PT Bank Negara Indonesia (Persero) Tbk (BBNI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. We are pleased to welcome you to Bank Negara Indonesia, or BBNI Analyst Meeting, First Half 2022 Financial Results. We would like to express our gratitude for your participations, and we believe you are in such a great health during this difficult time. Before we head to the presentation, please allow me to introduce our Board of Directors members, who are here with us. First, we have Bapak Royke Tumilaar, our President Director; Ibu Adi Sulistyowati, Vice President, Director; Bapak Silvano Rumantir, Managing Director of Corporate Banking; Ibu Novita Widya Anggraini, Managing Director of Finance; Bapak Muhammad Iqbal, Managing Director of Micro, Small and Medium Enterprise; Bapak Sis Apik Wijayanto, Managing Director of Institutional Relations; Ibu Corina Leyla Karnalies, Managing Director of Consumer Banking; Bapak Y.B. Hariantono, Managing Director of IT and Operations; Bapak Henry Panjaitan, Managing Director of Treasury and International Banking; Bapak David Pirzada, Managing Director of Risk Management; Bapak Ronny Venir, Managing Director of Service and Network. Ladies and gentlemen, our presentation for today will be started by Bapak Royke with several management highlights. Bapak Silvano will proceed with our accelerating business to top-tier industry players, continued by Ibu Susi with highlight of our stronger transaction-based CASA through digital corporate service. And to conclude the presentation, Ibu Novita will continue with our financial performance and the bank's approach to loan quality and risk management strategy. Ladies and gentlemen, our corporate presentation can be downloaded through the link that we provide in the chatroom or you may access our corporate presentation and other official publications in our website, www.bni.co.id. If you have any issues, please kindly reach out to Investor Relations via our e-mail [email protected]. Any questions are appreciated. Please send your question to our e-mail address, or you can simply send your questions in the Q&A box on your Zoom Apps. [Operator Instructions] And now to begin the presentation, please welcome our CEO, Bapak Royke Tumilaar.

Thank you, moderator. Good afternoon for all analysts, shareholders and rating agencies. I already appreciate your attendance here in BBNI First Half 2022 Earnings Call. Allow me to open the discussion by highlighting a summary of our performance. In the first half of this year, we grew our loan book by 8.9% year-on-year, faster than the growth momentum in to this quarter and relatively in line with the overall growth in the industry. We continue to do the risking of our portfolio by focusing on top-tier clients in its business segment. And at the same time, recycling our legacy book, we believe this is the right thing to do as uncertainty in the global economy is getting more intense nowadays and translating to volatility in the commodity price recently, especially palm oil. Third-party funds grew by 7% year-on-year with CASA ratio at 69.2%. The end of the quarter number was understated because a big outflow from one client from their business transaction, but the funds already coming back in the first week of July. Cost of third-party funds improved by 8 basis points quarter-on-quarter and 27 basis points year-on-year as we spend our most effort to shift our funding base into the transaction-based CASA, which is sticky and insensitive to interest rates. This is crucial because we are going to enter rising interest rate environment. Core profit or PPOP is first half 2022 grew by 6.9% year-on-year. Net profit grew by 75% year-on-year, supported by asset quality improvement, where loan at risk ratio is now below 20%, and cost of credit at 1.9% in the last quarter. The first half of net profit of IDR 8.8 trillion is 10% above Bloomberg consensus estimate. One of the highlights in this earnings call is our decision to revise down guidance on 2022 credit cost from initially 2% to 2.3% and now become 1.9% to 2.1%. There are 2 reasons behind this. First, we believe we have set aside sufficient provisioning for the legacy book, where the provision coverage to loan at-risk reached 42% higher than pre-pandemic level. Second, with regards to the global economic uncertainty, we have been disciplined and very selective in new loan booking since last year and still continue to do so. With this approach, future credit costs should be lower than [ further ]. Various high-frequency data on the economy also shows good trend of recovery, such as the number foreign tourists arrival, people mobility index and hotel occupancy rate. On the broader level, all these are reflected in the GDP growth, which is estimated between 5% to 5.5% this year. We just celebrated BNI 76-year anniversary this month, and we use this momentum to post our commitment toward [ BNI Go Green ]. Last quarter, we managed to issue our first rupiah green bond with 3- and 5-year tenure. The IDR 5 trillion proceeds usage will be directed to finance -- for financing our sustainable portfolio, especially renewable energy projects. On July, we also launched our support for electronic vehicle campaign by providing special pricing for EV financing and by collaborating with PLN to operate EV charging station. We believe we are the first bank in Indonesia, which is -- which are launching this initiative. Finally, MSCI upgrades BNI rating in their MSCI Indonesia ESG Leaders Index to top 3 in the country. This will give BNI a spotlight in the fast-growing global ESG funds. Focusing on SMEs, the potential to go global, we launched Xpora in September 2021, which offer a comprehensive solution for SME exporters beyond lending, including business advisory, global market access and payment solution. We offer [ bundled ] financial products with attractive discount for LC, discounting LC, collection and remittance. Even the loan application process is simplified through digital portal. In the first semester 2022, IDR 7.2 trillion loans were disbursed through Xpora scheme. As of the June 2022, total loan for export oriented reached IDR 22 trillion with trade volume at IDR 14.6 trillion and 39,000 SME debtors. BNI Xpora has gathered total CASA about IDR 3.9 trillion, grew by 30% compared to end of 2021. While all of our branches are able to provide assistance for Xpora, currently, we have 7 physical hub and Xpora portals to support these initiatives spread across Indonesia. To support Indonesian entrepreneurs, to expand their business overseas and to capture European market potential, we have inaugurated Vienna, Amsterdam rep office in May 2022 to complement the existing overseas network in Singapore, Hong Kong, Tokyo, Osaka, London, New York and Seoul. With this outstanding performance, we believe the BNI Xpora will be one of our future growth engines. And we'll strengthen BNI strategic positioning as a global bank and could increase our sustainable SME portfolio in the future. Bapak Silvano, Managing Director of Corporate Banking, will continue the presentation on our accelerating business for top-tier industry players. Please, Silvano.

Thank you, Bapak Royke. Thanks, everyone, for attending this earnings call. Ladies and gentlemen, BNI's financial objective is to deliver best-in-class and sustainable ROE of 18%, starting from 2025. We've been communicating also that the main assumption in our ROE projection is on significant reduction in credit costs, targeting only 1% COC starting in 2025. This is achievable if we consistently continue our derisking of our portfolio, starting from replacing legacy book with new bookings from top-tier clients, and also capturing business opportunities along their value chain and sources of growth for commercial, SME and Consumer segments. In today's earnings call, we want to convey the message that our loan growth is gaining momentum with Q2 new booking of IDR 74 trillion, which was the strongest disbursement in the past 6 quarters. In Q2 alone, we approved no less than IDR 30 trillion of loan facilities to top-tier clients, such as JAPFA, Kalbe Farma, Mitra Keluarga, AKR, Mayora and so on, as you can see from the slides. We are still at a relatively early stage of fine-tuning our client mix. And the effort started roughly 18 months ago. We've been focusing on a so-called Diamond clients, our internal term referring to key target clients, which consists of 88 highly reputable companies in prospective industry sectors. So far, we've been -- we've seen remarkable progress where diamond clients already represent 23% of our corporate loan portfolio from just 17% a year ago. The growth in outstanding loan to Diamond clients reached 51% year-on-year. If we could sustain this momentum, soon, our corporate loan book quality will be very resilient across various economic cycles going forward. We also nurture culture of collaboration within BNI, where corporate banking team and other business segments work very closely to grow our businesses together. In the first half of this year, there are 15,000 new payroll accounts, almost 6,000 payroll loans and more than 1,000 mortgage bookings coming from the value chain of our top-tier corporate clients. We believe that we are on track in terms of building an ideal loan portfolio mix. Competitive funding cost is one of the key success factors here as well. Acknowledging the strategic importance of building a sustainable CASA, our Deputy CEO herself, is leading the wholesale and retail digital teams to strengthen BNI transaction banking capabilities and will proceed with the detailed presentation. Please, Ibu Susi.

Thank you, Pak Silvano. In BNI, one of the key initiatives we have is to build a stronger transition-based CASA. This is to ensure that in [ fairness ] interest rate cycle, our CASA remains sticky and cost of fund remain competitive. In previous earnings call, we have explained our digital initiative in retail banking through a major upgrade in BNI Mobile Banking capability. Now I want to share with you the progress we have been achieving in wholesale banking side. Transaction value in BNIDirect, our cash management platform, grew by 41% year-on-year and 17% quarter-on-quarter, driven by the growth in registered user as well as more client activity. Year-on-year, the daily average balance of demand deposit from BNIDirect active user has been growing by 16%. This enabled us to rely less on [ specialty ] demand deposit and resulting in a resilient cost of fund. In Corporate segment, cash management adoption among our clients is already quite in high at 91% coverage. However, in commercial and SME segment, it only reached 26% penetration rate. Leaving other room for growth in the medium term, we keep pushing our business unit to cross-sell our cash management product to their clients. The lending pricing decision is highly dependent on whether client transition is already with us or not, we continue to upgrade user experience in BNIDirect. Some of the new initiatives, including providing service access to all business banking services now available in a single integrated platform as well as reducing onboarding processing from 6 days to only 1 day. Next topic regarding regular updating on our financials will be presented by our CFO, Ibu Novita.

Thank you, Ibu Susi. Our loan growth of 8.9% year-on-year came from [ lower-risk ] segment, private sector corporate grew by 15% year-on-year, large commercial 31% year-on-year, subsidized micro loan or KUR 27% year-on-year and payroll loan 20% year-on-year. Loan to SOE still showing 2% contraction by design. CASA grew by 6.4% year-on-year and flat quarter-on-quarter. Note that there was a chunky demand deposit outflow near the end of the second quarter, but the fund already coming back in the beginning of July. This is natural as we serve mainly large corporate clients. What's more important is our CEO mentioned just now that the transaction in our cash management platform grew by 41% year-on-year, translating to strong growth in average balance demand deposit. As we see our loan mix to lower-risk segment, margin will come under pressure, but credit costs should also become much lower. In the first half of 2022, our [ NEE ] was growing by only 1.5% year-on-year and noninterest income by 11% year-on-year, but significant reduction in cost of credit has resulted in the bottom line growth of 75% year-on-year, reaching IDR 8.8 trillion. This is the slide of our key operating metrics. Cost of third-party fund improved slightly by 8 basis points Q-on-Q as we cut funding costs at the end of first quarter and show the full impact on second quarter. As a result, net interest margin slightly pick up in -- by 40 basis points Q-on-Q. Return on equity was 15.1% in the first half of this year versus 8.9% a year ago, driven by credit cost improvement, which came down by 130 basis points year-on-year. As our CEO mentioned earlier, we are getting more optimistic on asset quality trajectory, shown by improvement in NPL ratio by 30 basis points Q-on-Q and loan at-risk ratio by 250 basis points Q-on-Q. As a result, quarterly credit cost declined from 2.5% in first quarter to be 1.9% in second quarter. This was a fundamental improvement coming from a combination of good quality new loan booking as well as aggressive provisioning on legacy book with loan at-risk coverage reaching all-time high position. Liquidity remains sufficient with ending position LDR at 90%, while LCR and NSFR are well above regulatory requirement. We are managing liquidity carefully, especially during [ rate ] high environment. Our strategy is to focus on increasing client transaction, both in the BNIDirect and Mobile Banking application. Now we are comfortable with our Tier 1 CAR at 16.5%. Our conservative loan mix strategy will result in the lower risk weighting in the long term. Core fee income on second quarter was strong on general. Retail fee income grew by 5.9% Q-on-Q and 5.6% year-on-year, driven mainly by bill payment to various third-party services, such as utility and lifestyle bill payment. And thanks to the consecutive upgrade in our mobile banking feature and more widespread API connection to other institutions. In line with our effort to strengthen our IBD and corporate banking franchise, loan syndication fee income grew by 47% year-on-year and almost double on Q-on-Q basis. Since the beginning of the year, we already anticipated tough global market environment driven by monetary stimulus normalization overseas. We already front-loaded realized gain from bonds portfolio in first quarter and the result gained from the trading was much smaller in the second quarter. As we are universal bank with a strong focus on the wholesale segment, some volatility on ending balance CASA is normal for us, like what we experienced at the very end of June, one-off demand deposit outflow has resulted in bad portrait of our CASA as if there was no growth. However, if we look into our cost of fund, it continued to improve with last quarter cost of fund at only 1.4%. Hence, we want to emphasize that the importance of looking into transaction velocity in our bank as opposed to only focusing on ending balance CASA. We want to position ourselves as a top-of-mind transaction banking of our clients. The more transaction done via our platform will translate to sticky CASA in the bank. Mobile banking application and BNIDirect are playing crucial role in building transaction-based CASA. Almost 60% of retail saving comes from mobile banking and 92% of demand deposit comes from BNIDirect. We closely monitor the growth of transaction in both platforms, where during first half 2022 Mobile Banking and BNIDirect transaction grew by almost 40% year-on-year. I will now give regular updates on our asset quality. One of the indicator of improvement in our underlying asset quality is to continue -- the continued decline of COVID restructured loan amount, which currently stands at 10.2% total loan. We always maintain our conservatism in terms of collectability classification, while OJK relaxation period still [ valid ] until March next year, we already classify the nonpaying loan as either NPL or collectability 2. Together, they represent 60% of the COVID restructuring loan. Another interesting data point is that 64% of the COVID restructured loan is paying at above base lending rate, which means there are good candidate for unflagging in the near term. With this, we expect the loan at [ this ratio ] will decline meaningfully within the next few quarters. For those who are paying a below base lending rate, this represents 1/3 of COVID restructured loan. We already set aside 22% provision coverage and will add more for the rest of this year. From its peak on December 2020, total loan at risk has been declining now at 19.6% total loan. Year-to-date improvement mainly came from current restructure, declined by 290 basis points as well as NPL and special mention loan, which declined by 50 basis points and 10 basis points, respectively. We are optimistic with the asset quality trend for the rest of the year. Despite a positive trend in asset quality, we still consistently build higher loan at risk coverage at 42% and NPL coverage at 2.6x in first half 2022. Combined with the expectation of gradual reduction in loan at risk, this should translate to material reduction in cost of credit this year. We continue to assign a conservative provision coverage of 82% on average for those in NPL category, which we deem sufficient, considering LGD rate of around 60% up to 70%. For this in collectability 2, the provision coverage was 66% and much more conservative than regulatory suggestion and, provision coverage for current restructured loan was 60.2% as we believe only a small portion of this bucket having high risk of downgraded to collectability 2. This is the end of first half 2022 result presentation. Next, moderator will coordinate for the Q&A session. Thank you.

Thank you, Bapak, Ibu for the insightful presentations. Ladies and gentlemen, we are now entering the Q&A session. [Operator Instructions] We received several questions regarding impacts to our business from commodity price, volatility, higher inflations, liquidity tightening and currency depreciation, and we will take the question one by one. Starting from the question that is related to commodity price movement. And I suppose it will be best if Pak Silvano could give us the insightful explanation for this one. The question is from a Sangameshwar Iyer from Consilium Investment and from Robertus Hardy from Henan Putihrai Sekuritas. The question is, how BNI see the loan demand and loan outlook for the rest of the year, especially with the commodity price started to slow down? Please, Pak Silvano.

Thank you. Thanks, Sangameshwar and Robertus for the question. So historically, in Indonesia Banking Industry, loan growth is highly correlated with commodity prices. So we think it is fair to assume that this pattern will repeat again, at least for the banking industry in general. Specific to BNI, the situation could be different in a positive way, and let me explain. We think it is important to highlight that in BNI, we're building our new portfolio, focusing on top-tier clients. Half of our loan book comprises of Corporate segment. And one of the characteristics of corporate clients, the top-tier ones, is there stability in the business model as they take -- tend to take a longer-term view in strategic decision making. And as a result, short-term volatility in commodity prices should not translate to a fluctuation in loan demand, except for working capital loan, which is short term in nature. With this, we believe loan demand in the Corporate segment, which is our single biggest segment, will continue to be resilient. In addition, we also started from low base in terms of expansion to top-tier clients, which means that the room for growth is still ample. Our data point in Q2 showed that we're gaining momentum in terms of new loan booking. For the smaller size business banking segments, such as SMEs and mid-market commercial, we continue to be selective. On one hand, we have to appreciate that small businesses that survive during pandemic means they have proven business model and resilience in the worst operating environment ever, but on the other hand, higher inflation and commodity prices volatility may impact them more than large corporations. And that it may affect their appetite for expansion. Whereas for consumer loans, we didn't see massive growth in the past 6 months despite strong commodity prices. It seems that in general, people are more disciplined in terms of big spending decisions during this pandemic situation, unless the spending is really necessary, for example, purchasing a house for them to stay in as opposed to for renting out. Consequently, we also do not expect significant reversal in consumer loan demand. We are optimistic that we will be able to book low double-digit growth in consumer loan book this year.

Thank you, Pak Silvano for the clear answer. Once again, ladies and gentlemen, one of the important highlights is that our business to top-tier player -- top tier industry players, who have stability in doing their business. The next question came from Angus Mackintosh from Smartkarma and Maynard Arif from DBS. This is about inflation. The question is, what are the bank's main concerns surrounding inflation in Indonesia? And is there any impact of the inflation to loan demand? We believe our CEO, Bapak Royke could give us a clear answer for this question. Please, Bapak Royke?

Thank you. We understand there are 2 macroeconomic challenges in this year. One is higher inflation and interest rate trend reversal. In terms of inflation, reported headline inflation in second quarter 2022 was at [ 4.35% ]. It's already exceeding initial inflation target of the central bank. Even though the inflation rate is still considered moderate, we have to admit that the [ risk ] is there given rising volatility in the energy costs and [indiscernible]. Our loan growth strategy, which is targeting low-risk client, implies that our view on the economy is cautious optimist. We believe this is the right strategy to pursue since global economy is not a good shape. And there is a limit how to -- how much government could support domestic economy. Our data also shows that there are moderate level of correlation between high inflation rate and banking sector NPL. But Corporate segment, asset quality remains the most resilient from time to time. Our loan demand and asset quality should be resilient towards moderately higher inflation rate because the 2 factors. First, half of our book is on large corporate. This type of business are typically inflation proof because of strong pricing power both on the products sold to customer and their input costs. Secondly, our consumer loan exposure is mainly comprised of fixed income earners, and their rates are inflation adjusted annually. So the impact of inflation to loan demand and asset quality should be minimal. We think SME and micro segment could face bigger challenge in the higher inflation environment.

Thank you, Pak Royke. One thing to note that the Corporate segment, which dominates our loan competition, at more than 50% of their asset quality is proven to be resilient from time to time. The next question is from Handy Noverdanius from CGS-CIMB. The question is, does [ BNI ] worry about the tighter than expected of third-party funds for the rest of 2022 and going in 2023. Ibu Novita, would you please kindly answer this question?

Thank you. Until the first half of this year, we were still seeing a healthy inflow of third-party funds by 7% year-on-year, supported mainly from CASA growth. Liquidity remains sufficient with ending position LDR at [ 19% ]. And despite improving [indiscernible] of the country, we feel that liquidity and banking system may not be as good as last year due to loan demand recovery at the same time, central bank strategy to absorb liquidity through reserve requirement policy hike. We are managing liquidity carefully, especially during the [ rate ] high environment, and we target our low-cost funding CASA to grow sustainably higher than the industry averages, while time deposit growth will be adjustable. We are comfortable with rupiah's liquidity. Our attention is more on the USD liquidity as [indiscernible] will impact USD liquidity in every country, including Indonesia. Potential liquidity scarcity means that we have to be selective in the terms of foreign lending, through pricing mechanism. We expect foreign exchange lending yield will be -- trend higher following the global benchmark rate. In BNI, we keep adding more and more export-oriented clients that will naturally bring foreign expense supply to our balance sheet. We do it both in large Corporate segment as well as in the SME segment through our platform, Xpora that we launched since last year. And our strategy is to keep focusing on increasing client transaction, both in our platform, BNIDirect and mobile banking application to save our funding base into transaction-based CASA. We want to position ourselves as a top of mind transaction bank in our clients. The more transaction done via our platform with translate to sticky CASA in the bank. 59% of our saving balance right now comes from regular mobile app user and 92% of it comes from cash management user, BNIDirect. Thank you.

I think since we are very active in the transaction banking, so we are introduced -- try to accelerate the cash management fee like BNIDirect, and now I think more company or like a client, now they're using more about the BNIDirect. So we believe, in the future, most of the corporate clients now using the very addictive to using the BNIDirect. So we don't see any potential issue about the third-party fund because now we start to focus to make client more comfortable with our platform for transactional banking and also mobile banking. And now we are fairly selective to lending in U.S. dollar. So since the interest -- inflation and interest rate in U.S. is increasing, so we are now fairly selective in U.S. dollar lending.

Thank you, Pak Royke and Ibu Novi. I hope -- we hope that can clear things out. And the next question came from Yulinda Hartanto from BNI Securities. The question is, which level of rupiah depreciation that will prompt the management to slow down loan disbursement and its impact to credit costs? Given the nature for this question, I believe Ibu Novita will clear things out. Would you please answer this question Ibu Novi?

Thank you. Like Pak Royke already explained before, we anticipate that foreign exchange liquidity will tighten. We have been adjusting pricing higher in foreign exchange loan as well as being selective in terms of client exposure gradually. We also advise our clients to convert their foreign exchange loan into rupiah when it is appropriate to do so by doing this. Weakness in foreign exchange loan disbursement will be partially compensated by strong rupiah's loan disbursement. As for asset quality impact from risk of rupiah depreciation, we are managing it very closely. 80% of our foreign exchange loan book are naturally hedged. The borrowers revenue are in the foreign currency, or their product pricing is tied to U.S. dollar. We also implement rule that 25% of the borrower net debt exposure must be hedged with banks product. Right now, 20% of our loan is in foreign currency. And with strict risk management practice, we explained just now, we are optimist that the downside risk to asset quality is minimum. Thank you.

Thank you, Ibu Novita, for the comprehensive answer. Next question is from Selvie from Morgan Stanley and also from Ferry from Citi. The question is, what drives 40 bps quarter-on-quarter NIM expansion? I believe Ibu Novita will give a clear answer for this question. Please, Ibu Novi.

What drive 40 basis point Q-on-Q NIM expansion? First, higher loan yield by 14 basis points, especially from foreign exchange loan pricing, which increased due to global bench metric movement. We refer to LIBOR and SOFR rate. And second, lower cost of fund by 8 basis points Q-on-Q. And higher LDR ratio amounted by [ 90% ], lower NPL ratio, around 3.2%.

Thank you, Ibu Novi. Moving on to the next question. This is from Kresna Hutabarat from Mandiri Sekuritas, [indiscernible] and Angus Mackintosh from Smart Karma. And we believe Pak Royke will provide a great explanation for this one. Pak Royke, please kindly give us the update on the bank's overall digital strategy and the latest progress on the joint venture with Sea Group. Please, Pak Royke.

BNI digital strategy is done at the BNI level and also through our new digital bank subsidiary. At the BNI level, our focus right now is make BNI to be top of mind transaction bank for institutional and retail clients. We have upgraded our products in cash management, BNIDirect as well as retail banking apps, BNI Mobile. Now we focus on campaign to grow transaction value in those 2 platforms in order to build sticky transaction based CASA. Along the way, we are still upgrading some features as well making our platform to always meet customer demand and preferences. On digital bank subsidiary, which is designed to be our long-term growth engine in SME segment, right now, our focus to step up the foundation of the bank such as preparing, therefore, the IT infrastructure, the core banking and the technology as well as appointing a key management team. The digital bank first business will come mainly from pay later products, while the same -- they are building front-end digital product, which may take up 2 years. Sea Limited, as our tech partner, has also been involved in this process. We are currently filing the Board of Directors and all of the 3 parties have agreed to select management independently to ensure this digital bank will be nimble and has a distinct competitive culture. In the cost of the partnership, Sea will act in the common interest and effectively function with the mindset of a vested partner. When appropriate, Sea will take an equity stake in the bank. We are also planning to rebrand the bank in the near term. With BNI strong brand equity and active contribution from BNI, Mayora Group and Sea Limited, our digital bank will be different with the rest of digital banks in Indonesia, especially in terms of funding cost competitiveness, technological leadership and stakeholder relationship.

Thank you, Pak Royke for the comprehensive answer. Jumping to the next question. This is from Kresna Hutabarat from Mandiri Sekuritas. What percentage of BNI's loan outstanding is negatively exposed to the higher energy prices and vice versa. And what percentage of BNI's loan outstanding that is positively exposed to the higher energy prices. We believe Pak Silvano can provide a clear answer for this one. Please, Pak Silvano.

Thank you, Krishna. Very good and valid question. So I think we all agree that higher energy price is generally not good for most companies, except for energy producers. Energy is one of the biggest input costs for companies in various industry sectors such as transportation and manufacturing. Energy price volatility have broad implication to companies directly and indirectly. And to simplify this discussion, we will limit the analysis to the direct impact only, which is through revenue and direct costs. 4% of our portfolio are direct beneficiary of energy price increase. This include clients in the coal mining and oil and gas value chain, excluding Pertamina. Palm oil historically also have correlation to energy price and that represents approximately 7% of our portfolio. 24% of our portfolio are negatively impacted by higher energy prices, including those in general manufacturing and transportation sectors. Note that when we mentioned the companies are negatively impacted, it doesn't mean that they're at risk of default. It simply means that they will face rising cost pressure. Our NPL ratio will remain low as we've been repositioning our portfolio, focusing on top-tier corporates. These big corporations typically have strong pricing power to pass on cost pressure to their customers. They are also usually more agile in terms of cost-cutting in critical areas, and their debt burden ratio or leverage ratio is typically not excessive.

Thank you, Pak Silvano for the clear answer. Ladies and gentlemen, we are entering the end of our analyst meeting. Thank you to all, our BOD, and also thank you for all the attendees for your participation in our analyst meeting for first half and 2022. And we hope that we have delivered our financial results for the first half of 2022 to all the attendees. Any questions that have not been answered, our Investor Relations team will happily accommodate you offline or online. Please reach out to us via e-mail, [email protected]. And we would like to express our gratitude for your participations. And we hope things are getting better, and we will be able to see and have discussion face-to-face as soon as possible. You may now leave the webinar room. Thank you. Stay safe, and have a great weekend.