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

Good morning, everyone. Thank you for joining BNI's earnings call for 2025 financial performance. My name is Sigit, and I'll be your host today. Thank you for joining us today and for your continued support and trust towards BNI. The session marks an opportunity to reflect on our full year 2025 performance, highlighting how we navigated dynamic macroeconomic environment [indiscernible] resilient results and continue to reinforce our core fundamentals across key business segments. We will also share our strategic priorities as we position the bank for sustainable growth going forward this year. Joining us today are members of BNI directors. We have Baba Putrama Wahju Setyawan, President Director; Ibu Alexandra Askandar, Deputy President Director; Baba Hussein Paolo Kartadjoemena, Finance and Strategy Director; Baba David Pirzada, Risk Management Director. And other members of the management team. Thank you all for being here. Into the session, we will present 2025 full year performance along with our take on the resilient economy of the country as well as our diversified portfolio and also prudent risk management. And finally, our guidance for this year. Without further ado, I would like to invite by Baba Putrama, President Director, to open the sharing session. Please.

Thank you, Sigit. Good morning, everyone. Thank you for joining BNI's full year's 2025 earnings calls. Today, I will begin with a highlight for the review of our 2025 performance and share our perspective on the year ahead. Following my remarks, our CFO will take you through the financial details. After which, the rest of the management team will address the topics. 2025 was a year defined by 2 strategic priorities: strengthening our funding base and maintaining prudent risk management even as we navigated industry wide margin pressure. The Central Bank cut its benchmark at 5x last year by a total of 125 basis points, ending the year at 4.75%. While these actions supported broader economic growth, they also led to a compression of our net interest margins, which declined from 4.2% to 3.8%. This was primarily driven by a 50 basis point reduction in our blended loan yield as our cost of funds remain relatively stable. In response, we focused intensively on building a more resilient low-cost funding base. I'm pleased to report that our CASA grew by 29%, significantly outpacing our 16%% loan growth. In nominal terms, our loan expansion of IDR 124 trillion was fully funded by CASA growth of IDR 163 trillion, this represent an exceptional funding achievement and stands as a clear success story in BNI's ongoing transformation. The strong business momentum, robust loan growth paired with extraordinary CASA generation substantially offset the margin pressure. As a result, our net interest income remained stable year-over-year together with a 5% increase in noninterest income, total operating income grew 1.6%. Our disciplined approach to risk management continued to deliver results. Despite sector with concern of our asset quality, BNI improved both its loan at risk and NPL ratio, which now stands at 8.5% and 1.9%, respectively. Nevertheless, we remain cautious in light of potential risk, including the Sumatra floods, commodity price volatility and broader retail banking challenges. We increased our credit cost by 10 basis points compared to the prior year. For the full year, BNI recorded a net profit of IDR 20 trillion, a decrease of 6.6% year-on-year. This result reflects both the lower rate environment and our deliberate decision to strengthen provision through a conservative management of our [indiscernible]. Looking ahead, we believe BNI is on solid footing for sustainable growth. We are supported by a strong Tier 1 capital adequacy ratio of 19.4% and robust liquidity buffer with a loan deposit ratio of just 86%. Now I would like to frame our outlook for the coming year which is shaped by Indonesia resilient economic position. Globally, growth is projected to slow down to 2.9% in 2026. In contrast, Indonesia economy is forecast by the OECD to grow at stable and robust 5.0%. The strength and consistency of Indonesia position as an attractive designation for global capital flows. Domestically, we anticipated a coordinated policy push to sustain this momentum. The government is set to run an expansionary fiscal policy with budgeted spending increasing by 11%. More importantly, there is a clear focus on improving the quality and timing of this expenditure by frontloading programs to maximize their economic multiplier effect throughout the year. We expect fiscal stimulus to play the leading role in driving growth in 2026. Monetary policy is expected to remain supportive with more moderate easing amid global developments. Our outlook is underpinned by confidence in Indonesia growth trajectory. In fact, our internal economic forecast is slightly more optimistic than the OECDs, projecting GDP growth of 5.2%% for 2026. This view is informed by the government's targeted and substantial fiscal agenda, which you can see the details on the slide. This agenda, spanning education, defense, energy transition and public health represent significant strategic investment. For notional bank like BNI it also translates into concrete opportunities to serve the real economy while building a stronger, more resilient business. Let me illustrate these 2 examples. First, the Files operative economic empowerment program. Here, we have provided approximately IDR 47 trillion in long-term financing. This represents a high-quality asset for our book with low risk due to its repayment structure coming from state budget. Beyond the loan, we also see significant potential to capture low-cost CASA deposits from the program procurement and payment ecosystem. Second, the free nutritious milk program. Our primary benefit here is low-cost funding advantage. We serve as the operating bank for 1,000 of central kitchen nationwide, generating stable transaction accounts when the loan exposure remains minimal. This program should help in statically aligned with national priorities. They allow us to support impactful development while simultaneously strengthening our own balance sheet through quality lending and stable low-cost deposits. This position us well to navigate the year ahead. Our strategy remains focused on what we can control, defending our margin through funding discipline and managing risk prudently to ensure stable profitable growth. With this strategic context, I will now hand over to our CFO, who will take you through the detailed financials for the year. Next, our CFO, will explain more about our financial performance. Please, Paolo.

Thank you, Putrama. Following our CEO strategic overview, I will now provide a more detailed look at the underlying financial and business fundamentals that are building a stronger BNI for the future beyond the immediate profit and loss. First, let me discuss our loan portfolio composition and growth. A key achievement in 2025 was achieving a more balanced growth profile across our core segments. Corporate Banking, our largest segment, grew by a robust 20% year-on-year, maintaining its foundational role. We are particularly encouraged by the resurgence in our middle and non-KUR SME segments, which also grew by 20% and 15%, respectively. These are higher-yielding portfolios that had contracted in prior years and the return to growth is a strategic win. In contrast, we exercised deliberate selectivity in the consumer segment, where growth moderated to below 10%. This reflects our priority on asset quality amid broader industry concerns in retail banking. We applied a similar prudent approach to the KUR program, which saw a 21% reduction as we focused on portfolio quality. Secondly, I would like to highlight our progress in risk and capital efficiency. As a systemic bank, we place a high priority on diversification and a resilient balance sheet. Our borrower concentration has improved significantly. The share of our top 20 largest loans has been reduced from 45% in 2020 to 32% today, enhancing our risk distribution. Importantly, this diversification has been achieved while simultaneously lowering the overall risk profile of our loan book. Our risk-weighted asset density has declined from 82% in 2020 to 69% currently. This disciplined approach to portfolio construction has been a primary driver behind the improvement in our credit cost trend over the past 5 years. Our provisioning policy remains more conservative than average peers with our loan loss reserve ratio at 4% remains above the peer average of 3.8%. We view this as a strategic buffer and a reflection of our commitment to prudent risk management. The foundations of our loan book are stronger. Growth is more balanced, concentration risk is lower and the overall risk density has improved. This sets a solid platform for sustainable, high-quality growth moving forward. Let me now walk you through the quarterly trends, where we saw a strong finish to 2025. Business momentum accelerated significantly in the fourth quarter. Our PPOP reached IDR 9.4 trillion, a substantial increase over the previous 3 quarters and almost on par with our all-time high Q4 of 2024 performance. The strength was broad-based with contributions from all 3 components of operating income. Net interest income was the primary driver, followed by a healthy fee income, and we also saw a positive contribution from recovery income. A key factor behind the strong NII performance was an improved margin environment. Our cost of third-party funds declined by 47 basis points quarter-over-quarter, lifting our exit NIM for Q4 to 3.9%. This repricing of third-party funds was supported by several favorable conditions, including government fund placements, which temporarily improved money supply growth in the economy as well as market share gain in our CASA franchise. I would also like to highlight a particularly encouraging trend within our fee income, which grew 6% quarter-over-quarter. Digital channel fee income was a major contributor, rising 22% Q-on-Q. The stream comprising of bill payments, e-channel fees, retail investment products and cash management solutions now represents nearly 20% of our total fee income. The progress in fee income and low-cost funding is a direct result of our strategic investment in digital infrastructure through our wondr and BNI Direct platforms. We are executing a successful hybrid banking model that uniquely combines our extensive physical branch network with these digital capabilities. This dual approach is effectively serving Indonesian customers, driving low-cost funding and scaling fee-based revenue. The results are clear. Transaction frequency on our digital channels increased 36% year-over-year, while branch productivity also improved markedly with daily account openings per outlet, up 36%. We are building a more efficient digitally enabled bank while strengthening our core physical presence. Moving to our full year 2025 profit and loss. Our net interest income saw a modest decline of 0.4% year-over-year. This was driven by the industry-wide compression in lending yields, which held our interest income growth to 4.2%, lagging behind our loan growth. We are pleased to note, however, that our cost of third-party funds remained stable year-over-year, a testament to the success of our CASA strategy. Outside of net interest income, the year showed positive momentum in several areas. Fee income grew a strong 11% year-on-year with a healthy and balanced contribution from both our consumer as well as business banking segments. This balanced mix, a shift from our historical reliance on more volatile market-driven fee income adds resilience to our revenue base. Operating expenses grew by 6%, in line with our budget of not exceeding 7%. More importantly, the composition of this growth reflects strategic investment. Digitalization and transaction-related expenses, investments that directly support future revenue grew by 19%. Personnel costs grew moderately at 5.4% while we maintain excellent control over G&A expenses, which increased by only 1.6%. Recovery income was a headwind for the year, declining 9.7% as it got off to a slow start before improving in the fourth quarter. A key driver of our profit and loss this year was our conservative stance on risk. While we saw meaningful improvements in our NPL and loan net risk ratios, our provisioning charges increased by 18.4%. This reflects a deliberate management overlay as we applied to the account for potential risks related to the Sumatra floods, the retail banking sector weakness and geopolitical commodity price volatility. Consequently, our bottom line net profit for the year stands at IDR 20 trillion, a 6.6% decrease year-on-year. This result is a direct reflection of 2 factors: the margin pressure in a lower rate environment as well as our proactive conservative approach to strengthening our balance sheet buffer. Turning to our loan portfolio growth in 2025. We achieved a balanced expansion across key segments, underpinned by our continued focus on credit discipline and asset quality. The Corporate segment was our primary growth driver expanding by 20% year-on-year. Within this segment, the growth was broad-based. Lending to private sector corporations grew by 6% while our book with state-owned enterprises grew by 18%, concentrated with top-tier clients such as SOE market leaders in telco, utilities, financials as well as manufacturing sectors. Notably, a single IDR 47 trillion facility to Agri as for a national Village Cooperative program contributed additional growth. We emphasize that all SOE lending, including this facility, adhere to our strict underwriting standards. We are particularly encouraged by the performance of our Middle segment, which grew by nearly 20%. This growth was led by our enterprise subsegment, which comprises of large companies just below the corporate threshold. A key success factor has been our strategy of fostering collaboration between our corporate and middle market teams to capture comprehensive value chain opportunities. In our SME segments, we maintain a highly selective approach. The SME non-KUR portfolio grew a solid 15%, supported by our robust credit scoring-driven underwriting framework. Conversely, our KUR portfolio contracted by 21%, in line with the small national quota for the year. Finally, in the Consumer segment, we exercised deliberate caution, allowing growth to moderate to 9.6%. This reflects our priority on asset quality as we await clear signs of a sustained recovery in household purchasing power. From a yield perspective, the blended loan yield for the portfolio declined by 50 basis points to 7.2%, driven primarily by the Corporate, SME and Consumer segments. It's worth highlighting that the Middle segment demonstrated yield resilience, being the only segment to show a slight yield increase of 10 basis points year-on-year. This portfolio performance reflects our strategy of pursuing disciplined growth in higher-quality segments while actively managing risk and yield. Now shifting focus to our liabilities. We saw very strong growth in our third-party funds during 2025, with momentum accelerating notably in the fourth quarter. This growth, coupled with active management allowed us to meaningfully optimize our funding costs. Growth was broad-based across deposit types. Term deposits grew by 30% year-on-year. A significant portion of this growth was driven by a temporary IDR 55 trillion placement of government funds at a cost of approximately 3.8%, below our average term deposit rate. Savings deposits grew by 11.2%, supported by successful digital banking penetration A key highlight is our payroll business, where the number of accounts grew by 24% to 5.6 million customers, providing a stable core deposit base. And current accounts saw an elevated growth of 44% which included a significant placement. Excluding this item, our core current account growth remains exceptionally strong at 29%. This was driven by a successful expansion of our BNI Direct platform and wholesale banking client base with platform users increasing by 25% year-on-year. This robust third-party fund growth, which exceeded loan growth, provided us with sufficient liquidity to proactively lower our cost of funds across all deposit categories by year-end. Savings deposits returned to below the 1% level, term deposits moved closer to the low 4% range from a peak of 5.1% in mid-2025 and the cost of current accounts declined to 2.2%, aligning with 2023 levels. Consequently, our overall cost of funds improved significantly, reaching 2.5% in Q4 of 2025. While the Q4 trend is encouraging, we remain vigilant. Competition for deposits typically intensifies in the first quarter, and we have observed a slight uptick in our monthly cost of funds in December from the November low. We will continue to actively manage our deposit mix and pricing to sustain these improvements. This brings us to our liquidity position, a key pillar of strength. We closed full year 2025 with robust metrics, a loan-to-deposit ratio of 86%, LCR of 160% and NSFR of 142%. this strong foundation is critical as we enter 2026. A key focus last year was normalizing our foreign currency loan-to-deposit ratio, which we successfully reduced from a type 95% to 100% range to a more comfortable 87%. We achieved this by growing our foreign currency deposits by 10% while allowing the foreign currency loan book to contract modestly. In local currency, we also maintained a conservative loan-to-deposit ratio relative to peers. This is a deliberate strategy to ensure adequate liquidity buffers, particularly for the seasonally competitive first half of 2026 and pending clarity on the rollover of the IDR 55 trillion Ministry of Finance funds. Maintaining the strength requires not only prudent liquidity management but also vigilant risk oversight. Let me now summarize our strong 2025 results and provide our financial guidance for the year ahead. Our 2025 loan growth reached 15.9%. This included a significant back-end loaded IDR 47 trillion facility to Agrinas. Excluding this, core growth was a strong 9.8% at the upper end of our 8% to 10% guidance. For 2026, we project stable loan growth of 8% to 10%, supported by expected economic stability and fiscal stimulus. Secondly, we closed 2025 with a NIM of 3.8%, exceeding our 3.7% guidance, driven by Q4 funding cost improvements. Given the continuing volatility from global factors, which led us to revise forecast last year, we are adopting a conservative stance for 2026. Our guidance is 3.5% to 3.8%, factoring in competitive pressures in wholesale lending and potential deposit competition, particularly taking into account volatile deposits in SOE banks December book. The 2025 credit cost was 1.15% at the upper end of our range, reflecting our conservative approach to provisioning despite improving asset quality. As we expect write-off in 2026 to decline meaningfully, we anticipate a credit cost range of 1% to 1.2% for 2026. I will now hand over to our Chief Risk Officer, Pak David, to provide further detail on our portfolio quality and risk framework.

Thank you, Paolo. I'd like to begin by highlighting the fundamental resilience of BNI's asset quality throughout fiscal year 2025. Despite the challenging macro environment, our portfolio has shown remarkable stability and improvement. We are particularly encouraged by the significant reduction in our overall loan at risk, which improved from 10.3% to 8.5%. Notably, this ratio is now stronger than the pre-pandemic level of 9.4% in 2019. This broad-based improvement was seen across most segments. Now looking at segment level performance. Within Corporate, Middle and Small segments, this portfolio showed stable to improving asset quality. Specific for Consumer segment, this segment presented a mixed but ultimately positive picture. While the NPL ratio increased year-over-year, primarily driven by the mortgage and card business, we observed a sharp 80 bps sequential improvement in Q-on-Q loan at risk. More importantly, the Special Mention Loan ratio for consumer improved by 70 bps Q-on-Q, signaling a positive near-term trend. The improvement in Special Mention Loans is a highly encouraging leading indicator. Our write-offs in full year 2025 totaled IDR 15.4 trillion. This is in line with our budget, representing 1.8% of the loan book. Based on our current portfolio trends, we anticipate a significant decline in the write-off ratio for 2026. Our risk metrics reflect a robust and improving portfolio. We have managed through sector-specific pressures, particularly in consumer with proactive measures that are already yielding positive results in leading indicators like Special Mention Loan. We entered 2026 with a strong and stable asset quality foundation. Let me address our credit cost, which at 1.2% was 10 bps higher than the prior year. This increase was a conscious and prudent choice. While asset quality metrics improved, we proactively provision to address elevated write-offs, building significant reserves for the future. This disciplined approach has resulted in a robust provision coverage position that is high relative to peers. We closed the year with a 4% loan loss reserve, 205% NPL coverage and 47% loan net risk coverage. Looking ahead, as write-offs are expected to remain moderate, our continued conservative approach in 2026 is expected to sustain the strength of our coverage ratio and asset quality, keeping it stable and in line with our above industry levels. This brings us to the end of our presentation. I will now return the floor to the moderator for Q&A. Thank you.

[Operator Instructions] Our management team will address questions as time permits. responses may be delivered in English or Bahasa Indonesia and [indiscernible] issues, an English summary will follow. Please ensure the interpretation feature on your Zoom app is enabled. Questions will be directed to the relevant directors and similar topics may be grouped together for efficiency. All right. We will begin the Q&A session with the question #1 related to the our guidance and outlook for this year. We have received several questions with the same topic from Spring or HP and Manulife regarding the management's overall performance outlook for 2020, including loan demand, expectations and key sectoral growth drivers. To address this question, we invite our President Director, Pak Putrama to respond. Please Pak.

Thank you, Sigit, Belinda and Ba Andre. For 2026, we are looking at loan growth at the range of 8% to 10%, broadly in line with last year's core loan expansion with balance contribution across segments. Demand from high-quality SOEs is expected to be a key growth driver as these entities line expansion plans with government-led initiatives. Sector-wise, telecommunication, infrastructure, natural resources and manufacturing represent the most notable pipelines in the first half of the year. Stable to slightly improving liquidity conditions together with the acceleration of government programs are expected to further spot load demand going forward.

Thank you. Putrama, please stay because I have another question still on the outlook for our liquidity for this one. The located outlook and condition for 2026. This one is from Spring and also from Sun Life. Please Pak Putrama.

Thank you, Sigit. Entering Q4 last year, system liquidity improved meaningfully, but probably only temporary with M2 growth accelerating to 9.6%, largely supported by Ministry of Finance Fund placements in September. This was for the complete complement by our market share gains in CASA, which help reduce BNI cost of funds by 47 basis points Q-on-Q and brought our LDR down to healthy 86% by year-end. We remain cautious in our liquidity management. Cost of funds begin to add up in December and could remain under pressure in the first half of this year, driven by seasonal factors such as brand-related customer and dividend payments as well as uncertainties surrounding potential Ministry of Finance fund withdrawals. In addition, the scope for further monetary expansion appears more limited this year. On the positive side, stronger and accelerated fiscal spending could provide a sportive tailwind to system liquidity and funding conditions. Thank you.

Thank you, Pak Putrama for the answer. Moving on, we have a question. This one is related to one of the government program, which is the Village Cooperative program. The questions I received is from Citi, Spring Manulife, OXCapital and also from Macquarie regarding the total size of the program and the total disbursement to date and expected disbursement for this year. We invite our Director of Risk Management, Pak David to give some insights for this question. Please Pak David.

Okay. Thank you for the question. Under the KDMP program, Agrinas is managed to develop the physical buildings and supporting infrastructure for the cooperatives banks, including BNI participate by extending CapEx loans to Agrinas. In terms of size, BNI's total loan allocation under the KDMP program amounts to IDR 66 trillion. And as of December 2025, we had disbursed IDR 47 trillion, which increased to IDR 55 trillion by January 2026, leaving a remaining balance of IDR 11 trillion. The remaining loan money is expected to be disbursed gradually throughout 2026. Thank you.

Thank you, Pak David. Please stand by par because this question is still related to Village Cooperative program. This question is from CP and Ox Capital. But the question is more on the loan structure economics and key risks of village Cooperative. Please, Pak David.

Okay. The Agrinas loan carries a 6-year tenor with a lending rate of 6% per annum. With the cost of funds of 3.8%, the resulting NIM is 2.2%. This is lower than our current bank-wide NIM. However, this is acceptable given the low-risk profile of the program as it is backed by the state budget. Operating expenses also minimal as this is a B2B lending scheme where we deal directly with Agrinas as an institution. The current scheme has been effective in enabling banks to distribute cooperative loans. The key is to monitor potential changes to the existing structure and the possibility of Ministry of Finance Fund withdrawals. We expect greater clarity on these points by the end of the first quarter. Thank you.

Thank you, Pak David. A follow-up question, Pak, still related to the Pelagic operating program, specifically regarding the collection and amortization mechanism, including timing and whether the installer must cover interest only or include principle. Please, Pak David.

Okay. So the repayments for the Agrinas loans are structured on an annual amortization basis. The facility includes an 8-month grace period with the first cash repayment scheduled for September 2026 will be followed by annual repayments on July, each July thereafter. Each installment comprises both principal and interest with payments sourced directly from state budget allocations, which is ensuring a reliable and predictable repayment mechanism. Thank you.

Thank you, Pak David, for the insightful explanation on the Village Cooperative program. Moving on, I have another question. This one is from spring concerning the certainty of Ministry of Finance fund placement after the initial 6 months period. We invite our Finance Director, Paolo to address this question. Please, Pak.

Thank you for the question. The Ministry of Finance Liquidity Placement is structured as an on-call time deposit. So it provides flexibility for government cash management. At the moment, there has been no confirmation yet regarding a potential rollover or termination of the placement. So given the situation, we have applied a conservative assumptions in our NIM projections while maintaining active communication with the Ministry of Finance to monitor for any further developments. Thank you.

Thank you, Pak Paolo. We now move to a question from Manulife, Macquarie and RHB regarding the outlook for net interest margin this year, Pak Paolo, including loan yield trends amid refinancing pressure and funding cost movements. Please, Pak Paolo.

Yes. Thank you for the question. We expect our net interest margin to be in the 3.5% to 3.8% range for 2026. implying an up to 30 basis point compression from 2025 levels or around a 40 basis point decline from our Q4 exit NIM. This outlook reflects several pressures. The first one is the inclusion of the Agrinas loan, which carries a margin of around 2 percentage points, as my colleague, Pak David mentioned earlier and is expected to dilute bank-wide NIM by nearly 10 basis points. Secondly, we also see the full year impact from last year's benchmark rate cuts. And the last one is the competition in the wholesale segment continues to be quite intense while our guidance also incorporates a conservative assumption regarding potential Ministry of Finance fund withdrawals. Now how do we mitigate these NIM pressures? Our primary focus remains on strengthening our CASA franchise. We are already seeing encouraging progress. Savings account openings reached 25.6 million in 2025. This is up 13% year-on-year. This is driven by a strong mobile app adoption and also improved branch productivity. Payroll accounts increased from 4.5 million in 2024 to 5.6 million in 2025. This also provides a stable source of low cost savings. At the same time, customer engagement continues to improve as reflected in higher transaction frequency across our mobile platforms as well as on BNI Direct supporting our deposit stickiness and funding quality. Thank you.

Thank you, Pak Paolo. The next question relates to the outlook for credit costs in 2026 and whether is there any provision write-backs and I would like to invite Pak David, our Risk Management Director to respond for this question. Please, Pak David.

We did not record any provision write-backs in 2025. Instead, we accelerated provisioning towards the end of the year, supported by strong top line momentum in Q4 2021. As a result, credit costs in 2025 came in around 10 bps higher than in 2024 despite continued improvement in NPL and loan at metrics. For 2026, we are guiding credit costs in the range of 1% to 1.2%. This outlook reflects resilient asset quality across the majority of our loan book and also provision coverage that remains above peers and our expectation that write-offs will trend lower this year. Thank you.

Thank you, Pak David. We have another question. This one is from Kit from Ox Capital addressed to Pak David regarding the management's view on consumer and retail asset quality trends for this year. Please, Pak David.

Thank you for the question. So we continue to monitor the Consumer segment cautiously as trends remain mixed but overall constructive. Consumer loan NPLs edged up by around 10 bps between September and December 2025. However, we can see that Special Mention Loans which is probably a better indicator for this segment improved materially by 70 bps quarter-on-quarter. Taken together, the signals support our prudent and cautious stance toward consumer lending. To mitigate risk, we are tightening our underwriting standards by being more selective in customer and property developer partner selection, implementing sinking fund requirements enforcing more disciplined LTV thresholds and also strengthening both credit monitoring and human capital capabilities. From Retail segment, asset quality in KUR -- so clear improvement with both NPL and SML ratios declining supported by the broader implementation of enhanced credit scoring across the small business segment. With the continuing lower trend of KUR quota, we keep maintaining our prudent strategy going forward by being more selective in disbursements and focusing on better quality borrowers. For 2026, BNI's KUR quota is set at IDR 10 trillion. This is down from IDR 12 trillion in 2025, which we believe supports a more balanced approach between growth and risk management. Thank you.

Thank you, Pak David, for the insightful answer. Moving on, I have another question from this 1 from Autonomous Research. The question is, the cost of fund was a lot lower in the fourth quarter of 2025. Was this mostly from repricing of special rate deposit? What was the average deposit rate given for Agrinas deposits? And how fast should we expect those to roll off the book? I would like to invite Pak Paolo to address this question. Please, Pak.

Yes. Thank you for the question. Yes, for Q4, the downward trend in cost of fund is largely driven by repricing of special deposits, as you mentioned. So I think within a few weeks after receiving the MOF deposit, the repricing continued aggressively. And overall, I think cost of funds hit bottom around November and December. For Agrinas itself, the deposit is at 2%. We do expect as part of their mandate that the funds will be used relatively quickly in the first half of this year as they build out the infrastructure related to the KDMP program. Thank you.

Thank you, Pak Paolo. The next question comes from City focusing on the outlook for the cost-to-income ratio in 2026. We again invite our Finance Director, Pak Paolo to respond for this question. Please, Pak.

Yes. Thank you for the question. From a cost perspective, operating expenses rose 6% remaining within our internal budget. Cost growth was directed towards digitalization and transaction-related initiatives that support future revenue generation while personnel and G&A expenses were tightly controlled. We do not provide formal guidance on cost-to-income ratio, but our priority is to keep operating expense growth well below 7% on a yearly basis. This is broadly in line with revenue growth. On this basis, we expect cost-to-income ratio to remain relatively stable this year while continuing to pursue gradual and sustainable improvements over the medium and long run. Thank you.

Thank you, Pak David -- Pak Paolo. I have another question Pak Paolo for our Director. This one is from Ox Capital. Is there any notable expense growth items that investors should be aware of in 2026, please, Pak Paolo.

Yes. Thank you for the question. We do not expect any unusual expense items we have maintained strong discipline in both spending and accounting treatment. And our OpEx growth is consistently ranging between 3% to 7% over the past 3 years. Our approach to OpEx remains unchanged. We continue to drive efficiency and G&A expenses, reward our employees and team members fairly and also prioritize spending that delivers clear revenue multiplier. In recent years, this has been largely directed towards digital investments. And going forward, our focus will increasingly shift towards branch transformation while maintaining digital momentum. Overall, we expect operating expense growth to remain well controlled, capped at no more than 7%, in line with our historical discipline. Importantly, any increase will be driven by delivered revenue supporting initiatives such as higher digital transaction volumes, platform enhancements as well as targeted promotions to deepen customer engagement rather than structural cost pressures. Thank you.

Thank you, Pak Paolo. We have another question from Citi regarding management's outlook on the dividend payout ratio. Please Pak Paolo. We would like you to address the question.

Thank you. So similar to the previous years, the final decision on dividend will be subject to shareholder approval at the annual GMS. The management's intention is to maintain a stable payout ratio at 65%, of course, subject to shareholder approval. From a capital perspective, this remains well supported. While the regulatory minimum Tier 1 car is 12%, our current Tier 1 car stands at 19.4%. And our internal control comfort level is we want to maintain Tier 1 at 17% to support business expansion prudently. Thank you.

Thank you, Paolo, for the answer. Ladies and gentlemen, we have another question from the audience. I believe this one will be addressed to Pak David. Pak David, this question is from Autonomous Research. Okay. This question is addressed to Paolo. Pak Paolo, please. The question is what is the comfort our LLR to loan ratio level for BNI. And for the 8% to 10% loan growth, which segments will be the key driver? Please, Pak Paolo.

Yes. Thank you for the question. First, on loan growth. We believe the shape of our loan growth will be overall quite similar to 2025. So the wholesale segment will continue to show double-digit growth I think we will continue to see strong momentum also in SME as well as cautious growth in consumer. With regard to the loan/loss reserve ratio, we are basically comfortable with the 3.5% to 4% range. Of course, we continue to monitor market developments, but that is broadly the range that we are comfortable with. Thank you.

Thank you, directors for the insightful Q&A. Ladies and gentlemen, that brings us to the conclusion of today's session. On behalf of the entire BNI team, we extend sincere gratitude for your time and engaging questions. While our scheduled hour is over, our IR team remains at your disposal for any further discussion, please feel free to reach out to us to our e-mail address, [email protected]. We are excited about the path ahead that we look forward to sharing our continued progress with you. Thank you and have a nice week ahead.