PT Bank Mandiri (Persero) Tbk (BMRI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you for joining us, and welcome to Bank Mandiri Full Year 2020 Results. My name is Simorangkir Ronald. On behalf old Investor Relations team, I will be your host for today. Before we begin, there are a couple of things that we would like to address. First, for those of you who are joining us, we strongly encourage you to download a copy of our presentation and financial statement currently available in our website in the Investor Relations section. And second, during the entire session, we will disable the raise hand buttons and chat features. And therefore, if you would like to ask a question, please send an e-mail to our e-mail address. That will be [email protected], and please state your name and your company on the subject of your e-mail and your questions on the body of your e-mail. And with that, I would like to hand it over to our first speaker, our CEO, Pak Darmawan Junaidi.

Thank you, Ronald. Good afternoon, everyone. On behalf of my fellow Board members, I would like to thank you for your participation in this earnings call. Before going further to the full year 2020 financial results, allow me to convey some key highlights on our performance. Despite various concerns on the COVID-19 pandemic outbreak, Bank Mandiri continues to deliver a resilient and credible performance in 2020. During this past period, we proactively identify and monitor our loan portfolio and set up a very thorough process to restructure our loans impacted by COVID-19, while upholding prudent and conservative policies regarding provision and income recognition. On the other hand, we also impose a disciplined expenses policy to keep our operations as efficient as possible. This year, it will be still very challenging. But since we have built a solid ground in 2020, we are confident that we -- that by sharpening our business strategy aligned with our corporate plan, we would be able to bring positive value to our stakeholders. Despite all the uncertainties, we still managed to grow our loans by 7.1% year-on-year while conservatively build up provision for loan impairment. This third-party fund grew strongly by 12% year-on-year, supported by strong growth both in our CASA and time deposit, while bringing down cost of fund by 30 basis points. We were able to maintain our operating expenses at a significant growth of 1.4% year-on-year as a result of our discipline in expenses management. Our PPOP decreased by 5.1% to IDR 46.1 trillion mainly due to lower net interest income. We will have a detailed discussion on financial performance later on. With regards to the COVID-19 restructuring progress, by the end of 2020, we have approved more than IDR 120 trillion of loan and there is more significant changes during the last quarter. Total COVID-19 restructured loan outstanding was 12.2% of our total bank-only loan. This is lower than what the total Indonesian banking had at 18% according to OJK statistics. In terms of provisioning, we gradually built additional provision for corporate restructured loans since they stopped the program in second quarter of 2020 as part of our strategy to anticipate potential downgrades from higher-risk loans after the restructuring period ends. In December 2020, Indonesia's financial services authority, OJK, issued the POJK 48, an updated regulation regarding COVID-19 loan restructuring, allowing banks to extend their restructuring period by 1 year, thus extending the end of program until March 31, 2022. The updated regulation allow banks to extend loan restructuring selectively and requires banks to build sufficient provision for high-risk restructured loans, which, in fact, is already in line with our policy. We continuously review and monitor all of our COVID-19 restructured loan. As of December 31, 2020, 64% of them are considered low risk, 25% are medium and 11% are considered high risk. We expect to see around 40% of these loans will be expanded. One of the anticipated impact of this expansion would be to our net interest income as we carry out cash basis accrual policy for the interest income coming from COVID-19 restructured loans. NPL recognition will be slightly below as well, but it would still be below 4% level. We also expect no significant impact to cost of credit as we have built up additional provision for high-risk COVID-19 restructured loans in 2020. As part of our strategy to improve cost of fund, in last quarter of 2020, we continue our program to lower time deposit counter rate while on parallel reducing the total amount of special time deposit rate given to our customers. Our synchronized strategy to lower time deposit counter rate further to 3.25% and having at least 26.7% of special fund deposit rate brought our monthly cost of fund to as low as 1.97% and 1.92% in November and December 2020, respectively. Ladies and gentlemen, year 2021 will not be easier than 2020. While the progress on vaccines has given us light at the tunnel -- at the end of the tunnel, but uncertainties remain to exist. Therefore, we believe that only by sharpening our focus and stick to our 5-years corporate plan, we would have better chance to thrive and continue bringing remarkable results going forward. This year, we expect to unlock more potential from our wholesale clients' value chain, while pushing our regional offices to cultivate more local potential and leading sectors. We would like to accelerate sustainable growth of our micro and SME segment through digital innovation, thus enabling a healthy customer graduation from micro to SME to commercial as well. Last but not least, we will introduce more digital innovations going forward as we will continue to modernize our apps and enhance our core banking capability as part of our mission to shift customer transactions to online platform and becoming Indonesia's #1 modern digital retail bank. Now I would like to turn the presentation to Pak Sigit Prastowo, our CFO, to discuss more on the financial results. Pak Sigit, please.

Despite the exceptional and unprecedented circumstances for the past 12 months, the bank has continued to maintain the strength of its balance sheet that provides safety during the pandemic and allows room to grow prudently. As per our expectations, loan growth remains subdued in 2020 with 1.6% year-on-year contraction in December 2020. As a result, we placed excess funding into placement in Central Bank as well as tactically seeking for the optimal yield in government bond and marketable securities, which grew at 46% year-on-year. Our third-party funds grew strongly by 12.2% year-on-year, mostly driven by current account and time deposit that grew by 22% year-on-year and 9% year-on-year, respectively. We are seeing a strong inflow of deposit despite multiple cuts in time deposit rate, reflecting our solid domestic funding franchise that continue to boost customers' confidence during this uncertain time. As deposit inflow was strong and exceeded loan demand, our loan-to-deposit declined gradually from 96.4% to 83% as of December 2020, establishing ample liquidity. The bank's diversified funding base gave us strong liquidity and stable funding position as evidenced by our liquidity coverage ratio of 207.8% and net stable funding ratio of 125.2% in December 2020, the highest level we have had in the past couple of years. Despite some improvement on cost of fund, our net interest income declined by 4.9% year-on-year due to lower loan-to-deposit ratio as well as conservative accounting policy. In group, we do not accrue interest income coming from COVID-19 restructured loan with grace period concession. We did time deposit rate cut on September and November. We expect net interest income to start to recover in 2021. Throughout the pandemic, cost of funds have been the bank's top priority. Our effort to reprioritize expenses and to operate more efficiently have given us significant impact with only 1.4% year-on-year growth on expenses. We also have front-loaded the majority of COVID-19 loan loss provision in 2020. As a result, our full year provision expenses has increased by 89.7% year-on-year. Despite the challenging operating environment and conservative policy we adopted, we managed to book a positive profit of IDR 17.1 trillion in full year 2020, decreased by 37.7% year-on-year on the back of our credit cost, continuous OpEx savings and loan interest income growth. Our consolidated full year net interest margin is 4.65%, driven by a significant drop in interest income due to a lower demand coupled with our conservative interest accrual policy for COVID-19 restructuring loans, which contribute approximately 30 basis points to our NIM drop. Adjusted return on our equity decreased from 14.25% in full year '19 to 9.16% in full year '20. Our [indiscernible] debt is still relatively high as compared to our original base and is considered good enough during these unprecedented times. CASA ratio came up by 114 basis points year-on-year due to stronger inflow on current account. Our liquidity indicator, LCR and SFR, rate is on higher level as compared to that of the third quarter. NPL coverage reached 229.1% as we conservatively add more provision to higher-risk portfolios in anticipation for the future uncertainties. As you might be aware, over the past third quarter, we have consistently showing loan and deposit growth in term of daily average balance -- instead of ending balance to provide a better picture and more intuitive way to look at our portfolio strategy and to promote a more sustainable asset and liabilities management. As you can see on the left-hand chart, the daily average loan was stable quarter-on-quarter and still grew healthily by 7.1% year-on-year with 2 biggest contributor from corporate segment and micro segment predominantly coming from subsidized KUR loan. On the other hand, our deposits grew stronger than our loan, which resulted in ample liquidity. Current account grew by 22% year-on-year, and time deposits still grew by 11.6% year-on-year despite multiple cut in TD rates this year. On asset side, blended loan yield decreased Q-on-Q mainly due to conservative accounting policy of switching into cash basis for COVID-19 restructured loan with grace period. However, the Q-on-Q decline in the fourth quarter was 17 basis points lower than Q-on-Q decline in the third quarter of 37 basis points. On the funding side, cost of fund decreased considerably by 51 basis points Q-on-Q, driven by a significant drop of TD rate, coupled with our effort to limit our above-the-counter rate time deposit. As explained earlier, we are actively lowering our cost of fund to help alleviate the pressure of our NIMs. As a result, our fourth quarter '20 net interest margin improved by 39 basis point Q-on-Q compared to 31 basis points down in previous quarter. Next, our total noninterest income grew by 4.9% year-on-year, driven mostly by fee from treasury and income from subsidiaries. Mandiri Capital Indonesia become one of the biggest contributor as a result of [indiscernible] of IDR 1.3 trillion. We also notice a significant increase of 19.3% year-on-year increase from our online platform. On the other hand, fee from ATM saw a gradual decrease, proving that, in the pandemic period, there is a significant shift from our physical to electronic channels. As mentioned earlier, our total operating expense grew only by 1.4% year-on-year. The emphasis on cost control started on the second quarter of 2020. We have started to see the impact of -- on quarterly operating expense performance result, which was rather flat Q-on-Q bringing full year 2020 operating expense to grow relatively flat at 1.4% year-on-year. We expect to see the cost-cutting impact on subsequent period and still aim to flatten operating expense growth in this year. We are not only focusing and tightening our control on this year's operating expense, but also identifying activities that directly impact operating expense component in order to optimize structural shift in operating expense in the long run. I would now like to turn the presentation to Pak Siddik, our Director of Risk Management, to discuss more our asset. Pak Siddik?

Thank you, Pak Sigit. As we've guided in the previous earnings call, we have gradually built up additional provision for COVID-19 restructured loan throughout 2020. Just please note that additional provision is not really required under regulatory requirements, so this is our own initiative to actually be conservative in building up additional reserve for a portion of the restructured loans which we think will not be able to survive post-completion of POJK 11 and 48. Our consolidated cost of credit, as shown on the slide here, increased from 1.4% to 2.35%, of which 61 basis points was additional provision for COVID-19 restructured loans. So the remaining 1.74%, which is considered as business-as-usual cost of credit, remain at manageable level and also showing a significant improvement as compared to what we had in 2016, 2018 period. And this is again another evidence of our improvement in our credit risk management strategy in the past 4 years. COVID-19 loan specific provision, which added a lot in the retail banking segment, covering SME, micro as well as the consumer banking, including auto loans and mortgages, and this is basically to show that the pandemic has actually significantly affected both the productive segment as well as the consumptive segment. In the next slide, we want to show that the NPL ratio has improved slightly in the last quarter to give us end of year NPL of 3.1%. Our NPL coverage is 229% as we gradually added more provision to high-risk loans. And probably, our NPL coverage is probably one of the highest in the industry. Loan-at-risk ratio at 10.2% shows gradual improvement since the second quarter. However, if we included COVID-19 restructured loans, the adjusted LAR would have been around 20.8%. To give you a better picture, our adjusted loan-at-risk in September 2020 was probably lower than most of our peers. We are quite conservative in setting aside reserve for potential loan losses. In the bottom left table, you can see that the loan loss reserve for Stage 2 and Stage 3 were high at 31% and 86% level, respectively. Next slide, please. Our capital allocation ratio remains strong, shown by CAR and CET1 ratio at 19.9% and 18.8%, respectively. The decline in CAR was driven by the implementation of IFRS 9 and also the dividend payment. We expect to maintain CAR above 17% and CET1 ratio above 16% in the midterm. Given the high and resilient capital ratio, we do not expect to raise any capital anytime soon. We also want to continue to run our business prudently at around 12x leverage ratio. I would now like to turn over the presentation to Pak Rico, our Director of Information Technology, to present our digital transformation progress and strategy. Pak Rico, [Foreign Language].

Thank you, Pak Siddik. As laid out in the beginning of the presentation regarding our new 5-year corporate plan, we are aiming to be the best modern and digital retail bank in Indonesia by 2024. To meet emerging customers' expectations, we continue to invest the need for digital transformation at scale. We are implementing the 4 digital -- 4-pronged digital strategies, namely digitizing our internal platform, developing digital native products, modernizing our distribution channels and leveraging digital ecosystems. In developing digital native products, we are able to deliver 12-minutes digital saving accounts onboarding and lending applications process for less than 3 hours. We also have delivered more than 13 new features to support our customers' needs through mobile and physical channels. Meanwhile, we also have collaborated with more than 350 partners in digital ecosystem for account onboarding, payment transactions and also digital lending. Along with the ongoing transformation happening, we need to ensure that we continue to build out our human capital skill set and strengthen the framework of information security and risk management in order to be able to keep pace in this digital age. To have the foundations to be the best digital bank, we're continuously revamping our core banking capacity and systems to anticipate a huge digital demand. We have upgraded our core banking capacity by almost threefold, which resulted in 2.7x higher maximum transaction per seconds capacity and 50% faster processing time. And yet, we managed to also lower the maintenance cost by 80%. We accelerated the provision of our infrastructure by shifting from conventional models to cloud computing models, which has improved provisioning SLA from 2 weeks to 15 minutes and also enable us to provide more range of services. As we are automating our processes, we are also building our capability in big data analytics in order to be able to identify client needs, servicing them better and even launching product campaign in more efficient manner. We have also started modernizing our enterprise data management. We have successfully launched our online onboarding platform in April this year -- last year, actually, in which customer could open new accounts just by scanning QR in about 12 minutes end-to-end process. Customers no longer need to come to the banks and opening account can be done paperless anytime, anywhere. As of now, we are running at around 3,000 account opening per day. Currently, we have an average of 3,000 accounts already opened and -- 300 new accounts opened daily, and there are more than 323,000 accounts that have been opened via our online onboarding platform year-to-date and to increase -- increased by 78,000 from September 2020. In addition to online onboarding, another digital lending product initiative that we deliver is merchant lending. This is just one of the digital capabilities that we developed. Similarly, with online onboarding, our merchant lending can be done paperless, no face-to-face meeting, authorized by electronic KYC with digital signature and direct disbursement to customer accounts within less than 3 hours. From time to time, we are modernizing our mobile banking platform, Mandiri Online, with latest development include biometric login and more number of dealers and also QR code payment that is sponsored by Bank Indonesia. We are right now in the process of redesigning and re-platforming our mobile banking to enhance customer experience with services from our subsidiaries as well as external digital ecosystem. We believe integrating our services in one single platform will bring tremendous convenience for our customers as we are the most diversified bank with leading market share in every product category. Our internal transactions continue to show growth year-on-year, reflecting customer preference to use our bank for their transactions. For the first time, we finally saw transaction value done via our mobile banking apps surpass that via ATMs, which is a very encouraging trend that enables us to continue lowering network infrastructure costs going forward. Please note that average cost per transaction in mobile banking app is only around 1/4 of that in ATM. Since its launching, our mobile banking apps, Mandiri Online, has been very well accepted by our customer as shown by the number of active users that continue to grow. Currently, our monthly active user reached 4.5 million as of December 2020, and we still see ample room for growth in terms of number of active users as we have more than 28 million deposit customers in total. The transaction value conducted via our mobile banking also showed a strong growth of more than 40% year-on-year, which also translates to a fee income generated. And if you can see from -- you can see from the slide that even when our GDP contracted during this period, the number of financial transactions grew by 18% quarter-on-quarter. To accelerate customer adoption of our products, we are opening ourselves through the digital ecosystem by launching API portal in September 2020. Through this quarter, we want customers to be able to access our products and services through various platforms they are using in their daily digital life. For example, customers should be able to top-up e-money card from e-commerce website or apps when they are doing shopping. Another example is we also provide digital financing whereby our merchants in various e-commerce websites are able to apply for bank loans through their e-commerce platform without hassle as compared to going to our branch or opening our apps separately. As of December, disbursement amount in digital financing increased from IDR 48 billion per month to IDR 50 billion per month or increased by 11%. Indirectly, the number of frequency also increased from 50,000 transactions per month to around 60,000 transactions per month. Meanwhile, we have also added few merchant partners, namely [indiscernible] and et cetera. I would now like to turn the presentation back to our CFO, Pak Sigit.

Thank you, Pak Rico. Our 2021 growth was in line with our guidance of 7.1% year-on-year and the guidance for 2021 will be a single-digit growth. Net interest margin exceeded our guidance at 4.65% due to time deposit rate cut and cost of fund management -- sorry, and cost of fund management, and so far this year it would be 4.6% to 4.8%. Cost of credit was below our guidance at 2.35%. The asset quality performed better than we anticipated. Therefore, we do not need to book as much provision as we initially planned. And thus, for this year, the guidance is at 1.9% to 2.4%. I believe that concludes our presentation. I will now hand it over to Investor Relations team to coordinate the Q&A session. Thank you all for your attention.

Thank you, Pak Sigit. We will now begin the Q&A session. [Operator Instructions] And for the first question, we have a question [indiscernible] from Goldman Sachs. There are 3 questions. The first question would be, can you give us some color on why you expect loan growth in 2021 to remain at single digits despite the expectation of GDP rebound? And what factors will drive the recovery? I think Pak Siddik. The first question would be, can you give us some color on why you expect the loan growth in 2021 to remain at single digits despite the expectation of the GDP rebound?

Yes. Thank you. So basically, we are very cautious in terms of our estimation of the loan growth for 2021 even though we expect the GDP to rebound. We actually put a very specific target on each industry sector that we want to actually push aggressive growth for 2021 with a lot of uncertainties. And again, a lot of the loan demand, especially on the [indiscernible] and corporate sector, will be driven on the realization of the vaccination program throughout the year. So we have had a long discussion within the Board of Directors and BOC as well as the regulators in terms of discussing what should be the right number for the loan growth, and we come to a conclusion that probably, at this time, it would be wise to actually set the growth at around 5% to 6%. But we will evaluate the growth target every month, every quarter as we get more information during this quarter, especially in the first quarter and second quarter. In terms of the sectors, we will continue to focus on sectors and continue to be resilient during this pandemic, especially the FMCG, the food and then also the telecommunication sectors, the health-related industries. And then we will continue to see selective recovery for certain industry sector in various regions. And we will -- as probably Pak Darmawan has alluded earlier, we will continue to focus the growth strategy anchoring on our key corporate clients in corporate banking, value chain as well as the payroll accounts that are already with us so that we have our existing target market identified rather than going out there, identifying new target markets.

Thank you, Pak Siddik. The next couple of questions is asking about the moratorium impact to our portfolio. So the question would be loans under moratorium pipeline has increased from the previous quarter. Why is the case? And are we expecting it to further rise given the rise of COVID cases? And the next question is related to that. Given the rise of the pipeline of the restructured loans, do you see this will impact our cost of credit? And how much buffer do you expect to see in the cost of credit guidance?

Okay. For the loan and the restructuring due to COVID-19, the rate of increase has actually declined. So quarter-on-quarter growth for booking of the restructured loans, for example, in the second quarter, it has grown versus first quarter by 187% because that's the beginning of our implementation of POJK 11. And going to the third quarter, the growth was only about 14%. And going into the fourth quarter, the growth is only 3%. So -- and then we've identified all the potential pipelines across all segments, the remaining of those accounts that are eligible under POJK 11 and 48 to be restructured is now very low. So we would probably continue to do selective booking throughout 2021 on the restructured loans, but we do not expect a significant increase. So we've actually factored those into our prediction -- projection for the full year, including how much actually built-up revision that we actually want to do. And then in terms of the restructuring, how do I see impacting the cost of credit. So as probably with -- Pak Sigit has covered earlier, our cost of credit for 2020 overall was around 2.3%. And that consisted of the VA cost of credit of 1.73%. And then the additional provision we put in for COVID restructuring around 0.6%. So 1.7% plus 0.6% becomes 2.3%. And based on our projections, including the December numbers, for the rest of 2021, we'd probably come to around 2.1%, something like that and within our guidance, give and take. And then that still includes around 0.2% of the built-up provisions. So -- and again, these built-up provision are in anticipation of the high-risk loans if they need to be downgraded. If it turns out to be that these accounts actually can survive, we would be able to realize some of these potential savings. So I think we are quite confident that based on the data we've acquired in the last 9 months on how the restructured accounts for each segment has behaved, our give-and-take estimation of the high-risk loans and the restructured loans, 11%, is probably quite accurate, but we will update it along the way every quarter to you guys. So I think the additional provision of 0.22% for COVID is probably lifting the ballpark that we would probably need to provide if the high-risk accounts are not to be -- not being able to survive.

Okay. Thank you, Pak Siddik. Move to the next question. It's from Harsh Modi of JPMorgan. I think the first question is already answered by Pak Siddik earlier. The question would be, what was the reason for 2020 provision being lower than guidance?

Okay. I think that 2020 provision was lower than guidance, especially driven by the retail banking segment, which actually has performed tremendously well throughout the crisis. That is a testimony of our targeting, which we did in the last few years, how we actually disciplined -- in a disciplined way implemented portfolio mix and guideline across all segments so that the NPL percentage for retail banking segments, for example, in our original budget for 2020, we should end up at around 2.2%. But in fact, since reaching the peak at 1.9% in June, actually, the NPL has decreased to around 1.1%. That already includes the predicted NPL on the COVID restructuring. So we would expect that improvement in the flow rates and vintage quality to remain throughout the year. And that's one of the, I guess, driver of our confidence level that probably, in 2021, we would be able to deliver NPL rates comparable to 2020 or even if we can book more credit in 2021 because of higher credit growth, we would be able to deliver better NPL. And if you look at also cost of credit for the retail banking segment, we were supposed to end up at 4.5%, but we deliver 3.3%. While on the wholesale segment, we are actually delivering around the budget at 1.7%, 1.8%. So that's one of the reasons that actually positive surprises coming from the retail banking segment, especially in the last 2 quarters of the year.

Thank you, Pak Siddik. The next question would be from Jayden of Macquarie. The first question, how much of the restructured loan may be possibly need second round of restructuring? It was mentioned 40% that was [indiscernible]. Is that the proportion that needs the second round of assistance or is it closer to the 11% that identify as high risk?

Okay. So yes, I think as we explained earlier, we actually categorize the restructured loans into 3 categories: low risk, medium risk and high risk. Low risk are those accounts which we think at the end of the restructuring tenor would be able to survive and continue to pay back the monthly installment as usual. The medium risk are those loans who are surviving, but not at the level prior to pandemic. So they may need additional round of restructuring. But post that, they will be able to survive. The high risk are those which we expect not being able to survive. That's around 11%. So around 35% to 40%, we think that 35% coming from the medium risk and a few of them probably are from low risk, which we think that may be our estimation is too aggressive. So that's why 35% to 40% would be probably the right number which would need a second line of restructuring when the first round has ended.

Thank you, Pak Siddik. Next question is still from Jayden. Full year expenses grew 35% quarter-on-quarter and 4% year-on-year in fourth quarter '20. Overall, flat for full year, but any recent progress in the quarter relative to those prior which were at IDR 9 trillion versus IDR 12 trillion in the fourth quarter?

Yes. Thank you, Jayden. If we look at our pattern previous years, it always has been that in the fourth quarter expenses always increase. If we look at fourth quarter 2019, also, we booked operating expense around IDR 12 trillion. So if we compare with third quarter and fourth quarter, always the pattern historically increased. We booked some provision, some reserve on the fourth quarter, for example, a personal expense we booked for [ bonuses ]. Also for G&A, we also book for provision or reserve because the last quarter is the most expensive we must reserve and spend. That's for the other hand. On the fourth quarter also, the [ revenue ] of cost increase for the total bottom line, we still maintain good on fourth quarter. Thank you.

Thank you, Pak Sigit. Next question, last question from Jayden would be, any thoughts on the dividend? The bank is in a strong capital position and can support 10% loan CAGR. Is it possible to pay out 60% again this year?

Yes. Thanks, Jayden. I think with our capital level right now and also how we support all the dividend to the shareholders, I think for the 60% level for payout, I think we prepare for that level. But if asking for a bit more than that, also, we're still incapable to meet the requirement.

Thank you, Pak Darmawan. Let's move to the next question from Jovent of Indo Premier. Commercial remained a risky segment, as shown in high Stage 2 and 3 proportion of 27%, but why in 2020? Last year, commercial loan grew the fastest?

Okay. Basically, the high Stage 2 and 3 of Commercial Banking segment, that remains because of the legacy NPL issues that we had in the past that we have to carry, and they're all under various stages of a solution or finding recoveries. But if we want to look at the quality of the new vintages from Commercial Banking, we can show you that actually those loans, new loans, new disbursement, which we booked in 2018 until now, probably only 1 or 2 actually has actually been downgraded into NPL. The rest of them actually remain current. So I think that's one of the things which we probably want to emphasize that, in Commercial Banking, we continue to be very selective in growing, and we've actually revamped our strategy of growth. And then those that we put in the book have gone through pipelining process cutting before we even approach them. So I think, we will continue to carry probably NPL level at around 10% or 11% for the next 1 or 2 years, but that's more of, I guess, time that we need to actually resolve the existing NPL problems, but we do not add new ones in a significant manner into the portfolio. But one thing which I want to actually added to the explanation earlier for Jayden and Jovent as well on the restructured loans. I mentioned earlier that around 11% is -- actually is in the high-risk segment, right, and then around 60% or so in the low risk. Between now and end of the year, once, let's say, the low-risk restructuring accounts has ended the tenor and started paying back, we'll actually move them out on the portfolio of COVID because we have gone back to normal, right? So those that will remain is probably more of the -- those that need second line of restructuring or those that would be downgraded to NPL between now and end of the year. So for example, the high-risk inventory as of end of quarter 2020 is around IDR 15.8 trillion. At the end of 2021, we would project to be at around IDR 11 trillion. But the low-risk segment from IDR 91 trillion will go down to around IDR 42 trillion because the remaining of IDR 49 trillion would be reclassified as normal, non-COVID anymore, because they have finished the restructuring program and they're paying back as the usual pattern. So later on, there would be a change in percentage mix between low, medium and high as some account would be out of the C19 restructuring portfolio and gone back to normal, some will stay because they will take longer for restructuring in the second round or remain as downgraded NPL accounts. [Foreign Language]

Thank you, Pak Siddik. We missed some of the questions from Harsh Modi of JPMorgan. I think the question would be, e-channel fees have lots of moving parts, somewhat higher, but other e-channel fees was down. What is the nature of this, please? I think Pak Rico will...

Okay. Thank you. So basically, on the general fee, especially on the repo side, for full year 2019, we achieved IDR 2.5 trillion. For full year 2020, we achieved IDR 2.367 trillion, which -- around 5% down from last year so -- from the previous year. So this can be explained as well follows. the ATMs -- the fee from ATM has been decreased by around 7%. This is understandable, because during the pandemic basically, the ATM usage has been decreased because people are not going out as much. But it is compensated by the increase in the fee-based income from the Mandiri Online, which grows by 9%. The other channels, which is quite significantly impacted by the pandemic, is prepaid card and payment EDC. Prepaid card is mainly our e-money, which used in [indiscernible] mainly, which is we have a 70% market share. So this is clearly impacted, down by 36%. And EDC, which is merchant payments, down by 26%. So this is the nature of the fees -- repo transaction fees during last year. So for next year, we expect, as the business much -- going into a much better shape, hopefully, the merchant payment will also get back into the -- what you call the volume that the -- normal volumes as well as the prepaid card as well. But on the ATM, we expect the increase will not be much, but perhaps we also see some decrease on the ATM side. The reasons being that we also -- last year, we take down around 5,000 of our ATM. This is the ATM that has been quite old as well as not really optimal in terms of the usage. And even though if we take down around 5,000 ATM, it does not impact our transaction very much because we have already analyzed which ATM is used by our customer. We can shift the users to other ATM. And from the bottom line shape, we actually managed to get around IDR 200 billion to IDR 500 billion cost saving because of taking down this 5,000 ATMs. So I think that's the explanation for the e-channel. Thank you.

Thank you, Pak Rico. Move to the next one, comes from Andri Ngaserin at Crédit Suisse. I think he has some questions, some of them already answered by Pak Siddik. And the question would be, how much more room to cut cost of fund? I think Pak Siddik?

As we mentioned earlier that in November and September, we did cut of time deposit rate, and we believe that it will impact on full year 2021, and we target our cost of funds can decrease around 25 basis points and down from 2.5% at the end of 2020.

Thank you, Pak Siddik. I think we still have time for one more question, still from Andri Ngaserin. Fee income growth guidance for 2021.

Yes. For fee income, we expect a single-digit growth. We understand that we have opportunity to increase from transaction. That -- the other side, we have [indiscernible] for treasury because we believe on treasury side. 2021 is not as volatile as 2020. So we get a very good contribution for treasury in 2020, but maybe in 2021, we predict contribution from treasury is slightly lower. That's why we really predict on 2021 our fee-based income grow single digit. Thank you.

Thank you, Pak Darmawan, Pak Siddik, Pak Sigit, Pak Rico. That will conclude our analyst presentation for this evening. Thank you all for attending the session. For the rest of your questions that are not answered this evening, we will reply your e-mails. I will make sure your questions are well answered. Thank you for your attendance. Good evening. Thank you.

Thanks, everyone.

Thank you.