PT Bank Rakyat Indonesia (Persero) Tbk (BBRI.JK) Q2 FY2025 Earnings Call Transcript & Summary

[Audio Gap] Begin shortly. First, let me introduce the members of our Board of Directors with us today, our CEO, Hery Gunardi; our vice CEO, Pak Sunarso; Director of Finance, Ibu Vivi; Director of Micro, Akhmad Purwakajaya; Director of Risk Management, Mucharom; and Director of Consumer Banking, [indiscernible]. Before we start, a few housekeep notes to all of you. For those on the Zoom call, please download a copy of our presentation materials from the BRI Investor Relations homepage on the link that we sent you this morning. [Operator Instructions]. Now I would like to invite Hery Gunardi, our CEO, to begin the meeting.

Very good morning, everyone. Let me continue the presentation. Before discussing our results, I would like to give you some color on the current update on the macroeconomic condition in Indonesia. So Indonesia economic growth remain challenging. Purchasing power continue to face pressure validated by BRI MSME index, that shows declining trend since the end of 2024, particularly in the lower income segment. However, inflation has remained relatively stable in 2025, where it was 1.87% year-on-year in June 2025 within Bank Indonesia target range driven by control food and energy price. In terms of government spending is expected to accelerate in second half 2025, mainly through social assistance, MSME support and also other fiscal program to boost domestic demand. While we maintain a conservative stance amid global uncertainty this fiscal tailwind offers selective growth opportunities. BRI have been supporting the key national programs such as Qiuara, Ultra Micro Financial, [indiscernible] and also upcoming housing program. As the largest micro finance institution in Indonesia, BRI continue to balance social mandate with commercial favorability by embedding risk-based pricing, strengthening underwriting process and also digitalization services. This approach ensure that while we expand access to underserved communities, we also maintain asset quality and also the long-term profitability referring both social and sustainable economic return. First of all, we would like to move into the liquidity monetary conditions, recent improvement in liquidity, supported by Rupiah stability and Central Bank, Bank Indonesia gradual rate cut. Benchmark rate currently at 5.25% compared to U.S. cut rate at 4.5%. The cut reflect for growth [ stands ] Bank Indonesia to support the banking sector decline in SRBI issuance and also the signaling reduced liquidity absorptions by the Central Bank. So in terms of fiscal stimulus outlook, the government spending is projected to rise sharply in the second half 2025 with a target of 97% for the full year compared to the 39% budget realization as of June 2025. Increased fiscal spending is expected to support domestic demand and also stimulate economic momentum. Banking industry performance. If you look at into the asset growth remained moderate in line with a slower loan expansion as bank adopted more selective lending amid ongoing macroeconomic uncertainty. Loan growth stood at 8.9% year-on-year, reflecting continuous credit strategies and also still subdued MSME demand. In terms of deposit grew achieved 4.5% year-on-year, led by 6.05% growth in saving account, while demand and time deposits were flat, deposit growth may accelerate in the second half 2025, supported by rising government spending and also seasonal inflow. LDR stood at 85.9% still below the line, indicating the balance funding and also lending dynamic. In terms of net interest margin was 4.5% in April, lower year-on-year due to first rate hike. However, NIM has begun to improve sequentially driven by better funding costs and also improving liquidity condition. CAR stay robust at 25.4%, comfortably above regulatory minimum, reflecting solid capital buffers. Please note that we started to see liquidity improve in second quarter 2024, supported by stable deposit growth of 5.3% achieved in the quarter 2 -- and quarter 1 and quarter 2. In June 2025, deposits spiked to 6.9%, driven by government stimulus and also fund placement created strong funding based position [ done ] well for second half 2025. As you may be aware that the new management has to focus going forward. In the first 3 months, we have been starting some initiatives to ensure the discipline of execution of the ground. So we also established a strategic favorable focus on lending, funding, distribution and operation, government program and also human capital. To enhance the regional brand oversight, we're centralizing and also streamlining operation under the network and retail funding Director, positioning regional office and branches as the core engine of the retail funding growth. We also boosted the digital channel productivity by optimizing business merchant and also key queries [indiscernible] in aim reducing funding outflow to other banks and strengthening BI transaction banking ecosystem. So strengthen micro segment operation by developing additional supervisors and also to micro units. So we are on the way to remodeling the role of loan officers and enhancing underwriting quality through improved prescreening, risk-based approval limit by unit grading and also more structured loan funding process. And as part of our second transformation pillar, we are revamping our core micro business by strengthening operation by adding micro unit supervisor, redesigning loan offices role and also improving underwriting and pipeline quality. At the same time, we are building the new core, we call it the new engine by accelerating consumer loan through payroll loan, targeting new customers in private sectors and growing mortgages market share by acquiring Tier 1 and Tier 2 [indiscernible], which is giving the more quality in terms of the credit risk and expanding also the commercial loan in priority sectors like education, health care sectors, state budget program and also the potential sectors across the region. So we would like to report the initiatives in retail funding, transforming funding franchise. We revitalized key merchant ecosystem through targeted activation program at high traffic F&B hotspot. For example, in Jakarta, we have quite many numbers of place, a very hectic in the food and beverage restaurants, for example, [indiscernible], we're also going forward into the [indiscernible] high traffic for F&B as well. So intimate engagement even with the top merchant across BRI regional office, we push this one [ more ] package with the regional CEO. Campaign aligned with the emerging lifestyle. This effort aim to deepen merchant relationship and also increase the transactional CASA. So we also strengthened the capabilities of the RM, relationship managers with targeted upskilling while enforcing disciplined execution to the brand level. So collaboration between business unit and also the subsidiaries to share customers' ecosystem bandwidth offering and also coordinate the campaign. So in terms of the initiative in the asset quality, so we also [ repainting ] human capital as recruitment standards, reskilling, upskilling loan offers and also enable multi-roll capabilities. Business process improvement, for example, we deploy unit supervisors in the micro unit enhance BRIspot and also the pipeline management, centralizing monitoring. So strengthening risk management, strengthening the prescreening risk sector, original risk profile and also implement dynamic fulfill limit. While it is still early, we are starting to see encouraging sign of improvement in our retail transaction performance. First of all, we continue that we have been tracking the performance of digital channel, for example, such as BRIMO, Business Merchant and QRIS to drive digital CASA growth. So with BRIMO, for example, numbers of users increased by 21.2% year-on-year, reaching 42.7 million. But more importantly, we see improvement in monthly active users or MAU from 15.6 million to 19.3 million, increased by 24% year-on-year. And also financial transaction with BRIMO also increased by 26.4% year-on-year and transaction value grew by 25.5% year-on-year. How about the Business Merchant and QRIS. The number of our Business Merchants reached 306,000. In terms of numbers it little bit declined by 21.7% year-on-year, but it's -- we are on the way to optimizing our merchant outlet. The numbers of productive merchant business merchant increased by 14.3% year-on-year, while sales volume per merchant grew by 62.5%, while reflect high usability, security is certain and also has become the key driver for broader Business Merchant transaction adoption. For our QRIS sales volume also increased by 142.9% year-on-year and the numbers of transactions grew by 162.5% year-on-year. So I think our initiative to grow retail transaction has supported a manageable cost of deposit and also driven by higher growth in retail CASA. So the next one, the next slide. Not only the leading indicators we start to see gradual improvement in our funding mix. You can see in the slide in the screen in terms of total deposits grew 6.7% year-on-year in the first half 2025, supported by strong 10.6% year-on-year CASA growth. CASA ratio remained high at 65.5%, well above historical levels. So Q-to-Q, quarter-to-quarter deposit growth was robust, driven by 2.4% increase in saving account, signaling a recovery in saving behavior. Saving account with balance of IDR 500 million grew 11.5% quarter-to-quarter, rising their share from 21.1% to 23%, supporting by the strategy to optimize CASA through retail activity and also mass of emerging or emerging affluent customers expansion. Looking forward, we remain optimistic about funding cost, not only because of continuous effort to refirm our funding franchise, but also Bank Indonesia stand to maintain ample liquidity in the system. So the next slide. So from the asset side, the portfolio mix shifting from macro to consumer, corporate and also commercial segment had a limited impact on the profitability. as reflected in resilient in terms of net interest margin or NIM. This was supported by improvement in our funding structure, driven by strong CASA growth at 10.6% year-on-year, which reduced our cost of fund by 5 basis points year-on-year. At the same time, robust yield were maintained supported by the increased contribution from our subsidiaries company, which is PNM also Pegadaian within the micro segment. This balanced approach has enabled us to sustain a stable NIM at 7.76% despite the [ stiff ] in terms of the portfolio composition. So the next one. As June 2025, we are able to book moderate growth in terms of balance sheet. Total asset grew 6.5% year-on-year, supported by 6% loan growth, more favorable liquidity situation expected in second half 2025. Deposit also grew 6.7% year-on-year, supported by 10.6% year-on-year increase in CASA, both current account and especially saving account quarter-to-quarter improved in the quarter 2 with current account growing by 5.8% in quarter 2 compared to 4.6% in quarter 1, while staffing grew by 2.4% in the quarter 2, a notable recovery from minus 0.2% in the quarter 1. We do hope that we will continue to improve going forward as well as we want to transform our retail funding franchise. In terms of fee and other operational income grew 10.4% year-on-year, supported by increase in the gold sales and also recovery income is lagging since we had a fewer working days in first half 2025. We expect that the growth will accelerate in the second half of 2025, not only because we have more working day, but we also already set dedicated team on collection and recovery from micro and small [indiscernible] office until the BRI [ unit ]. From profitability perspective, we are still in the progress to improve our asset quality, especially in micro and small segment. But also PPOP still grew positively around 2.2%. This is a positive signal because the PPOP already positive driven by net interest income positive growth at 2.8% year-on-year and manageable OpEx grew only 5.7% year-on-year. We still book negative growth in net profit around 11.2% year-on-year. Please note that in June 2024, we had one-off non-loan provisions [indiscernible] of around IDR 4 trillion, IDR 4.2 trillion due to [indiscernible] restructuring scheme. So I think this is my last slide, keep tracking as expected as we remain in [indiscernible]. We're ongoing loan quality improvement reflected by declining LAR and also [indiscernible]. So while profitability metric faced headwind and also core earnings remained stable, supported by strong retail funding growth and also increased contribution from Pegadaian. So reported NIM was 7.76% first half 2025, increased 16 basis points to 7.76%, quarter-to-quarter supported by stronger loan yield and increased 35 basis points quarter-to-quarter and also manageable cost of fund. LAR declining 31% quarter-to-quarter, and LAR coverage was at 53.17%. Cost-to-income ratio slightly increased quarter-quarter to 41.9% from 41.1%, due to declining in net premium income as there was higher in [ secondary stuff ] in second quarter 2025. Cost of credit was 3.40% first half 2025. Furthermore the gross NPL ratio improved year-on-year to 3.4%. I would like to turn the call to Ibu Vivi, our CFO, to discuss financial detail. Please, Ibu Vivi.

Good morning, everyone. So I would like to start with our balance sheet as of June 2025. So the total loan grew around -- total assets grew around 6.5% year-on-year, supported by our earning asset basically that grew 1.9% year-on-year. So that the composition of earning assets to total assets increased to 94% compared to 92.5% in a year ago period. The main contributors of earning assets still coming from the loans that grew around 6%, 5.97% year-on-year or if we break it down into quarter-to-quarter is 3.1% quarter-on-quarter. If you recall, our first quarter grew only 1.4% quarter-on-quarter. Contribution actually coming from the subsidiaries. So the contributions of loan coming from Pegadaian and PNM increased from 9.4% to 10.7% year-on-year. Quarter-on-quarter, Pegadaian grew 9.21%, increased from 8.8% in the first quarter, while bank-only actually quarter-on-quarter increased by 2.94% compared to 0.86% in the first quarter 2025. And the source of growth in a bank-only level for loan actually coming from corporate and also consumer. For consumer, it is coming from -- mostly from payroll loan and also subsidized mortgage. For corporate clients, it's basically coming from the corporate borrowers that already been approved previously and now they are using their loan and most of them are Tier 1 clients. Still talking about the loan growth in BRI. Micro loan grew 1.6% year-on-year, supported by Pegadaian grew 31% year-on-year. And the main growth from Pegadaian is coming from the pawn lending that grew 40% year-on-year. In the same time, in a bank-only level, our micro segment only grew minus 3.29% year-on-year due to the weakening demand in the [indiscernible]. On another side, from liability side, our third-party fund grew 6.7% year-on-year. Q-on-Q, actually, we grew 4.3% in the second quarter of 2025, supported by CASA that previously mentioned by Hery that grew 10.6% or 3.8% Q-on-Q, especially the growth coming from the saving account that Q-on-Q grew 2.4% versus minus 0.2% in the first quarter. So the driver of the saving account coming from the retail segment basically that grew 4.2% Q-on-Q. But the saving from the pressured economy actually is still growing, but still like in a very low number around 1.2% Q-on-Q. The second account that we got from retail segment driven by the emerging affluent or mass affluent like Hery mentioned previously, we try -- in the last 3 months, we try to minimize leakage of funds to other banks. So this is basically helping our existing customer saving account balance to increase. And also we recognize new funds that we acquire from other banks due to the improving merchant business. Then if we are talking about our P&L, our profitability as of June 2025, our interest income grew around 2.6% year-on-year and I think supported by the contributions from Pegadaian, so Pegadaian contributions in interest income actually improved from 10.27% to 12.77% year-on-year. And within the interest income, actually, we have a one-off mod loss due to the write-off in a corporate loan around 390 basis points. And then we also have a reclassifications, the SME insurance around IDR 230 billion. So the reverse mod loss is IDR 390 billion and the reclass of SME insurance is IDR 230 billion. And if we take into account this one, so our net interest margin from 7.76% down to 7.69%, still quite resilient at the moment. The interest expense in BRI grew 2.1% year-on-year and Q-on-Q basically improved 8.1%, from bank only level and also the subsidiary is still impacted by the liquidity conditions in the second quarter. And also one of our subsidiary in this case is Pegadaian, the cost of fund is increased to finance their higher loan growth. So the cost of fund of Pegadaian increased from 6% to 6.3%. And here, we have net premium income and insurance services that year-on-year basically grew minus 70% and this is due to the implement of PSAK 117 or IFRS 17 replacing the IFRS 14. So the idea of the implement is to recognize it's accounting treatment basically to recognize the premium based on the banner instead of you book all of the premium in one time upfront, but it will be booked -- recognizing according in every year, accrue every year. And also previously, this -- the IFRS 14 actually when we book the promotions related to the insurance product, for example, they will be booked under OpEx. But now according to the new IFRS, it will be booked under the insurance services. So that is why you see that the growth in this item basically is declining around 70% year-on-year. Move into our OpEx. Our OpEx As of June 2025 basically 5. 7% year-on-year and around 4.93% Q-on-Q, up from around minus 4.6% if we compare Q-on-Q in the first quarter 2025. And increase basically coming from subsidiaries contributions Pegadaian and PNM, so the contributions for OpEx coming from Pegadaian and PNM increased from 11.1% to 24% basically. To be more specific, this is basically related to the increase in the personnel OpEx in Pegadaian because they make a reserve for incentives and salary and bonuses. After considering the OpEx, the pre-provisions operating profit grew positively roughly around 2.2% as of June 2025. Then moving to the provisions expenses. Can we go back to the previous slide, the P&L slide. The provision expenses, if we look at here the total provision expenses basically grew 25.8% and if we break it down into loan and non-loan. Loans still growing moderate roughly around close to 4%, but you see the non-loan provisions basically down very significant from 4.2 a year ago -- IDR 4.2 trillion a year ago, now it's only IDR 287 billion. Basically, this is the normal non-loan provisions basically for year. So that is why the net profit grew minus 11.2% year-on-year or quarter-on- basic it's minus 7.8% or slightly better if you compare with the first quarter where our net profit basically minus IDR 9.4 trillion -- sorry, 9.4%. Then move to the liquid conditions. In the first quarter, our loan-to-deposit ratio basically still manage roughly around 85%. So it's still below our appetite basically yet might still accept the loan-to-deposit ratio 90% to 92%. The other indicators that reflecting our liquidity condition is the liquidity coverage ratio still way above the regulations around 100%, where we maintain around 150%. This manageable liquidity conditions basically helps us to manage the cost on deposit where basically Q-on-Q is flat around 3%. But if we are talking about the marginal margin -- the May to June cost of deposit, it's continued to decrease. Move to our earning asset NIM, lending yield and cost of fund. Our consolidated net interest margin roughly around 7.76% in the first half 2025 despite a challenging liquidity environment and pressure on micro loan. While the micro loan compositions declined to 44.7%, Pegadaian and PNM shares within consolidated micro loan increased significantly. So it helps to raise micro loan yield basically by 5 basis points to 70.9% in the first half. And if we are talking about other operating income and also operating expenses, fee and commissions actually rose 2.7% year-on-year with recovery income contributing 36% of bank-only noninterest income. Notably, the net gold fee income surged to roughly around IDR 800 billion from IDR 200 billion year-on-year, driven by Pegadaian robust performance. For the recovery income, actually, if we see the year-on-year is still flat, it's around 1% and this is due to several reasons. The first one is like less working days in the first half. So we are expecting an accelerated pace in the second half for recovery. And from this recovery around 42% coming from claim and the rest is coming from non-claim or based on our efforts to collect the money from our customers. I think that's the overall presentation from financial perspective. And next, I will turn the presentation over to our Director of Risk, Mucharom to discuss our asset quality.

Thank you, Ibu Vivi. I will continue the presentation talking about loan quality. Our consolidated nonperforming loan ratio decreased slightly by 1 basis point year-on-year to 3.04%, supported by corporate segment, which declined by 146 basis points. This was mainly due to the write-off of several borrowers in the textile industry totaling approximately IDR 2.6 trillion in the first half 2025. However, we continue to see our pressure on NPLs in the micro segment as we progress further into the 2023 Kupedes loan cycle. This particular contributed around 35.5% of total micro gross to increase in the first half 2025. We expect micro NPLs to remain elevated in the near term. On a positive note, we are starting to see early signs of improvement as micro SML declined by 11 basis points year-on-year. Overall, our SML ratio improved to 5.15% from 5.41% year-on-year, driven by 1.1% year-on-year reduction in BI bank-only SML for you. This improvement was partially offset by an increase in write-offs, which rose 10% to IDR 23.3 trillion. Loan provision stood at IDR 81.4 trillion, equivalent to 5.7% of the total loans. For context, between 2015 to 2019 prior to the pandemic, our loans loss reserve to loans ratio never exceeded 4.4%. As credit condition normalized, we expect this ratio to gradually return closer to the pre-pandemic levels. Our NPL coverage ratio, which peak in 2022 has continued to normalize and now stands at 188.8%. We anticipate this ratio to remain within the 170% to 200% range throughout 2025. Our loan average declined to 10.8% as first half 2025, continuing the trend observed since December 2024. The improvement reflects some stabilization in SML formation, particularly in newer Kupedes loan cycle within the micro segment. That said, we remain cautious on asset quality, particularly in the micro and small segments, which could lead to potential NPL volatility. In line with this, [indiscernible] we are maintaining a conservative approach with loan at risk coverage at 53.17% as of the first half 2025. Our cost of credit stood at 3.4% in the first half 2025. The elevated level was mainly driven by continued management overlay, which remained above IDR 2 trillion and contributed around 34 basis points. This overlay is primarily allocated to support the restructuring of the 2023 Kupedes portfolio, reflecting our prudent approach to managing residual risk in the micro segment. On a quarter-on-quarter basis, second quarter this year, provision cost declined by 3.98% compared to the first quarter 2025, supported by improved asset quality and micro. Our credit cost in this segment fell by 46% basis points, in line with an 18.1% quarter-on-quarter reduction in the net NPL downgrades. However, the 2020 Kupedes [ flex ] continues to be the largest contributor to NPL downgrades accounting for 35.5% in the total in the first quarter -- in the first half in 2025. We remain focused in resolving this portfolio through proactive restructuring, strengthening risk control and tighter underwriting going forward. Our net cost of credit declined by 27 basis points quarter-on-quarter to 1.8% in the second quarter this year, supported by higher recoveries, which rose 4.8% quarter-on-quarter. We anticipate this positive trend in recoveries to continue into second half this year. We wrote off around IDR 23.3 trillion in the first half in this year, slightly exceeding our full year annualized target with IDR 5 trillion written off in June alone, which was primarily driven by micro alongside around IDR 1.8 trillion write-off in the corporate segment from a fully reserved [indiscernible] borrower. In parallel, we are strengthening our risk management through transformation aligned with industry best practice. Key initiatives include segment focused risk organization, more agile and prudent processes, enhanced data analytics for proactive risk response and consistent adoption of risk-based decision-making across all levels. With that, I'd like to turn the presentation over to our Director of Micro, Akhmad Purwakajaya, to share more on Ultra Micro and micro business segments. Please, Akhmad.

Thank you, Mucharom. This slide shows us that PNM and Pegadaian's contribution to consolidated micro loans rose to 24.1% in first half '25, up from 20.3% last year as [indiscernible] previous. Pegadaian led the growth with 31.8% year-on-year increase driven by 38.6% year-on-year pricing gold back pawn lending. In contrast, PNM's growth slowed to 2.9% year-on-year as we took a more cautious stance due to its higher cost of credit. The shift in portfolio mix within consolidated micro supported stable micro yields at 18% and boosted their contribution to consolidated NII to 21.4% from 19% a year ago. Pegadaian continues to leverage BRIs network to expand gold savings and pawn services while also growing its bullion banking business, now holding nearly 13.8 tons in gold savings and 2.9 tons in custodian storage. Stronger global gold prices driven by geopolitical risk and demand for inflation hedging assets have fueled customer demand for gold-linked products, providing a strong tailwind for Pegadaian growth. Meanwhile, we are deliberately slowing lending at PNM, where cost of credit remains elevated at 4.3% versus 1.6% at Pegadaian. Next slide, we see that micro loan growth declined by 3.3% year-on-year in first half '25 as we deliberately shifted focus from volume to asset quality, collections and funding. This included tightening underwriting standards, adjusting loan officers KPIs and streamlining risk and operation across the micro segment. The only growing segment within micro at the bank-only level is KUR, which rose 2.4% year-on-year. KUR is expected to remain the primary disbursement driver until 2026, while growth in Kupedes will likely remain muted due to ongoing cleanup of the 2023 batch and legacy COVID restructured loans. Nonetheless, we see promising potential in micro Briguna or payroll loans with disbursements rising 9.1% quarter-on-quarter. Our strategy focuses on increasing payroll penetration and improving loan officers' productivity to drive growth. Borrowers per loan officer decreased to 482 from a peak of 528 in 2022, in line with our effort to strengthen our customer relationships and enable better service as we expand digital capabilities. Loans per officer remained steady at IDR 18 billion with productivity expected to increase as we execute on our micro transformation agenda. We are currently conducting a holistic review of the micro portfolio, incorporating input from risk, operation and network direct trades to enhance processes, mitigate risk and integrate rural and urban strategies through digitalization. To support sustainable long-term growth, we are focusing on 3 key areas. The first area is human capital. We are revamping capabilities through reskilling, retraining and redesigning recruitment and career progression and remodeling micro loan officer roles. We are also adding supervisors at all micro units to reduce operational burden on branch managers, allowing them to focus more on client relationships. And the second area is in business process. We improved end-to-end business process and centralized business performance monitoring. And the third area is risk. We are enhancing credit scoring models and also loan underwriting processes. Next slide. As June 2025, we see that IDR 54.5 trillion from the 2023 Kupedes disbursements remains on our balance sheet, while IDR 8.7 trillion has been written off and IDR 138.4 trillion has been paid off. Of the remaining 2023 disbursements, 18.9% are in special mention loan, 11.6% in nonperforming loan and 16% have been written off and 16.7% has been restructured. We are seeing that 2024 Kupedes debt vintages are looking better. But of course, we are still monitoring the portfolio until it has all fully seasoned. Now I would like to turn the presentation back to [indiscernible] to organize the question-and-answer segment. Thank you.

Thank you,. Now I will split the questions into 2 because I'd like to read the chat box, the question from chat box. The first one came from Gaurav and the question is, the first one is what led to losses in insurance income quarter-on-quarter? And the second is [indiscernible] related what is the [ loss ] taken in the second quarter? If not, when do we plan to take those? And the third, where is the strong current deposit growth coming from? And what are the latest CASA you that you are offering? And the last one is what was second quarter consolidated exit NIM?

Okay. Well, I think there are 4 questions. Ibu Vivi will start with the first question in [indiscernible] insurance?

Gaurav, thank you for the questions. Like I explained previously, this is related to the implementation of IFRS 17 replacing IFRS 4. It happens in BRI Life and BRI Insurance. Basically, this is to recognize the premium more equally along with the insurance contract. And also the recognition of the OpEx previously in OpEx and now they have to move up into the insurance services line item. Even though the premium, the net premium and insurance services kind of declining. But on the other hand, the OpEx is impacting on the -- impact the same way. So the impact to the bottom line actually is very, very minimum, around 20 basis points lower in PPOP.

Okay. So I think most of the [indiscernible] Ibu Vivi, you can continue to answer your questions.

Okay. So the [indiscernible] restructuring program still not happening in the second quarter. And I don't know if they will be executed in the third quarter. One of the mandates basically is they want to effectively implement the restructuring program this year. But after the transfer of shares to Danantara, I think Danantara would like to review. So at this moment, I think the best case probably in the fourth quarter of 2024.

So what is the number three question? Where is the strong current account deposit growth coming from? What are the latest CASA you are offering? So let me take to respond the questions. So basically, the strong current account deposit growth coming from both not only from the wholesale side, but also from the retail side. From the wholesale side, we grew just around 20% year-on-year and the retail side, about 3.2% year-on-year. For the cost of current account in June 2025 is around 3.65%, a decline around 6 basis points year-to-date compared to December 2024. Okay. So the last question is -- Ibu Vivi maybe if you can take the consolidated net interest margin...

So the exit quarterly NIM as of second quarter 2024 is around 7.84% it's slightly higher than the first quarter. As I mentioned previously, there are several aspects that impacting the quarterly net interest margin. So the reverse modification loss coming from the corporate segment, roughly around IDR 390 billion and then reclassification of SME insurance premium, roughly around IDR 230 billion and both basically impacting roughly around 10 to 14 basis points to the second Q net interest margin. Therefore, if we exclude this one-off, the second quarter NIM will be roughly around 7.7%.

And the next question still in the chat box came from [indiscernible]. The first question is, could you please highlight the guidance for 2025? And the second question regarding the KUR and Koperasi Merah Putih or Red and White Village Cooperatives can you elaborate the CBSQ and how are you going to execute this?

Both Ibu Vivi can answer the questions. The guidance.

Thank you, Hery. So thank you, [indiscernible], for the questions. So if we are looking at our guidance that we give you previously, I will start with the loan growth. The loan growth guidance is like 7% to 9%. And as of June, our loan growth is around 5.97%. I think if we are looking at the current macroeconomic conditions, Rakyat will continue cautiously monitoring the purchasing power and also the demand from our core segment in this case, is micro and SME customers. So I think if we are looking at the current guidance, probably we might end up on the lower end of the guidance or slightly lower. The second guidance is on the net interest margin. We guide you with 7.3% until 7.7%. And I feel the guidance will stay because we are expecting better liquidity in the second half of this year, and we'll try to push our cost of fund lower from the current level that we have. We also expect that the contributions from Pegadaian, especially from the bond lending also continue to improve, so minimizing the impact in the loan yield. The next guidance is on the nonperforming loan. I think for this one, like previously explained by Akhmad, the Director of Micro business, the net downgrade to NPL basically is still elevated. So in this case, our NPL guidance probably will reach roughly around 3% or slightly higher due to, again, the macroeconomic condition. I have to admit that this is impacting our efforts basically on resolving the bad debt and also restructure the loan. So it might impact the NPL slightly. For the cost of credit, the current guidance is 3% until 3.2% at the moment. And looking at the current progress, especially in our micro and segment asset quality, we might end up in slightly higher end of our guidance or slightly higher actually. And please note that there are several assumptions when we use the guidance 3% until 3.2%. It might end up slightly higher, for example, if the loan growth lower, for example, if our loan growth is lower by 1% so the impact to the COC will be roughly around 1 to 3 basis points lower. And then the modification loss from Krakatau Steel, if that's not happened in this year, that might also impacting the COC 7 to 8 basis points. And the last one, actually, if the macroeconomic condition actually is still not favorable enough for our micro and small customers and the net downgrade to NPL continue at the current level, the current level of monthly net downgrade to micro is IDR 2.4 trillion. So assuming if the conditions remaining until the end of 2025, it might impact 12% until -- sorry, 12 basis points until 14 basis points to our COC. So that's why our COC might end up in the higher end or slightly higher.

Thank you, Ibu Vivi. So we have the second question, right? So this is about the KUR and also the Koperasi Desa Merah Putih. So might be Agus is much more involved in the government projects. You would like to, Agus, to respond to the question.

First about KUR, as you know that this is intended to support the business sectors of the micro segment. We see that this program will still be continued next year. I think the amount -- the quota for BRI this year is IDR 175 trillion. Maybe it will be the same. But now we are trying to ask to the government, the special ministry, Ministry of Finance, to increase the subsidies because this is according to our -- hence, the cost it's really high. So we are trying to discuss this with the Ministry of Finance, whether they can add the subsidies for this quarter. [indiscernible] so for KUR we're still waiting for [indiscernible] related to the [indiscernible] KUR program but we are waiting for that because the quarter -- in the government, so we are waiting for that. The second one is the Village Cooperatives program, the scheme is -- the financing the Village Cooperatives but the liquidity will be provided by the Ministry of Finance and the second [indiscernible] several days ago this already launched Ministry of Finance rules number 49, 2025, is about the financing of this KDMP. In this project BRI [indiscernible] as to finance this Village Cooperatives [indiscernible] I think it's 6% and from the 6%, part of this will [indiscernible] the liquidity profile to the bank and the [indiscernible] bank to cover the overhead and the margin. And the third one [indiscernible] for this financing which [indiscernible] cooperative obligation to the bank. So the government will intercept the Village funds. As you know, the Village funds is provided by the government to the Village to support their development, which disburse yearly from this cooperative. This Village fund will be interceptive by the government. And then the bank will ask the Ministry of Finance to provide this Village fund to cover the arrears or default. So technically, this is risk financing scheme. I think the amount -- if we talk about what is the magnitude of the loans will be financed to the number, the amount this year. We still -- it depends on the readiness of the cooperatives in terms of the organization, the business and the system. We're actually waiting for that.

Thank you, Agus. I think let me add a little bit in terms of the Koperasi Desa Merah Putih Village Cooperatives. So I think in terms of the risk premiums going to be close to 0% because we have something like the scheme is channeling scheme. The liquidity comes from the government basically from the Ministry of Finance and then also we have a guarantee to intercept the fund while something happened with the loan from the Village Cooperatives. So there is no risk with the bank because the money, the liquidity and also the guarantee is from the government.

And for the last one, I would call one last person [indiscernible].

I just had a few questions. [indiscernible] in retail and SME. Can you share a little bit more what's happening there? We've seen that also a rising trend for other banks? Secondly, in terms of the subsidized housing loans that you are doing, can you share what the economics of these loans and how much you're intending to do as a percentage of your loan book over time? And lastly, the third question is on your micro loan growth. I understand you're still cleaning up and you are still working to slow the growth and the growth is negative. When do you see you would end this clean up? And what would take it for you to start seeing a growth in this segment again?

Question number one, [indiscernible] involved in the [indiscernible] subsidies for the housing loan. Miss Ibu?

So regarding your questions that in increasing the NPL and also special mentions in the SME sectors, I think we understand that the conditions in the middle and low income currently actually is quite challenging. So basically, that's also impacting some of our clients, in particular, that clients that basically still related to the COVID-19, back to the 2022 and basically there have been restructures many times but the conditions at this moment actually is a bit struggle for them. So that is why we see like a increase in the non-performing loans and also special mention in SME, [indiscernible]

[indiscernible].

From the structured [indiscernible] probably BRI [indiscernible] more than 15,000 units from the more than 17,000 quota already committed for BRI, so we believe that during one or the next two months, we can fully disburse for all the quota that already committed to BRI and also from [indiscernible] program, the government disburse the competitive funding around 1%. Meanwhile, the public will pay for the interest above 5% and also we still believe that this program still lead by the public and will still continue for the next few years.

The other question is about the micro loan growth is still negative. So when do you see it is flattening out and also when will be ready to grow. Akhmad, you can take those question. Ibu Vivi can -- go ahead.

Okay. So I will start and probably Akhmad can add more color on the micro loan growth. [ Melissa ], as you mentioned earlier that currently we are still in the process of resourcing at the [ backup ] by doing a lot of initiatives. And this year, I think the focus of the initiatives is on the more on the human capital capability so the micro loan officers, the BRI unit managers, the micro business managers. So I think -- and we also consider the current economic situation, you know that when the GDP ratio is less than 5%, usually it's a bit hard for a bank like Rakyat to focus on the micro segment to grow the micro segment aggressively. So considering the macroeconomic conditions and also the process that we still are ongoing to revamp the business process and also human capital capability in micro. So this year, we'll try to grow micro in bank-only level like flattish, probably 0% to 1%. And the driver is still coming from basically from KUR. And from the payroll loan in micro that we call Briguna micro, I think this particular product also start to continue some improvement by penetrating more into our existing customers. I think next year 2026, we are still on process on revamping our initiatives in micro. So it might take probably another 2 years for our micro banking to start regrow the Kupedes again. Thank you, [ Melissa ].

Akhmad, maybe you would like to add some color

Okay. Thank you, Hery. Like, Ibu Vivi said that we are now still revamping the -- strengthening the business process in micro. And -- but we believe that micro segment still has room to grow positively in the future. Next year, we hope we can [move to ] maybe around 2%. I think that [indiscernible].

Thank you. I think will be the last question for today. Hery, give the closing.

Thanks to analysts and investors as well. First of all, thank you very much for your cooperation and questions taken. So let me give a little bit of background. BRI is underway doing the transformations. We know we are facing the problem in the area of the cost of fund a little bit higher compared to our peers and also the cost of credit. So many things have been done, but it's still too early to see the impact of the transformation we have done so far. So in terms of funding side, we already mentioned earlier so many initiatives we done. And for example, the way we are strengthening our funding franchise to get a more cheaper funding such as the current account and also the savings account and also the transaction banking. So BRI is lucky, we have a very strong in terms of the infrastructure for transaction banking, which is retail and also the wholesales. So we need to push more productive in terms of usage and in terms of the capacity in the market with our customers as well. So the lending side, we are fully aware. We have to return back grow this business [indiscernible] we are underway to return not only the business process but also related into the monitoring people, so people management and the way we run the business more robust in terms of the way we get a good pipeline as well and then also the monitoring system. We also already [indiscernible] also the operation, hopefully next year while our initiatives do implemented [indiscernible] but I think the results are coming good for us as well. Again, thank you very much for your involved questions and attending the call this morning. Hopefully, we get a good something effort in the next future. Thank you very much.