PT Bank Mandiri (Persero) Tbk (BMRI) Q4 FY2025 Earnings Call Transcript & Summary

Good morning. Good afternoon, ladies and gentlemen, and welcome to PT Bank Mandiri's Fourth Quarter 2025 Results Briefing, and thank you all for joining us today. My name is Laurensius, Head of Investor Relations. And together with us today are speakers, we have Ibu Novita, our CFO; Pat Danis, our Risk Director; and Pat Sunarto, our IT Director. Before we start, I strongly encourage you to download both our presentation material and financial statement currently available in the IR web page of Bank Mandiri. Ladies and gentlemen, we will start the analyst meeting or earnings call with a presentation from the Board of Directors, followed by the Q&A session. [Operator Instructions] We're also happy to take questions via e-mails afterward, and we'll try our best to reply to your questions as soon as we can. Now to start, I would like to hand the presentation to Ibu Novita, our CFO. [Foreign Language]

Thank you, Lau. Ladies and gentlemen, I would like to begin the presentation with a brief overview of macroeconomic environment and Bank Mandiri's positioning. Overall, the economy remained relatively stable with 4Q '25 GDP growth at 5.39%, supported by stronger consumption activity. Until the fourth quarter of '25, Bank Indonesia maintained its dovish stance, delivering a total of 3 rate cuts amounting to 75 basis points between June and September, bringing the benchmark rate down to 4.75%. We expect BI to maintain their dovish stance with 2 additional rate cuts with total 50 basis points anticipated in '26. This will support economic activity, which will drive the loan demand. In fourth quarter, we disbursed loan to SOE in charge which led to Bank Mandiri bank-only loan growth of 14.2% year-on-year, outperforming industry growth of 9.7%. If we exclude this loan, Mandiri loan growth expanded by 9% year-on-year, in line with our guidance. On the deposit side, we saw an improvement in the liquidity environment reflected in industry deposit growth, 13.8% year-on-year, while our bank-only deposits grew strong at 26.2% year-on-year. The improvement is driven by better liquidity environment and [ SAO ] placement for SOE in charge of affiliates cooperative program. If we exclude deposits from the government placements [ SAO ], our deposits still grew robust at 22% year-on-year. Lastly, as we maintain our prudent underwriting, our asset quality remained robust with NPL ratio at 0.96%, well below the industry average of 2.18% at December '25. The key strength and challenges during -- now we focus on the key strength and challenge during the quarter. Up until December '25, we observed a notable improvement in our cost of funds, supported by a more optimized deposit pricing mechanism. Our asset quality also remained resilient despite ongoing macroeconomic headwinds, reflecting prudent risk management and continued improvement in net NPL formation. We also delivered strong noninterest income growth of 14.5% year-on-year, further strengthening our revenue. On the challenge side, we saw yield pressure stemming from competitive loan pricing in a declining benchmark rate environment. While our ability to price higher yield lending loans remain limited, improvement in funding costs and liquidity conditions have allowed us to safeguard NIM stability. Meanwhile, retail loan growth remained modest with 1.8% year-on-year growth in 12 months '25, as we deliberately maintain a prudent stance amid softer retail economic condition. We will remain selective in expanding our retail portfolio book and focus on value chain-based lending. Lastly, OpEx growth remained elevated, continuing from the previous period due to post-audit adjustment. However, our internal efficiency initiatives helped maintain consolidated OpEx growth stable at 15% year-on-year with consolidated CIR at 43.5% in 12 month '25. Our CIR level has improved from 44% level in 9 month '25. As a result, in 12 month '25, our consolidated loan growth grew by 13.4% year-on-year, above our guidance level as we disbursed to SOE in charge of [ village ] cooperative program. If we exclude this loan, our loan growth was at 9% year-on-year, in line with our guidance. Our net interest margin also managed within our guidance level with 12 months '25 at 4.89%. Lastly, our provisioning remained ample, with current level at 58 basis points, better than our guidance of 80 up to 100 basis points due to healthier credit profile with lower net downgrade. Now let us move on to profitability metric of the bank. Overall, net profit trajectory saw an improvement on quarter-on-quarter basis. In fourth quarter of '25, our net profit reached IDR 18.6 trillion, increased by 39.8% Q-on-Q and 35% year-on-year. Additionally, our PPOP also improved to IDR 25.7 trillion, up to 22% Q-on-Q and year-on-year. On the lending side, we maintain a disciplined stance. Our consolidated loan portfolio grew 13.4% year-on-year to IDR 1,895 trillion. In parallel, we continue to strengthen our liquidity with CASA deposit rising 12.6% year-on-year to IDR 1,431 trillion, supporting balance sheet stability. Improvement in liquidity condition helped lower the bank cost of funds. On the other hand, loan yields stood at 7.55%, resulting to a stable NIM of 4.89% for the full year '25. Risk discipline remain a key strength. Cost of credit improved to 55 -- 58 basis points, reinforcing asset quality and overall balance sheet resilience. Return on assets stood at 2.14%, while return on equity improved to 20.3%, underscoring our consistent ability to deliver healthy and sustainable return amid a challenging macroeconomic environment. Ladies and gentlemen, the chart above shows loan growth by segment where wholesale led the overall growth in 2025. In fourth quarter '25, corporate loans grew strongly by 14.6% Q-on-Q and 23% year-on-year, largely to one-off government strategic program related to the [ village ] cooperative funds, followed by commercial loans, which grew by 4.28% Q-on-Q and 12% year-on-year. Growth of our retail segment focused on the value chain pipeline. Considering risk and the overall macro environment, we continue to manage our exposure to auto loan and mortgage as we observe deterioration to a certain extent on industry level, while growing SME and payroll loans selectively, prioritizing a disbursement within our value chain ecosystem. Importantly, improved deposit growth environment enabled us to manage the loan-to-deposit ratio with LDR at 88.9% as of December position. It is worth noting that the average daily LDR in December '25 was 93.9%. As a result of this disciplined approach, we successfully maintained net NPL formation at 0.77% in December '25, reflecting strong asset quality and sound risk management. Next is our margin performance. Overall, our NIM stayed resilient through the fourth quarter of '25. At fourth quarter '25, NIM stood at 4.89%, relatively stable compared to previous quarter as pressure on loan yield was offset by lower cost of fund. Bank-only loan yield declined to 7.24% in fourth quarter '25, driven by lower yield across segment. The decline was most pronounced in the corporate segment, reflecting our participation in SOE in the charge of [ village ] cooperative program, which carries a lower yield than our average corporate portfolio. However, our bank-only cost of fund has shown further improvement, declining by 16 basis points to 2.15% in fourth quarter '25 from 2.31% in third quarter '25 year-to-date, supported by repricing our special deposit as liquidity environment is improving. The improvement on cost of fund helped to offset the yield pressure, allowing us to sustain healthy margin within 4.8% up to 5% range, in line with our '25 guidance. Overall, our NIM remained well managed. However, we expect slightly NIM pressure in full year '26 as the pressure on the asset yield is expected to remain, yet we expect room for cost of fund improvement due to the better liquidity environment. Thus, we are consciously guiding our NIM at 4.6% up to 4.8% in full year '26. Now let us turn to noninterest income and operating expense. As of December '25, total noninterest income grew 14.5% year-on-year, driven by strong treasury income and recurring fee income from both digital and nondigital channel. Our organic recurring fee income grew by 15% year-on-year in full year 2025. We expect noninterest income to continue strengthening our revenue profile with growth expectation of mid-high single digit as growth of recurring income from digital initiatives could offset the flattish treasury income and cash recovery from wholesale segment. On the cost side, we observed a slight OpEx increase by 2.48% Q-on-Q in fourth quarter in '25. However, we were able to maintain our CIR at 43.5% in fourth quarter of '25, which is better than our recorded figure of 44.5% in third quarter of '25. This reflects our active efficiency measure and gradually normalization of operational activities. Overall, we expect normalization of CIR and OpEx growth in '26 with mid- to low single-digit growth on consolidated OpEx. Our consolidated CIR is expected to reach 42% up to 43% for the full year '26. We continue to pursue a disciplined cost management and align expenditures with strategic priorities. On asset quality, as of December '25, loan at risk remained stable at 6.51%, while the cost of credit declined to 58 basis points, reflecting the result of our strategy in maintaining discipline and well-managed portfolio. Loan at risk coverage remained strong at 40% on a consolidated basis and bank-only, providing a buffer against downside risk. Our NPL coverage also remained robust with bank-only coverage at 253% and consolidated coverage at 231% as of December '25, higher than our pre-COVID level. Looking ahead, we expect normalization in asset quality metrics, including a modest increase in cost of credit to the 0.6% and 0.8% range from 0.58% in full year '25, reflecting normalization from historically low level. Loan at risk ratio also expected to go up slightly, although overall asset quality fundamental is expected to remain healthy, supported by adequate coverage and continued discipline in risk management. Now let's discuss on our '26 guidance. On loan growth, we maintained our guidance at 7.9% year-on-year. We continue to see healthy demand supported by government-related spending and a more accommodative monetary environment. Our strategy continues to prioritize balanced growth across wholesale and retail while gradually increasing the share of investment loans, which are more value accretive and better aligned with our profitability objective. On a liquidity standpoint, we remain disciplined in applying our loan follow deposit strategy. We expect LDR remain well managed at around 95% supported by prudent liquidity management and balanced deposit growth strategy. This allows us to preserve balance sheet flexibility while still supporting credit expansion. On margin, we expect full year '26 NIM to be in the range of 4.6% to 4.8% as we anticipate more pressure on loan yield. However, improvement in cost of funds, better system liquidity and portfolio mix optimization should help maintain the downside. On asset quality, we expect net NPL formation to continue improving, underpinned by our prudent approach in retail expansion and our value chain-driven growth strategy. Accordingly, we guide for a cost of credit of 60 basis points to 80 basis points in full year '26, reflecting on conservative and proactive asset risk management. We expect normalization of share and OpEx growth in '26, with mid- to low single-digit growth on consolidated OpEx and consolidated CIR of 42% up to 43% in full year. Overall, our guidance has accommodated potential liquidity and risk event due to the macroeconomic surprise as we continue to pursue disciplined growth, strong liquidity management and disciplined cost control, we remain positioned to deliver more focused, sustainable and higher-quality returns going forward. Now I would like to hand the presentation to Pak Danis, our Risk Director, to explain more about the asset quality. Please, Pak Danis.

Thank you, Ibu Novita. Ladies and gentlemen, allow me to provide an update on our asset quality as of December 2025. In line with our conservative loan growth strategy, asset quality remained resilient, reflecting disciplined underwriting amid a challenging macro backdrop. Ended December 2025, loan at risk improved to 6.51%, showing an improvement trend, which supported by selective growth in positive sectors within the wholesale segment and targeted expansion through our ecosystem value chain in retail segment. Going forward, we expect LAR to remain stable to slightly up to more normalized level with NPL formation manageable across both wholesale and retail segments. We remain well provisioned with consolidated LAR coverage of 39.9% and NPL coverage ratio of 231%, providing a solid buffer against downside risk. Consequently, our cost of credit stood at 58 basis points in December 2025, below our full year guidance. Looking ahead, we aim to maintain stable asset quality, underpinned by robust risk management and the strength of our value chain strategy, which drives high-quality growth. We expect cost of credit to normalize, reaching 0.6% to 0.8% in full year 2026. Additionally, we also expect normalization of NPL cap rates to 230% to 250% in long term. Finally, let us discuss our capital positioning. As of December 2025, Bank Mandiri capital adequacy ratio declined slightly to 19.4%, primarily reflecting a higher dividend payout ratio. Looking ahead, we aim to maintain CAR and Tier 1 in range 18% to 20% for the near to medium term, balancing capital efficiency with sustainable growth. And now I would like to pass on the presentation to Pak Sunarto, our IT Director, to continue the presentation on our digital. Please, Pak Narto.

Thank you, Pak Danis. Ladies and gentlemen, let me start with the digital sections. I think before I'm going to explain slide by slide, I would like to introduce by -- I think, over the past 4 years, the bank has been investing a lot in digital transformation, including the technology, people. And until today, we have more than 4,100 people working in the IT division. I think the fair question today is what we have delivered today and what is the outcome. So I want to start by saying, as you see in the title of this slide, we can safely to conclude that digital has become the operational backbone of the bank. All the digital platform in this bank, including Livin', Kopra, Livin' Merchant, all of them are operating at a national scale. If you look at the chart on the left-hand side, on 2025, more than 80% of the transaction in this bank has been done through the digital platform. The 20% remaining is coming -- transaction is coming from EDC, ATM and branches. If you're looking at the only branch-only transaction, it is accounting less than 2%. So most of the transactions now, if I calculate all of them, 98% either is done through digital platform or through the machine. Let me start by the journey of the customer. Today, 90% of the new-to-bank customers opened their account through Livin'. This is telling us that the cost of acquisition is much, much lower compared to the conventional channel. But what is the most important thing is Livin' has become the default onboarding channel. So almost 9 out of 10 customers stepping into the Bank Mandiri branches or even opening their account anywhere in the world, now they are doing via the Livin'. As a result, all of the transactions as we see in the bottom of the chart is 99% are going through the transaction in the Livin', Kopra and Livin' Merchants, making the digital channel the primary transaction engine in the retail banking. Next. As I mentioned before, all of the digital channel today have become the operational backbone of the bank. So the next question is, what is the quality of the growth? If you see all the 3 charts displayed in this slide, we can see that transaction growth outpaces user growth across wholesale, value chain and retail. In the wholesale where Kopra is our main platform, the transaction frequency is growing at an index of 240. It means that the transaction is growing 140% compared to what we see in 2021. And the customer base has increased to 155. That means transaction activity is growing roughly at 1.5x faster than users. The middle chart showing that the value chains that we derive from the wholesale platform, wholesale clients, namely suppliers, distributors, payroll and merchants. If you see, the transaction frequency has been growing at the index of 374 versus a customer base at 204. This is a very strong signal that the growth is driven by deeper participation within the ecosystem. In retail, the numbers tell us the same story and even more pronounced. Transaction frequency has grown to 949, 10x larger than what we see in 2021, while the customer base stands at 518. Transaction intensity in this case is growing nearly 2x the pace of the customer growth. This tells us the acquisition is not driven by promotion or any one-off sign-ups. So all of the customers are entering into the platform because the platform is delivering a use case that fits into their mix. What is the most important is that the pattern is consistent across wholesale, value chains and retail. This is the platform effect rather than a segment-specific spike. Next. What is the implication of the high transaction volume that we try to translate into the CASA quality? In wholesale clients, let's look at the current account balances. 65% of the current account balances are coming from clients transacting more than 80x per month, while another 25% are coming from clients transacting 20 to 80x per month. This means more than 90% of the wholesale balances are generated by the customer with frequent and repeat operational activity. In the retail, the similar patterns emerged. Around 55% of the balances are coming from the client transacting more than 20x transaction per month. This 20x per month is ranging from 20x up to 100x or even more than 100x and another 30% are coming from clients that are transacting 6 to 20x per month. So in total, more than 85% of the balances of the saving accounts in this bank are supported by active and engaged users. These are the sticky balances. These balances support the day-to-day operations of our customers. Next, this slide is always the KPI of any IT division running the digital. I want to draw everyone's attention to the cost per transaction. The digital growth in Bank Mandiri is decoupled from the cost growth through automation, standardization and scale. Since 2021, digital transaction has grown to an index of 386. It's growing more than 4x, while the cost per transaction has declined to 44%, representing a reduction of more than 55%. At the same time, fee-based income per user has increased to 145, indicating that monetization improved even as unit costs fell. This is not a one-off efficiency gain. This trend has been consistent over multiple years. The cost driver that we achieved, the cost advantage which is coming from 3 main sources. Number one is high automation and structural processing. Almost all transactions that are coming to Livin', Kopra, Livin' Merchant are without human intervention. All of them are performed digitally, 100% straight-through processing. Another cost efficient that we achieved is platform consolidation. I think we have consolidated platform and reduced overlapping system and licenses, lowering fixed technology costs and therefore, give us some cost advantage. The last one is the most important thing. All of the digital platform in this bank are standardized. So our people that accounted for more than 4,000 people can do as one team to build, operate and maintain multiple system efficiently. So this is some of the cost driver that we try to maintain over the past 4 years. Next. Livin', to understand the numbers that we have just seen, I think it's important to understand how do we develop Livin' from the beginning. Livin' from the day 1, we built by design as a unified platform, integrating core banking services, subsidiaries and client ecosystem. If you look at the table on the left side, we have developed more than 150 features over the past 4 years, ranging from save money, move money, borrow money and grow money. And many of them are first in the market. Those transactions generated from the features generated a huge traffic for this bank. And then we shift to integrating subsidiaries in this bank. Livin' in the past 2 or 3 years has become the distribution channel of our subsidiaries. If you look at the middle table, Livin', we are integrating Livin' with Mandiri Utama Finance and Mandiri Tunas Finance, allowing our customers to apply loan directly from Livin', and we got the information -- our customer can get the confirmation of their approval within just 5 to 10 minutes. So everything is done through the Livin' platform. Customers do not need to fill a lot of information because everything is well integrated with the subsidiaries. The integration that we made with the Mandiri Sekuritas allowing the customer to buy and sell stock instantly inside the Livin'. The new one, we just integrated with AXA Mandiri where we allow customers to buy some insurance while they are transacting with the e-money. For your information, e-money in Mandiri, we control 60% of the market share. So this is allowing to boost the sales of AXA Mandiri inside the platform of the Livin'. Last but not least, ecosystem is one of the most important part as far as digital is concerned. Inside the Livin', we have been integrating 1,600 billers, ranging from e-wallet, electricity, e-commerce, insurance, telecommunications and many more. Those are the daily use cases for our customers, and therefore, we generate a huge traffic inside the Livin'. Below are some numbers about the registered users, transaction frequency and value. I don't think I want to repeat all the numbers and the numbers growing around CAGR in 2 years around 28%, both in users' frequency and transaction value. Next. On the merchant side, Livin' is developed for retail users. There's another significant cost funding source that we want to address, which is the merchant site. Merchant site is an application use and developed by the merchant -- sorry, and used by the merchant for payment acceptance. We have launched this product 2 years back in 2023. This is the road map of our Livin' Merchant. We started the Livin' Merchant as payment acceptance. So it allows the merchant to receive payment from QR, card and transfer. And then we develop the Livin' Merchant further becomes the point of sale, allowing the customer to put in all of their activity inside the Livin' Merchant. The yellow box one is the most important one for Livin' Merchant where we integrate our wholesale customer with the merchants, allowing our merchants to order, pay all the inventory that directly connected with our wholesale ecosystem. If you look at the chart on the right-hand side, Livin' Merchant is growing significantly in the past 2 years and exceed the EDC traditional payment acceptance machines. So Livin' Merchant is one of the platform that I think we are really looking forward to penetrate the market for the merchant segment. Next. Kopra is built for our wholesale customers. Today, I think the whole full year last year, we booked around IDR 27,000 trillion. This is all volume generated by our wholesale customers. Frequency is around 1.5 billion. This is a completely different DNA with the retail customer. The ticket size is very high. So we don't -- so the focus is on the transaction volume. The service that we built inside the Kopra ranging from cash management, trade finance and value chain. Recently, we just had some AI capability inside Kopra. We allow the customer to do their cash flow forecasting and transactional risk scoring where every transaction flow into the Kopra will be sent to the AI engine to have some scoring whether the transaction is fraudulent or not. AI for trade finance, we are going to launch very soon that allow the customer to upload the document, then automatically scan through the AI machine to check the consistency of the document they upload into the system. Those capabilities are available for 3 segments of the customer that are pure domestic Indonesia operating company or Indonesia company operating at overseas or any MNC company operating in Indonesia. Next. We have been spending 4 years developing every single feature in every single platform. Now I think digital platform in Mandiri, the way to differentiate ourselves from our competitors is how do we connect all of them. In last 2 years, we have been linked Kopra, Livin' Merchant and Livin' together. Kopra and Livin' Merchant, the linking processes is we're allowing customers and our wholesale customers to upload their inventory and allowing the merchant to buy the product inside the Livin' Merchant. The same story for Kopra and Livin', allowing the customer to upload their bill and customer can pay through Livin' immediately. So these are the 3 use cases that we try to build within the digital that we built in Bank Mandiri. The last -- next slide. AI has been a trending topic in the past 2 years. I think for the bank, it's very simple. The objective is very simple. We want to make our customer to be very productive and then we focus on the 4 use cases that we want to build. Number one is around customer service and document automation. Number two is how do we implement AI in fraud and risk and compliance. And the last one is sales, marketing and revenue growth. We also implement AI inside the IT division. So allowing our IT developer to faster the development process, this can account for 50% reduction of time. I don't want to go through every single bullet point, but one of the key use case that we want to launch very soon is about transactional risk scoring, which allows identify transaction elements using AI and machine learning methods. Sales, marketing and revenue growth, I think we have been implementing a lot in Livin' personalization, campaign, customer journey, sentiment analysis and property appraisal. This concludes my presentation in the digital part. Now I want to pass to Pak Danis, for the next presentation.

Thank you, Pak Narto. Now let me provide an update on our sustainability initiatives. In 2025, Bank Mandiri achieved a significant milestone on our ESG journey, receiving outstanding results from 2 leading global ESG rating agencies, which are from MSCI ESG rating and from Sustainalytics. From MSCI ESG rating, our score increased by 2 level or double notch from BBB to AA, a remarkable leap that underscore the strengthening of our governance, risk management and disciplined ESG implementation across business processes and operations. Meanwhile, the latest assessment from Sustainalytics position us in the negligible risk category with an ESG rating score of 9.5 ,reflecting the company's strong ESG risk management. Sustainalytics apply a scoring methodology where a lower score indicates better sustainability performance and ESG risk management. These 2 achievements highlight Bank Mandiri's position on par with and even surpassing other banks in Southeast Asia region. This achievement reaffirm that Bank Mandiri is not only strengthening its internal ESG foundation, but also shaping the broader sustainability landscape in Indonesia. As we continue this journey, we remain committed to continuously drive meaningful sustainability efforts. Next. As a result of our active engagement with clients and real estate stakeholders, Bank Mandiri offered 35% market share in green financing, aligned to support Indonesia net zero emission target. As of December 2025, Bank Mandiri's sustainable portfolio reached IDR 316 trillion, representing 8% year-on-year growth. This portfolio is composed of green and social portfolio. The green portfolio reached IDR 166 trillion, growing 11.7% year-on-year, while the social portfolio stood at IDR 150 trillion with 4.1% growth year-on-year with NPL quality well maintained. Our sustainable portfolio span on several key sectors, including sustainable agriculture, renewable energy, eco-efficient products and clean transportation. Furthermore, Bank Mandiri has developed a comprehensive product suite of sustainable financing solution to drive measurable environmental and social impacts. This includes sustainability-linked loan, which link financing term to borrower sustainability performance through clearly defined environmental, social and governance targets. In parallel, Bank Mandiri has expanded its sustainable funding instrument to support green and social projects. In 2025, Bank Mandiri successfully launched green bonds Phase 2 and sustainable bonds Phase 1, further strengthening its capacity to mobilize capital for sustainable projects. Together, this initiative strengthened Bank Mandiri role as a key enabler of Indonesia's sustainable transition, supporting business and communities to grow responsibly while advancing long-term economic resilience. To continue my presentation, our sustainable operation pillar, we continue progressing positively on our environmental footprint and also fostering diversity and equity. In 2025, we have reduced our operational emission up to 32% from baseline in 2019 through carbon-neutral initiatives, including the expansion of solar panels, adoption on electrics and hybrid vehicles, installation of charging stations and the development of green buildings and offices. Moreover, Bank Mandiri also promotes fair and equitable workplace, where women make up 52% of total employees and 46% of women are in manager grade or higher. Next, on our sustainability beyond banking pillar, we are eager to build an inclusive financial ecosystem that align with the [ FEGs ] and empowering underserved communities. Our CSR activities support variety of audience through programs such as Mandiri Sahabatku, Mandiri Sehat, Mandiri Difabel, Mandiri Peduli Sekolah and many more programs. We also expand inclusive financial access, particularly for MSMEs in nonurban area through Livin' Merchant by Mandiri. Here, we are expanding access to digital financial services. To date, 62.7% of 3.1 million MSMEs are based on -- are based in nonurban regions. Through all these initiatives, we continue our commitment to build a more inclusive financial ecosystem that align with sustainable development goals and empowers underserved communities. That concludes our ESG updates. And now I will pass this presentation back to Lau for the Q&A session. Thank you.

Great. Thank you very much to all speakers. Ladies and gentlemen, we are now opening the session for the Q&A. [Operator Instructions] We can't see the name. So operator, if you can please just highlight who are raising their hands. Okay. First question comes from the line of Olivia, Goldman Sachs.

Can you hear me?

Yes. Is it Olivia or Melissa?

I just have 2 to start with. Can you just remind us again in terms of your OpEx, what was the amount of the accounting difference or the accounting that you have to add in for this whole year? And earlier, you mentioned that the guidance for the full year was 25% growth year-on-year, but we are coming in at, I think it was, in my calculation, about 17%. So will there be some spillover to next year? That's my first question.

All right. Thanks, Mel. Let me just address that question. So the amount of the one-off accounting-related OpEx for the full year 2025 is about 10% of that number. And you're correct. We previously talked about 25% growth target for 2025, and we ended the year with about 17% growth. That doesn't change the amount that we dealt with, the one-off, that stayed. However, we were able to basically work on efficiencies on the side, which basically led to a lower OpEx on the business as usual sort of context. So to your question, whether or not there is a remaining or residual of one-off OpEx that has to be carried towards 2026, the answer is we don't have any of that. Does that answer your question?

Yes. Then the follow-up is because I think earlier, you said that OpEx growth would be low to mid-single, am I right?

Yes, correct. So that would be -- that's on a consolidated basis. On a bank-only basis, we're expecting low single digit, if not negative growth. But on a consolidated basis, which basically includes subsidiaries such as the like of BSI in it, the number would be mid- to low single-digit growth on the OpEx.

So if we think about it, this year, it's about 17% year-on-year growth. You said 10 percentage point of that was the accounting. So underlying is 7 percentage growth. So then if we go on to the next year and you're still guiding to low to mid-single, then wouldn't an underlying growth be pretty high because we should knock that 10 percentage points off, right, and grow from that piece upwards?

Yes. A big part of that comes from our subsidiaries. Well, we can talk about the details, but the one that actually dragged the growth on the higher end as in higher end being mid-single digit -- or mid to low single digit for 2025 -- 2026 is largely from the subsidiaries. And this is related to some investment that is required in that front.

All right. Okay. Then just my second question will be your credit cost. If we look at your credit cost slide, which I think you have a detailed one, provision by segmentation. We do -- there is a write-back in the commercial and corporate segment. Your bank-only credit cost is 34 bps and your subsidiaries is much higher. Next year, you're guiding to 60 to 80 basis points. Can you share what your bank-only credit cost is and your subsidiaries? Because I think in that workout, it's just wondering whether that -- is that 60 to 80 a normalized level? Or is that also considering that you still would see some write-backs in the corporate and commercial space?

For -- to answer your question about the credit costs, our credit cost being only '25 is around 40 basis points. And 40 basis points and consolidated basis is 50 basis points. And why our credit cost this year -- last year has decreased, yes, if you compare with the previous year because it's result. This is the result of our improving in our loan at risk condition. And we also revised our methodology on the -- how we calculate our provision. We want to classify based on each of model. We separated our model between the secured loan and unsecured loan and it's resulting improving on the LGD model. So the impact of the improvement on the modeling itself is improved around 20 up to 30 basis points of our cost of credit. So it only happened in '25. And that's why in our guidance this year, 60 up to 80 basis points because we want to normalize, we don't calculate again the reversal impact regarding to the improvement on the model.

Just to add to Ibu Novita's point. So the 60 basis points to 80 basis points would imply a bank-only cost of credit of about 40 basis points and 20 basis points on top of that number would be those pertaining to the subsidiaries essentially. And the modeling that we have on our cost of credit is something that is deeply discussed with our auditors and everything. So clearly, we want to ensure that the provisioning that we apply is sufficient and adequate. And the provisioning level that we have currently on the bank, which is about 2.5% is also very much in line with the expected trade credit loss that the bank is actually computing.

And also to add explanation from Lau, our loan portfolio right now is under Stage 1 majority. It's more than 99% our loan portfolio considered as Stage 1. And our model to -- in Stage 2 and Stage 3, we already calculate with 100% PD, and LGD will improve because of our effort to do some collateral recovery.

Thanks, Mel. The next questions come from Jayden, Macquarie.

I had some follow-up questions on the topic of credit cost and provisioning. Maybe I'll ask that first. So the coverage ratios came down through the year. What's the kind of comfort level because they're back at 40% loans at risk coverage, which I remember that was the goal a few years ago. Is it possible to run this lower if we need to? Or would we have to stay at current levels and sort of match with formation? That's my first question. I have a couple of others.

The coverage level will actually stay flat, if not upward. So the level of comfort on coverage for all the layers, right? So NPL coverage, loans at risk coverage. Right now, we're at 230% NPL coverage on a consolidated basis, but 250% on a bank-only basis. Our comfort level of NPL coverage is anywhere between 230% to 250% for the bank-only basis. On a LAR context, loans at risk, anywhere around 40% is where we want it to be. So if the question is whether or not we are aiming at a meaningfully lower LAR coverage from where we are now, which is 40%, the answer is no. And that is exactly also one of the reasons why we're expecting higher cost of credit in 2026, considering the uncertainties and all the volatility that we're facing, we want to have a good buffer on the coverage and hence, the higher cost of credit, and we're expecting to have higher LAR coverage as well. On the LLR to loan ratio, now I'm touching on this because there's many of you that's also looking at the coverage there on a broader level, which is LLR to loan. We are basically matching the LLR to loan to our expected credit loss, which is essentially a function of PD and LGD and everything else. And at the moment, ECL for Bank Mandiri is at 2.5%, 2.6%, which, as a reminder, is not comparable to any other banks that has more retail loans, micro, whatever consumer loans that has higher ECL and hence, higher LLR to loans naturally. So that would be my answer to the question, Jayden.

And then my next question, I saw there was an announcement where you will deconsolidate Bank Syariah. And I note that these accounts have not yet done that. Would you be able to talk us through what the implications would be? Would it make the ROE better? Would it improve your capital ratios? Any thoughts on what this event is going to mean for the group?

Yes. Yes. The consolidation is the impact of removal a special authority because last year, because the strategy from the -- our ultimate shareholder that remove our what we call [Foreign Language] special authority, special opportunity to consolidate BSI. And because of this activity, the impact is we cannot be -- we cannot control and consolidate BSI anymore. But right now, we're still working with our legal consultant, accounting consultant, also our external auditor also to make sure that everything is under regulation. And we want to make sure that all the -- we follow all the regulation. So there is no transaction. Impact on the balance sheet, assets and liabilities will be consolidated from Bank Mandiri consolidated. But in terms of revenue recognition, we still acknowledge the revenue from the BSI earnings after tax based on our shareholder -- our ownership on the share is around 51%. So we will record it as other revenue on the consolidated basis by equity method. So the impact is revenue is still same. But on the asset side, liability side, we will be consolidated. It will -- improvement on the return on asset. Improvement also on the NPL ratio. The impact is on the return on asset is around 10 basis points. Improvement on the NPL is also around 10 basis points. And then the impact of the revenue is 0.

And maybe just to check. My final question is on capital. What would it do to the Tier 1 ratio for the bank? And then if you could also comment on what your plans are for the dividend as we get into the AGM. That was my last question.

Our long-term strategy, we want to maintain our Tier 1 capital ratio is around 17%. And our total CAR is 19%. And we -- this ratio -- we already anticipate dividend payout ratio is around 65% up to 70% dividend payout ratio. I think in the long term, 70 -- sorry, 65% up to 70% is stable, stable ratio for us right now. That's why -- Jayden, that's why in our loan guidance because we want to make sure the balancing asset quality and then capital and also cost of fund as well in our loan guidance is only 8% to 10%.

Thank you, Jayden. And I think we'll take the next question from the line of Harsh Modi, JPMorgan.

A couple of questions. First, on December versus November cost of funds, has it improved or has it deteriorated?

Was that November, December, you're asking, month-to-month?

Improve.

Yes. The answer is, it improved month-to-month.

It improved, Harsh. Month-on-month improvement.

Yes. Correct.

Great. The second one is...

Sorry, across all products. So we're seeing improvement in current accounts, time deposits and all. Yes. Go ahead, Harsh.

And second one is on restructured loans. There was a pickup in fourth quarter. What led to this pickup? And should we read through from this in terms of NPL going forward or not really?

Which pickup, Harsh, sorry?

Restructured loans.

Okay. So the pickup of restructured loans came on a consolidated basis. So the number that you're looking at is a consolidated basis pickup. And that came from our subsidiary, the bank, BSI, basically. And it's basically the unfortunate natural disaster event that Indonesia had to deal with, and there's some restructuring action that we have to do. And so the restructured book increases on the back of that particular event, and that comes from our subsidiary. Now if you look at the restructured book of the bank only of just Bank Mandiri standalone, the restructured ratio is actually flat to slightly down. There is a quite substantial exposure of our subsidiary in that region that were impacted by the flood.

Okay. Okay. The other one is on credit cost and NPL. So if, let's say, the NPL formation is higher in 2026 compared to expectation, would you stick with your credit cost guidance and lower coverage or would you look to take higher provisions above guidance in case NPL formation is higher than what you anticipate?

Okay. Knock on the woods, Harsh. If something force majeure happen, we will increase our cost of credit. We do not want to sacrifice our coverage.

And last question. You talked about the change in methodology that led to LGD improvement. You said a bit about secured versus nonsecured -- unsecured. could you give slightly more detail about what led to the change in methodology? And I also see risk weight has reduced for overall from 64% to 58% year-on-year. Are both of these interlinked? And how do we think about lower risk weight and lower LGD? That is my last question.

So basically, on the coverage computation and decision around cost of credit, we obviously have to -- at the end of the day, we calculate the entire ECL of the bank. PD, PD macro, whatever, LGD and rest of them. Now what we meant by improvement of the model is essentially the focus that we've been having toward collateral-based lending and so on and so forth, automatically basically brought down the overall LGD part of that equation, especially on the LGD because that is where the bank can actually take a much more meaningful action in ensuring that the LGD is good and proper on the back of focusing on good collateralized loans, et cetera, et cetera. So that is what we refer to. Now as regard to the RWA decline, I think it's worth noting some of the events that happened in the month of December. As you know, so basically, if you look at the balance sheet table and you look at the balance of cash, right, the balance of cash increased meaningfully on a Q-on-Q and year-on-year basis. And the increase of cash is about IDR 100-something trillion, I forgot the number, excuse me, but you can look at the number. Now the increase of that cash is on the back of a huge deposit inflow, a big deposit inflow that happened towards the end of last year, which obviously is not something that we can simply disburse as loans within 1 or 2 weeks. So that goes into cash. So the risk-weighted assets or the risk-weighted asset density, which is RWA divided by asset declined towards a 50% level range, and I think about 58%. That is a result of an increase of the cash component inside the balance sheet. And the cash component comes with a 0% APMR. So it's 0% risk-weighted assets. So if that cash either goes away or gets reallocated toward other forms of assets, then automatically, you will see an increase in the RWA density or higher RWA. Now it happens that your number is the 31st December number, but that is just the explanation of why the ratio is very low, it shouldn't be that low, basically. Thank you, Harsh, and I think there is no other questions remaining. There are some questions coming from the e-mails, WhatsApp and other platforms. We'll try our best to address your questions as soon as possible by the end of the day. With this, I will end the presentation. Thank you very much to all participants, investors, sell-side analysts, buy-side analysts. Thank you to all speakers, Ibu Novita, Pak Danis, Pak Narto. And we would like to conclude the fourth quarter results briefing. Thank you very much, everyone. Have a good evening.