PT Bank Mandiri (Persero) Tbk (BMRI.JK) Q2 FY2025 Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to PT Bank Mandiri Second Quarter 2025 Results Briefing. Thank you for joining us today. My name is Laurensius, Head of Investor Relations. I'm joined this morning by Ibu Novita, our Chief Financial Officer; Danis, our Risk Director; and Pak Tim, our Operations Director, who will serve as today's speakers. Before we begin, I encourage you to download both the presentation materials and the financial statements, which are available on Bank Mandiri's Investor Relations web page. For today's agenda, we will first hear presentations from our speakers. Once all presentations have concluded, we will proceed to the Q&A session. During the Q&A, please state your name and the institution you will represent before asking your question. We also welcome any follow-up questions via e-mail after the session, and we will do our best to respond as promptly as possible. With that, I would now like to hand over the presentation Ibu Novita. [Foreign Language]

Thank you, Lau. Overall, the economy remained relatively stable in second quarter with GDP growth reaching 5.12% supported by higher investment. In addition, Bank Indonesia maintained a [indiscernible] stance this year, implementing a total of 25 basis point rate cuts between May and September, bringing the benchmark red to 4.75%. We expect BI to further cut interest rate down toward 4.25% by the end of this year. Within the banking industry, loan growth slightly moderated to 7.9% in the second quarter, lower than Bank Mandiri space at 11%, reflecting softening demand. On the deposit side, the the [indiscernible] BI policy increased market liquidity, resulting in deposit growth of 6.96%, which is more aligned with industry loan growth. Despite ongoing economic pressure, industry asset quality remains stable with the NPL ratio at 2.22% with Bank Mandiri at lower level of 1.08% on June '25. Now we discuss about our strength and weakness during this quarter. In the second quarter, our asset quality remained resilient despite macroeconomic headwinds, supported by our ecosystem value chain strategy while we also deliver a strong noninterest income growth and maintain stable loan yield despite a lower benchmark grade. Profitability was pressured by higher post-audit operational costs and tight liquidity condition that kept deposit costs elevated. Importantly, we exceeded guidance on both loan growth and credit costs underscoring solid execution, though consolidated margin came in slightly below expectation due to ongoing funding cost pressure. Again, this backdrop, we revised our '25 guidance, lowering loan growth to 8% up to 10%, NIM to 4.8% up to 5% with expectation of improvement in second half supported by government spending, dovish monetary policy, better liquidity while maintaining LDR around 90%, keeping cost of credit at 80 up to 100 basis points, continuing to prioritize ecosystem value chain and several sectors. Additionally, for full year '25, we anticipate the cost-to-income ratio to be approximately 45%, with a normalization toward 40% expected in '26 as the '25 one-off cost pressure subside. Loan growth in the first half of '25 was supported by strong momentum in commercial, credit card, micro KUR segment, which continued to deliver higher yields and strong asset quality. Within Retail Banking, growth was driven primarily by value chain financing, which recorded a 17.1% year-on-year increase and reflect our disciplined focus on ecosystem-based lending. Selective expansion in corporate value chain segment further strengthened our position, helping us prioritize quality over volume while maintaining a profitable loan mix. The value chain focus has ensured that our lending growth is both resilient and sustainable. As a result, with this disciplined approach, we successfully maintained net NPL formation at just 84 basis points in first half '25 demonstrating the benefit of our strategy in balancing growth with prudent risk management. In the first half of '25, net profit declined 7.89% year-on-year to IDR 24.5 trillion, while PPOP reached IDR 40.7 trillion, down [ 6.43% ] year-on-year. Fee-based income increased 7.82% to IDR 20.9 trillion, and revenue grew 5.43% year-on-year despite operating expense rising 25.2% year-on-year. On the lending side, we maintain a disciplined stance. Our consolidated loan portfolio grew 11% year-on-year to IDR 1,700 trillion. In parallel, we prioritize liquidity, lifting CASA deposit 9.30% to IDR 1,355 trillion and supporting balance sheet stability. System-wide liquidity pressure led to a 38 basis point increase in our cost of deposit, which rose to 2.44% and offsetting this, loan yield remained stable at 7.75%, supporting NIM at 4.92% in the first half '25. Risk discipline remained a key strength. Cost of credit improved 77 basis points, reinforcing asset quality and overall balance sheet resilience. Our ROA, return on assets stood at 1.98%, while return on equity, though slightly lower, remained robust at 18.1%, underscoring our continued ability to deliver healthy returns. Next, digital innovation and our corporate ecosystem strategy continued to strengthen Bank Mandiri's CASA franchise, both of which are central to our ambition to be a primary transactional bank of our clients, particularly in the tight liquidity environment. As June '25, Livin' transaction volume grew by 16% year-on-year, driving saving deposit growth of 8.5% year-on-year, higher than industry level of 6.5% and reflecting strong customer engagement with effective low-cost funding capture. On the demand deposit side, Kopra transaction value grew by 20.8% year-on-year in the second quarter of '25, supporting demand deposit growth of 10.37% year-on-year, in line with industry growth level. Looking ahead, we will continue to leverage our digital platform and value chain strategy to expand transactional CASA, maintain pricing discipline and optimize finding costs, reducing reliance of high cost funding and reinforcing our leadership in transactional banking across Indonesia. As [ profusely ] highlight, we prioritize our profitability and liquidity of our growth in '25. Since the first quarter, deposit has consistently grown faster than loan, allowing us to lower our LDR to 90.2% in the second quarter. In line with this focus, we maintained a stable loan yield trend despite pressure from bench market. In the other hand, light liquidity continued to put upward [ order ] on our cost of deposits in the second quarter, although the trend has improved between June and August. Despite the lower LDR in the second quarter, we managed to keep NIM at 4.9% level. In the first half of '25, noninterest income grew by 7.8% year-on-year to IDR 20.9 trillion, driven by treasury income and recurring digital fees, both of which delivered double-digit growth. Digital platform continue to contribute strongly, lifting noninterest income to nearly 29% of consolidated revenue and highlighting the resilience of our diversified income stream. On the cost side, operating expense rose 20.2% year-on-year to IDR 32.7 trillion, bringing the cost-to-income ratio to 44.5% in the first half. This increase was largely due to one-off post-audit adjustment. While this factor temporarily elevated costs, they are nonrecurring in nature and position us well for stronger execution ahead. Accordingly, we expect the cost-to-income ratio normalize toward our 40 up to 42 target range by '26. With regards to asset quality, as June '25, loan at risk improved slightly to 6.92%, reflecting disciplined and selective bookings. Our coverage level remained robust. Bank-only NPL coverage stood at 207.3% in June, well above our 230 internal threshold. Loan at risk coverage also remained strong, 44.5% on consolidated basis and 42.4% bank only, both above pre-COVID benchmark, providing a solid buffer against the onsite risk. Looking ahead, we remain confident in sustaining healthy asset quality throughout '25. Loan growth will continue to be anchored in our prudent underwriting and supported by strength of our [ Feligen ] ecosystem, reinforcing both profitability and resilience. Now let me talk -- now walk you through our financial highlights, starting with the balance sheet side. In the first half of 2025, we maintain our balance sheet healthy. Assets grew by 11.4% year-on-year, driven by loan growth as we shift our asset mix toward high-yielding assets. Our liability grew by 12.2% year-on-year, driven by third-party fund and wholesale funding as our effort to maintain stable liquidity ratio. Third-party fund grew by 4.56% Q-on-Q, higher than Q-on-Q loan growth at 1.72% as our effort to lower LDR toward 90%. We will continue to prioritize deposit growth, particularly transactional value chain CASA and reduce funding costs and further optimize the funding mix. Moving to the P&L side. Total interest income grew by 12.9% year-on-year, driven by loan interest income while interest income from bond declined 7.84% year-on-year, reflecting our strategic shift towards higher-yielding loan asset. On the funding side, tight liquidity pushed interest expense up to 26.1% year-on-year and NEE -- which temper NEE growth. Nevertheless, NII still increased 6.73% year-on-year. Noninterest income rose 7.82% year-on-year, supported by both recurring and nonrecurring fees, bringing total revenue growth to 5.43% year-on-year. On the cost side, we -- as we previously mentioned, OpEx increased 20.2% year-on-year as we booked one-off expense in '25. As a result, PPOP declined 6.43% year-on-year, while net profit decreased 7.89% year-on-year to IDR 24.5 trillion. We are revising down our loan growth guidance to 88% up to 10%, reflecting softer loan demand in the first half. We expect loan growth in the second half to be stronger, supported by higher government spending and continuous dovish BI policy. For NIM, we also revised our guidance to 4.8%, up to 5%, reflecting a let rebound of industry liquidity in '25. Lastly, with LAR improving and coverage still ample, we are lowering our cost of credit guidance to 80 basis points up to 100 basis points. I would like to now pass the presentation to Pak Danis, our Risk Director. Please, Pak Danis.

Thank you, Ibu Novita. Ladies and gentlemen, allow me to provide an update on our asset quality as of June 2025. In line with our conservative loan growth strategy, asset quality remains resilient, reflecting disciplined underwriting amid a challenging macro backdrop. Loan at risk improved to 6.92% in the first half, supported by selective growth in wholesale and targeted expansion through our ecosystem value chain in retail. And we expect LAR to remain stable at around 7% in the medium term. Our prudent approach has kept NPL formation highly manageable, enabling us to revise down our 2025 cost of credit guidance to 0.8% up to 1%, while booking lower credit costs in the first half. Looking further ahead, we expect cost of credit to normalize to 1.1% to 1.2% in 2026, which represent a more sustainable level. Meanwhile, we remain well provisioned with consolidated LAR coverage at 44.5% and consolidated NPL coverage at 246%, well above our long-term comfort level of 230%, providing a strong buffer against potential downside risk. With this foundation, we are confident in sustaining healthy asset quality, underpinned by robust risk management and the continued strength of our value chain strategy, which ensures both profitability and resilience. Finally, let us discuss on our capital positioning. As of June 2025, Bank Mandiri capital adequacy ratio increased to 18.4% from 17.3% in first quarter '25. Looking ahead, we aim to maintain CAR and Tier 1 in the 18% up to 20% range of the near- to medium-term balancing capital efficiency with sustainable growth. And now I would like to pass presentation to Pak Tim, our operating directors, to continue the presentation on our digital. Please, Pak Tim.

Thank you, Danis. Good morning to all of you. I'm going to take my presentation actually in 2 parts. The first one, I'm going to provide the progress on our retail and then cover on the wholesale as usual. I think all of you have been following how Mandiri has progressed. I'm very happy to provide update that just in 4 years after we launched all our capabilities in the digital format for our clients, we have gained strong adoption. It is almost nearing 100%, and therefore, Livin' has become the primary gateway to drive up our retail transactions. As you can see, the registered users remain strong. The growth is encouraging. But what's more encouraging is we can see that the addressable customers that use Livin' has touched 96%. And at the same time, we can see that all the accounts opened, the new bank accounts to Bank Mandiri opened 91% has been done through Livin'. So what it does with this addressable being in Livin' is obviously transactions. And as we have been positioning ourselves, the reason these apps are developed, so we become the transactional bank. And you can tell across the board at the chart that is presented from frequencies to values, to fee-based, the growth has been very phenomenal and strong. And the growth of savings balances that is the most important of this all, 87% now is all linked to Livin'. Let me move next to say that why is Livin' so strong, because obviously, because we have been providing the right use cases, and we continue to find the right use cases, not neglecting the customer experience. So this has positioned Livin' from an everyday payment perspective that can answer domestic, national needs of our clients with strong engagement. You can see that since we launched QR not too long ago, today, QR has positioned itself as the #1 feature in Livin', which is before was transfers. Now QR has become that. And you can see the shift that we see in the market from wallet apps to banking apps now, and the growth has been phenomenal. When we started to -- as a baseline in first half '23, today, we're 7.7x of that, being the #1 feature. When it comes to beyond domestic, we do cross-border comprehensively. We have introduced remittance, as you have known, and we believe we are 1 of the most competitive with 18 foreign currencies where we can enable our clients to send money to. And at the same time, we developed tap capabilities for payments with multicurrencies as well as QR cross-border. So what it does is actually for our clients that are traveling internationally, for example, with these capabilities, they can fund their own foreign currency accounts in Livin'. And when they go tap using our capabilities, they can directly tap into their source of account that is of the same currency, for example, if I were in Singapore, I have a Singapore account. I can tap using my Singapore account and therefore, as a source of repayment, so I don't have to go through the FX through the exchange. And you can see that the transaction frequency has increased significantly to 21 points of an x. Let me move now to -- we have been talking about wholesale bank with ecosystem drive that we get into the retail. And what it is, is actually salary-based loans from our wholesale ecosystem for our top corporates. So all the top corporates of Indonesia are our clients. You can see that we have introduced various loan products since our launch in October, but now we are moving forward with the likes of mortgages and Livin' auto. And again, it's showing a strong adoption with great progress where we can see that the value has gone up significantly from when we launched only in 2024. Livin' auto, Similarly, when we launched in the last quarter of 2024, today, we are seeing a strong progress adoption. Let me move now to beyond the loan side to the other parts of capabilities that we have been focusing to developing good use cases with the investment. So with Livin', in a single app, I can onboard transactions without moving out and in, and everything is on the app and allowing them to trade with well-curated investment products. So we have enabled trading account openings now in Livin' through our securities company, which is Mandiri Sekuritas. And today, within Livin', we can see that account openings for trading has gone up significantly since we launched in first half '24 to where we are today, 8.2x. We have allowed stock trading, and as a result, for retail stop trading, similarly, we can see a strong increase. So the theme has been consistent across the board. But what is more exciting now, not only we have launched primary bonds. We do have now secondary bonds that we just recently launched, and we are hopeful that this would be perceived very strongly in the market and the data shows since early launch. Let me now move to the next one to say that for Livin', we will continue to upgrade, but I think what has been consistent is funding the right customer experience. The use cases that we provide, the features that we have is reasonably comprehensive, but we will continue to improve that in order to drive engagement and more importantly going forward, is connecting the ecosystem where I'm going to talk about Kopra later on, that we bring Livin' into this. And obviously, it's all about targeting the new segments for our expansion. So very soon, we're going to be launching 2 exciting new progress that is going to be embedded within loyalty program and with the new customer segment. Let me now move quickly to address our Livin' merchant. We have launched this. And today, the -- what is important is not only the clients that have signed up to use this, is showing 35% year-on-year increase to 2.8 million now because we have a clear business case and model for MSME merchants where we can penetrate through onboarding through online and this technology or a solution through Livin' merchant can be paused at the same time as a merchant solution for acquiring. So what is important is the onboarding is very fast. We take all types of payments already, QR, including card acceptances for debit and credit. And at the same time, now what is important is real-time settlement. So for MSME, when we launched, we did 3x real-time settlement a day. Now today, we move to real-time settlement. You can see that as an outcome, the transactional frequency has significantly gone up. The previous update we did was it has surpassed EDC. Today, it has surpassed EDC by 1.8x. Let me now move to our platform for Kopra, which is the wholesale. The transaction, the same theme. The transaction growth has been phenomenal. You can see from the graph. So all -- we can see the result is where we look for the current accounts. In Livin', we look for savings. In this part is current accounts and the drive for that is all transactional. Let me move next just to quickly update. I think I'm reasonably confident to say that the one-click access that we provide on our platform is now really on par with global standard. And you can see that if I were to group all of them from cash management, trade AI-powered and integrated ecosystem, I think we are leading, but to be fair, because we are not just a wholesale but we have got a strong retail franchise. So you can see that from a Livin' perspective, if we were to compare with all the other domestic and global banks, we have been able to perform an integration where wholesale needs for treasurers. Liquidity management is done through this. Working capital is done through this. And we use business intelligence as advisers from the AI power that we have. But more importantly, it's the last part, which is about connecting the ecosystem through Kopra partnership with our Livin' and Livin' merchant. I'm just going to show you the next slide to see -- to show you the importance of transactional where we -- client engagement drive higher balances. So when we see with Kopra, the high engagement clients means they do 500 transactions or more in a month. The moderate is about up to 200,000. Basic would be 80 times to 200. As you can see that when we correlate this with the data, the 1 that has got high engagement has got 12x more balances. This is exactly what we are going for. So how do we do that is, again, by the right experience and the right use cases that you can see on the right. Have updated before, our liquidity management is probably one of the best today with the capabilities of the companies even to structure their own accounts. We do have proactive collections capabilities as well as payables capabilities. And at the same time, now connecting for both retail and wholesale, where they are interconnected. Just going to move next quickly to -- nobody talks about technology without mentioning AI. I do want to mention that we are investing heavily with agentic AI and AI in general. So it gives a lot of insight to drive the business growth. So that's where we are using a lot of these data points, where we have 200 data scientists dedicated to do this. And a lot of the things that you can see on the chart, whether it's productive improvement, revenue growth or even better risk management is down through our AI capabilities. So that would conclude my presentation on the digital side. And I think I'm going to move straight into ESG, Lau? Correct?

Yes, go ahead.

Okay. Let me take on ESG update. I'm thrilled to actually now present to you we have been talking about ESG, being serious about ESG. You can see that MSCI, which is an external party, has given us a double notch upgrade. We have moved up from BBB in 2024 to AA now. And what's quite exciting is to see how we are compared to all the larger national banks in Indonesia. So our jump in rating is probably the highest jump. You can tell from those numbers without me mentioning it, but I think it's worth mentioning to say that we are serious, hence the significant increase. How do we -- how did we do it? I think we have been very clear. We have a clear framework that we are executing it with discipline in the different pillars. Therefore, from governance, we are showing a strong governance increase from disciplined execution for operations and beyond banking, you can see the increase. From policies, we can see the increase. And even for the portfolio, which I'm going to unpack a bit more in the next page. So all in all, I think the recognition is appreciated, but it's showing our commitment and progress towards ESG agenda for the bank. Next, I'm just going to show that we remain committed to accelerating our financing with purpose and at the same time, putting all the guardrails to show that we remain on track with our ESG progress where the portfolio for sustainable portfolio has grown strongly to 3 and 4 -- 304 trillion, which is showing a strong increase. But more importantly, I think we are pleased to share that our green financing has been growing strongly, and that is supported, as you can see the breakdown below, be it a sustainable agriculture, renewable energy, eco-efficient products, clean transport, water and obviously, from a MSME, we continue to support that. The disclosure, which is a very important part of our ESG framework, we are continuing to look from the perspective of enhancing. Not only we have got all the existing, but you can tell that -- how we have been serious about enhancing the policies across for environmental, social and also governance related, be it code of conduct, AML and so on and so forth. So now let me move to our sustainable operations bid and as well as beyond banking. I think we -- as a company of this size, we remain committed to continue to drive towards 0 NZE or NZE by 2030. And the progress is showing our dedication and commitment where we will continue to push to achieving NZE by 2030. On a diversity side, I think we remain committed. You can tell that Bank Mandiri's gender diversity for manager level is very strong at 46% are women. And when it comes to total employees, even better, 52%. From a sustainability banking perspective, we will focus on the areas that are aligned with the country all the way from [indiscernible] this file or disability community that we support. [indiscernible] Roman, which is empowering and upscaling MSME, the number is growing. Rice milling, which is important of part of the nation now and obviously, [ Mandarisabarcu ]. Last but not least, I think I want to mention that for our digital platforms, we are supporting MSME for nonurban merchant has a penetration of 62.25%. And urban is actually lesser now. This is where MSME is going to be continued to be supported strongly with our digital platform. So that will be the end of my update, Lau. I'll hand it back to you. Thank you.

Yes. Thank you, Pak Tim, and thank you to all speakers that have presented. We will now move on to the Q&A session. To ensure an efficient flow, we will go one question or one person at a time. I understand that some of you have probably have typed your questions in the chat box, but we would appreciate if you can ask the questions directly just to make the discussion more engaging and to have better interaction. We'll give 10 to 20 seconds just to give time for all of you to raise your hand if you have any questions. And we'll call out your name. Unmute your mic and please ask your question. Don't forget to let us know your name and your institution. Thank you. We'll give it 10 t0 20 seconds. Operator, if you could identify the hands raised here because we can't see it from the front. The screen is blank.

All right. The first question comes from the line of Melissa Kuang of Goldman Sachs.

Can you just share on the OpEx side, how much in notional was the adjustment post audit?

Hello?

Can you hear me? Hello, can you hear me? Hello? Can you hear me?

Yes, we -- sorry, there's a bit of a volume issue. We can hear you, but not so clearly.

Okay. Maybe I -- can you hear me now better?

Moment, Melissa. This is on our side. Melissa, can you try one more time?

Okay. Can you share on the OpEx side how much in notional was the adjustment post audit? And what caused the need for the adjustment? When you mentioned CIR ratio to lower to 40% next year, how much are you expecting OpEx growth year-on-year for 2026? That's my first question. The second question is the additional IDR 55 trillion liquidity that you received. What do you think is the impact to your funding cost? Does this really help lower overall funding costs with this liquidity? And also on your loans growth, how are you going to expect to do and push on your loans growth? Is there a time line you need to lend out this money? And in terms of your new loans growth and NIM guidance, has this all been taken into consideration?

Let me answer your question, Melissa. Thank you for your question related to the OpEx. So this June, we post -- we book our one-off OpEx recognition due to the post audit, and the amount is around 10% up to 12% of our total OpEx. And we will recognize this one-off post-audit adjustment in '25 starting this June. And then it will reflect on our NIM guidance -- sorry, tier guidance, cost-to-income ratio guidance is around 45%. And for next year, we expect normalizing trend, our cost-to-income ratio back to the Mandiri level around 40% up to 42% consolidated basis. And next year, we expect our OpEx growth is, yes, around single -- low single digit on a consolidated basis.

Thanks, Ibu Novita. And maybe for the IDR 55 trillion, in general, and I think the spirit of the initiative is something that we highly appreciate, especially provided the challenging liquidity environment that the banking system is in over the last few quarters, if not, years. So clearly, additional IDR 55 trillion for us and IDR 200 trillion for the system is something that we highly appreciate and potentially on the medium term would be positive. However, there are details that is needed when it comes to the execution and the use of the IDR 55 trillion. Further detail about what does the government mean by real sector, for instance, what products are allowed, what products are allowed both on the asset side of the equation and the liability side of the equation, whether or not Central Bank placement on the BI facility is allowed, so on and so forth. So as we speak, this discussion is ongoing. And the IDR 55 trillion today is sitting with the bank at a cost of funds of -- an annual cost of funds about 4%. And to give you a context, if in a situation where the placement at the Central Bank facility is allowed, there is a 25 basis point for us. And on a net-net basis, if that's the case, and that is to be done, generally, that will be ROE accretive as leverage goes up. But again, before concluding the actual impact of it, more details is needed before the bank can actually execute the IDR 55 trillion. In terms of growth and whether or not IDR 55 trillion can be easily disbursed toward growth, we won't say that is easy, but clearly, it's not impossible, provided our size that is quite big. For instance, Bank Mandiri's second quarter total disbursement of loans amounted to IDR 220 trillion, something that you can find on the Slide 25 of our full pack presentation. We disbursed IDR 100 trillion of corporate, IDR 50 trillion of commercial, IDR 10 trillion of consumer, IDR 22 trillion of disbursement of small, and we booked -- we disbursed IDR 20 trillion of micro as well. So clearly, all those numbers adding up [ IDR 220 trillion ] is higher than IDR 55 trillion. So I think when it comes to capacity and engine to grow, our size does help, but again, we need to be very careful and very -- ensure that we have all the governance in place before we start executing the -- this initiative. And as regard to whether or not this is -- this has been incorporated in our loan growth and NIM guidance, the answer is yes. Good. The next question has come from the line of Harsh Modi, JPMorgan.

Sorry, I am in a car, so there must be a bit of a lag. But one question -- a couple of questions. One, if I look at your LCR, it is lowest in 5 years. How low can the LCR go from here? And what are the implications? And second question is on loans at risk, was there any change in the definition of the calculation of loans at risk? And sorry, the third question is one-off. I'm unclear a bit on are there any one-offs on either NII interest income or expense or on the cost side of it. I did not get that very clearly.

Sorry, can you repeat the last part on the cost side of, we missed you?

On the net interest income or on operating costs, are there any one-off items? And could you quantify that? I missed that part.

All right. Give us 3 seconds here. All right. I'll let Danis to talk about the LAR definition, Ibu Novita to talk about the OpEx one-off, and I'll try to address the liquidity coverage ratio as well as the NIM side of the equation. [Foreign Language]

Related to the question that do we have to change -- do you have any plan to change the definition of loan at risk, definitely, we don't have any change, any chance -- any plan to change the definition of loan at risk. I think the definition of loan at risk still the same with current definition.

Thank you. Ibu Novita, [Foreign Language]

Thank you, Harsh. Let me answer about the onetime OpEx and also on the onetime NIM, one-off post audited. First, on the OpEx, like I already mentioned earlier that we have one-off adjustment from the post audit, and the amount is around 10% up to 12% of our total OpEx is related to the 1 adjustment on the post audit. And we start to book that adjustment since June and until by the end of this year. And so it reflects our OpEx growth on the consolidated basis is around 23% up to 25% consolidated, and bank only is around 30% up to 30% OpEx growth by the end of this year. And it will impact our cost-to-income ratio around -- we can -- we expect our cost-to-income ratio is around 45%. And we hope that next year, cost-to-income ratio will stabilize again to the normal level around 40% on the consolidated basis. And then in terms of NIM, net interest margin, yes, we have also one-off in regards to the revenue recognition on our -- one of our product, mortgage loan. We recognize the revenue coming from the one specific product, which is mortgage. A small part of our mortgage product still on the recognition, noneffective interest rate. And due to the audit adjustment, we adjust this recognition to comply with the regulation in effective interest rate basis.

And on liquidity coverage ratio, the LCR, the level we're at now is at 131%. That's the June number. Just as a context, the regulatory level is at 100%, so we are 300 -- we are 30 percentage points higher than the regulatory level. And we do plan that the LCR level to stay around the level we're at towards the end of the year. And this is something that has not incorporated the IDR 55 trillion additional, which happened just recently. And that one would come as a high-quality liquid assets, which is essentially accretive to the LCR. So I think on an LCR context, we are pretty adequate, higher than the regulatory level. And we would like to maintain it stable at this level and probably higher with additional liquidity we just received for the rest of the year, at least in 2025. As regard to the net interest margin, I think Ibu Novita has explained partly on that. But essentially, the 4.9% net interest margin that we had -- we have in first half 2025 would have been about 4.80 high without that small one-off basically.

Great. Sorry, just to understand, if I heard you correctly, next year, you are basically guiding for costs to be up 6% to 7% from the total cost base of 2025. Is that what the guidance I heard? I'm just trying to understand, is it really a one-off? Or is it kind of embedded in the numbers now going forward on the cost?

So basically, a big part of the post-audit adjustment has been incorporated and embedded in the June number. And some of them would be basically coming on the subsequent months. But in full year 2025, you will see a full recognition of that. And that is embedded in the expectation of 45% cost to income ratio on a consolidated basis for full year 2025. Now that will not -- none of that will be carried into 2026. And therefore, the pressure on costs in 2026 will be far, far, much lighter. And as cost normalizes toward the BAU sort of operationals, our cost-to-income ratio from 45% in 2025 expected will very much likely to move and trend toward the 40%, 42%, probably 40% in 2026. And on a growth context, this is to add to Melissa's question earlier, we are likely to see on a best case scenario, high drop, big drop in OpEx growth in '26. On a moderate case scenario, probably a flat, if not, a slight decline in OpEx year-on-year next year; and on a worst-case scenario with single-digit growth of OpEx. So that's the details, Harsh.

Okay. And if I could just ask one last question on Slide 34. I see recovery rate going up very significantly to 110%. How sustainable is it? And what number should we think about for 2025 and '26 in terms of recovery? That was my last question.

So I think that 110% is a function of lower write-off. That's number one and as opposed to unusual high recovery. So for example, if you look at this slide, I don't know whether the slide is shown here, but if you look at slide, the chart that Harsh was pointing at, The write-off is much lower now. So in the first half '25, our write-off was IDR 2.81 trillion versus IDR 7.37 trillion in first half '24. So clearly, our write-off has gone down from a historical level or at least in the last few years' level. But if you look at the recovery rate in first half '25, it was actually very similar across the last few years. Last year, we had IDR 3.03 trillion. So for recovery -- so hence, the ratio is 100%, if not, higher. So for recovery, Harsh, it's -- we believe that we will have more recoveries in the second half. We are aiming at around anywhere between IDR 6 trillion to IDR 8 trillion. But as you know, recovery is pretty complex in the process. It's easier to talk about the pipeline, not the time line for recovery. So I think it's worth noting that the write-off -- the written-off loans has gone down meaningfully in that half. Yes. We'll take 2 last questions, and it would be great if we limit 2 questions per person. So from Jayden, Macquarie; and [ Joshua ]. We'll start with Jayden.

I just wanted to understand a bit better on the lending rates. I think on Slide 29, you can see that the consumer loan yield picked up. I assume that has to do with the recognition on effective interest rate basis. Can you let us know what the consumer yield would be on a normalized basis? And then my second question related to loan yields as well as. With the IDR 55 trillion that's coming in and the recent BI easing, I guess, one, you're expected to land all of the money and BI has expressed a view that they want lending rates to come down to reflect the recent rate cuts. How do you see the outlook for loan yields in that kind of environment, especially in segments such as corporate and commercial?

So on the first question, what would the consumer yield be without the one-off. If it's okay, we'll get back to you, Jayden, after the call and to everyone that is -- that joins the call right now, sorry. Yes. But it would be around -- it would be flattish. So we'll get it back to you with a more accurate sort of figure. But a ballpark number for now is that the 9.03% of yield in consumer would be similar to the level that we had in 2024, which is about 8 percentage. So that's on the first question. On the second question, I think, in general, the IDR 55 trillion additional liquidity, we explained that earlier that we have to wait for additional clarity on what segments, what sectors that we can lend to and what instruments on the liability side that we can place this additional liquidity on. So that's something that we're still looking. But in general, an easing BI environment, an interest rate decline environment from the -- driven by the Central Bank, is something that might be yield challenging for the corporate segment, especially due to the benchmark nature of it. But for commercial and other segments such as small, medium enterprises and other -- especially for our subsidiaries is actually either no impact, if not, positive. Most of our subsidiaries would actually benefit from rate hike -- rate cut environment. Multi-finance are largely funded by bonds. As a lower rate, obviously, is good for cost of funds, so on and so forth. But I think the short answer is that our net interest margin guidance of 4.8% to 5% has incorporated a Central Bank rate decline toward 4.25% from 4.75% just recently, which means that we do incorporate 50 basis points of extra rate cut into our NIM guidance already. Was that clear, Jayden?

Yes.

Thanks. Yes. So maybe last question from [ Jishuan ].

Am I audible. I just have one follow-up question on the cost side. First of all, I'm sorry to harp on this, but when you say 10% to 12% of cost, are you talking about 10% to 12% of the first half cost or second quarter cost or June cost -- June month cost?

It's a total cost full year.

10% to 12% total cost full year. And do you mind share with us what's happening in the audit because there's a big change? Is it change in the way on how we book cost going forward? And if you can give an example would be very helpful. Or is it a back booking of previous cost? Or is it a combination of both?

Unfortunately, it is confidential. We are -- we have high limitation in the disclosure of the audit as for internal regulations governance and on the regulatory context. We'll talk about it, if you need, after the call, but unfortunately, not much disclosure we can share on that.

Got it. So if I hear you guys correctly, basically next year, FY '26 -- sorry, FY '25, the cost growth, just Ibu Novita, is you saying 20%, 23% cost growth consolidated for 2025? Just want to check what I hear you correct.

OpEx growth consolidated -- your question is about OpEx growth...

2025, yes. So including these one-offs, these audit [indiscernible] the rough bridge?

Yes. Yes, '25 OpEx growth year-on-year, including this one-off post-audit adjustment.

Yes. So what's the growth roughly? Sorry, I missed the...

The full year '25 growth will be very similar to the first half '25 pace, which is at anywhere between 25% to 26% year-on-year.

Got it. And on top -- so 2026, on that base, we are looking for base case, as you would say, flattish to worst case low single-digit growth.

Yes.

Got it. Sorry, just on the loan guidance, just including the IDR 55 trillion additional money we got and the deployment of that, right?

With -- yes. The answer is yes. Thank you. Thank you very much to all participants, investors and analysts. I'm happy to receive more questions, and we will respond as fast as possible. And thank you again to all speakers. Have a good rest of the day. Thank you, and good weekend.