close with our priorities for the balance of the year and our guidance as well. So 5 priorities. The first one is accelerate revenue diversification, growing fees and commissions income to cushion the margin compression. Second, prioritize liquidity resilience supported by steady deposit growth to fund the balance sheet. The third, deepen customer engagement across wealth, digital and transaction banking to build recurring fee stream. I think we have done it well in the previous quarter. The fourth one, maintain discipline in our loan growth, keeping the asset quality sound and provisioning prudent. And the last one, the fifth one, continued to invest on improvement of productivity with full commitment to profitable growth and also value creation. Now to the guidance, we are making 3 changes. We are narrowing our NIM guidance. to 3.8% to 4% to be realistic from 3.9% to 4.1% previously. And deposit composition -- competition has been very intense and persistent in the market. That's the one that we really look at currently. And we assume that the start of the year will continue to be the same. So we are raising cost of credit guidance to 1.1% to 1.4% from 0.9% to 1.1%. This is mostly coming from the repossessed asset treatment in auto business, the one that KK and myself explained to you through the full year impact, together with the additional macro provisionings that we have taken, especially on the MEF. So we are revising ROE guidance this year to 11.5% to 12.5% from previously 12.5% to 13.5%. So 2 things that we are not changing. Loan growth guidance stay between 3% to 5%. We are running ahead of it, but we would rather retain the discipline that we chase up on the numbers. And cost to income stays in the range of 45% to 46%. We are tracking within the range and our structural initiatives are on plan and also on track. So this is a reflection of a tougher margin environment and regulatory change we have absorbed. So they do not reflect the weaker franchise. So the operating engine is growing. Credit quality compares -- even compared to the market is actually very well and our capital position give us the real room for us to maneuver. So again, thank you for joining us today and also for your continued interest in CIMB Niaga. We now are very happy to take questions from you, if any. Thank you.

Thank you. Thank you very much for the presentation, Ibu Lani and Pak KK. [Operator Instructions] With that, let us begin the Q&A session, and we will begin with Peter Kong from CLSA.

Peter from [ Kenangan ] right now. I like to ask 2 questions. The first one, thank you for the very clear explanation about the CNAF treatment. I think that's very useful to understand. But the first question is, how does this change any way you think about your business? Since I think Ibu Lani, you mentioned that you are actually volunteering to adopt a more stricter interpretation when your competitors may not have done that, right? So I'm just thinking how do you think about the business? The second question I have is a bit housekeeping. Can you please remind me again how many percent of your loan customers that you normally have to negotiate for pass-through of the BI rates? What has been in the past, the proportion you managed to pass through normally? And do you think that this time around since the May rate hikes, would there be any significant deviation? Finally, my last question is perhaps just a little bit of the thinking around the lowering of the -- some of the guidances. Therefore, what would be the commitment to CIMB Group in terms of capital? I understand speaking to the group side, there's always opportunity to be actively reallocating capital. So maybe just to hear a bit about the dividend outlook as well.

Thank you for the questions, Peter. Let me just answer one-by-one. About the compliance that we choose for auto business, apparently -- well, that's the new regulation is very clear. So again, CNAF is part of much bigger CIMB Niaga. So we choose to comply right away. And apparently in the market, there are some who wants to deliver it. But of course, that's between them and the regulators. So I think what will be the impact of our auto business. One thing is that the asset quality and the positioning and the fundamental of auto business still remained healthy. If you strip off the one-off because of the regulatory, all is actually still very healthy and sound. As you know, but of course, our strategy in auto business needs to be very agile. As you might know in our previous quarter's reports to analysts, in CNAF in our multifinance, we have practically 3 types of businesses, new cars, used cars and refinancing. And we just recently add [indiscernible] gold loan, particularly, which -- but super small currently, but growing. But during these conditions, we are changing it to the point that which area within the big 3 segment of loan in multifinance will work. So currently, we are shifting a little bit more on the new car because that will be -- the new car meaning is that we still are focusing on middle and upper segment. So we are not focusing on lower ticket size, continue to focus on middle and upper ticket size with a shorter tenure. So averaging around 3, so coming down from 4 to 3, and we give incentive to 1 year with shorter LTV. Average LTV from 80% coming down to 70%, just to ensure that we are attracting the middle and upper segment that we know and majority is actually the segment of the bank. So we are shifting some of the volume and compositions into the new car. Well, we reduced the stress -- the more stressed portfolio coming from used car and refinancing. But it doesn't mean we exit on those. So in terms of RAC (sic) [ RAS ], risk appetite statement and et cetera, CNAF working very well with the bank to take a look at those. So it's very important for auto business to become agile to take a look at what the opportunity as well as to risk. So if you're asking me what will be the prognosis of auto business, still very, very good. still very good. So if you strip off the one-off because of regulatory, the business still runs very, very well. Now number two, on the percentage of -- is there any -- how much that we pass through the increase of BI rate to the customers. Well, frankly, that's quite tough across the segment, not only corporate, not only commercial banking, not only SMEs or retails. So that's why the trade-off is actually the NIM compression, which is not only happening in CIMB Niaga, but also in the market. But if we are looking at on a month-on-month basis, like KK also mentioned earlier, actually, our loan yield increasing month-on-month because the repricing up in all the segments start to show. Whether it's a corporate, whether it's commercial banking, whether it's SME or even some of it retail, like majority is actually mortgage because we cannot reprice credit card particularly because that's very much cap. So and the other part, which is actually impacting our NIM because we exit the fintech lending business, high-yield lending. We exit that with the considerations of the trend of asset quality, which is going into negative. So how many percent that we pass through and how many percent on deviation, probably, parsley will add to it later on, but we are trying the best that we can. However, the trade-off will be that we are going into a low-risk segment. As you see, our COC in our non-retail is super good. And we think that we can take more risk on that, but not within the current situations. And the guidance on whether the revisions of the guidance, what it is and the impact for the group, we definitely aligned with group, whatever that we discuss and then we calculated and then the impact to group because, again, our contribution is more than 20%. The group is very well acknowledged. Yes. Probably, Pak Rusly, you want to add something on the pass-through of the rate?

Yes. If you want, I can try to do this. [indiscernible]. Okay, maybe I can try to do this. We are seeing some very, very strong pass-through from the corporate and investment banking side. On the investment loan, working capital loans, I see -- maybe I share a little bit of detailed information with you. We have seen about 66 basis points pass through already, which is very good. On the FI business side, it's also passed through pretty well at 82 basis points. So the challenge really is on the commercial banking side and the SME side. SME already, right, the market is facing some tough competition. So we have not repriced that well. Consumer, Ibu Lani mentioned, mortgages, fixed rate loans in the first 5 years, we can't reprice that one. Credit card, personal loans is a fixed rate. Auto, it's really focusing on segments and go to the new car segment, we can't really reprice it too much because the yields are typically lower. But Rusly, is your microphone?

Just to add to what KK has said earlier, it's really repricing is a market force because if you remember, the BI rate has increased multiple times. And there are things that we need to comply in some segments where we need to inform the customers that about 1 month notice before we adjust the pricing. But in short, I think we are -- we have been repricing our loans about 70%. But I see there are more that we can reprice up. to improve our margins. But this -- how much can we really increase is really depending on how the market reacts because some banks will increase, but some banks will not increase. So this is something that we observe and -- but the reprice action will continue because the cost of fund has rise up quite significantly.

Yes. Probably I'll just add a little bit more on those with data, Peter. So for example, loan yield, we are looking at month-on-month across many segments because, again, repricing is not happening in corporate banking only, but across the segment. Our loan yield in the month of March was 7.5-something percent. But in June, it's up to 7.7%. So that's already in our pipeline. But of course, I think that the point is that we only want to go into a low-risk segment, and they are usually very price sensitive. So again, that's sometimes also a balance of the margin versus the asset quality. You can see from the result as well.

Our next question comes from Aakash Rawat from UBS.

So I have 3. The first one is just to understand the auto sector provisioning a little bit better. So I understand it's an accounting change. And then you said that because of this change, we also see some recoveries in the future. So I'm just wondering what is the lag between the recoveries and the provisioning that you make? And then if you were to look at this on a rolling basis, let's say, rolling 12-month, 18-month basis, should the net impact on your bottom line be -- not be neutral? We should think of it like that, right? And I think you also described that the outlook for this sector, in particular, has not deteriorated. So you're still growing the auto book. So is it fair to say that the net impact should be neutral? And what is that lag? The second question is, so out of the credit cost guidance that you've changed in the outlook, the 20 to 30 basis point change to the range of the credit cost guidance, how much of that is driven by this auto provisioning related change versus the MEV macroeconomic variable change? And if there's anything else that is also going into it? And then just the last question is, I think based on your comments, it seems like cost of funds is one area clearly where you think the second half is looking more challenging compared to the first half. Is there any other areas that you think things are getting a little bit more challenging, whether it be loans or fee income or just credit cost underlying or anything else? Those would be the 3 questions.

All right. Thanks for the question, Aakash. I just want to answer you one by one. On auto provisioning, you are right. But at the end of the day, that will be neutralized with the income coming from the selling of the repossessed auto. But the lagging will be comprised about probably about 12 months and over, yes. So will that be impact neutralization will be this year, probably within the next quarter next year. But yes, you are right. At the end of the day, that will go -- when we sell the repossess, it goes to our fee income later on, right? And then the second question is actually -- the impact on the bottom line, how long? That's not that answer you probably I don't really think that -- because, again, that will be depending on the timing, how much that we want to sell the repossessed asset auto to the market. So again, the neutralized impact this year to be more conservative, I predict will not be fully this year, but there will be some within the first quarter next year. That will be impacting our bottom line. And the guidance, how much from auto and MEF, I think majority currently in terms of COC coming from auto and additional provision coming from the macro econ, but we are also putting some more related to the exit on personal loan to the exit of fintech lending that we have. And in terms of retail, majority is more to retail. Again, not necessarily because of the fundamental of our business, but I think the loan growth will be rather muted for retail, including mortgage. So that impacts our COC as well. But we don't really think to be more realistic that the buying power will be going back to normal or positive until the end of the year. And then the challenging part on cost of fund is actually very much really in front of us. In terms of probably the real liquidity is there, we are closing H1 with LDRs around 90%, but we are quite happy within around 86%, 80% to 90% to be more efficient. But we want to ramp it up the LDR to be a little bit lower because I think we are now more confident about returning to the fee income because again, if you are looking at the high net worth customers, there's quite a lot that we can do in terms of wealth as well as in terms of transactions that we have already proven in. Now the other challenging part, what more? Of course, so that's why we put the loan growth remaining [ 3% to 5% ] when in actual it's about 6.6%. But again, as KK and myself explained to you earlier, we want to be more prudent in this area except if there is some real confidence and ensure then the macroeconomic is actually getting better. So loan growth will be challenging. So that's why NIM is other area that we revised in terms of guidance. I think that will be for me. Probably anybody want to add on more challenging part?

Yes. Maybe just to add on, on the provisioning. I think the question was heightened provisioning in the guidance to 1.1% to 1.4%. It was also deliberate on our part to give a wider range. We do foresee that we may need higher coverage. Ibu Lani mentioned on the consumer segment, maybe MEF, if the macroeconomic factor is not improving, we may need to also adjust it into our models. So that's why it can range between those levels. So the one-off that we saw in the first half may not appear in bulk like that. But because of the new accounting change, we will also have to now provide 100% already of any loans that is more than 180 days going forward. You cannot put it into an inventory and hope to collect it later. So I can't tell to the last basis how much it will cost or how much it will be normalized in our overall cost of credit. But I suspect between the 1.1% and 1.4%, this auto provisions would be coming -- causing us about 20 basis points, back of the envelope kind of assessment.

Our final question for today will come from Yong Hong Tan with Citi.