PT Bank Rakyat Indonesia (Persero) Tbk (BBRI.JK) Q3 FY2025 Earnings Call Transcript & Summary

Hi. Good morning, everyone, and thank you for joining us for BRI's Third Quarter '25 Earnings Call. We'd like to start the meeting now. First, please let me introduce the members of our Board of Directors who are with us today. Our Group CEO, Pak Hery Gunardi; our vice CEO, Pak Sunarso; our CFO, Ibu Vivi; our Director of Micro, Akhmad Purwakajaya; our Director of Risk Management, Mucharom; and finally our Director of Consumer, Ibu Handayani. Now I would like to mention a few points before we get started. First, for everyone joining us on Zoom call today, I would strongly encourage you to download a copy of our production materials currently available either from the IR homepage of or from BRI or from the link we sent this morning. [Operator Instructions]. Now without further ado, I'd like to invite our Group CEO, Hery Gunardi, to share the highlights for the third quarter. Hery, the floor is yours.

Thank you, [ Syaga ]. Good morning, everyone. Before discussing our results, I would like to give you some color on the current update on the macroeconomic conditions. Indonesia's economy grew moderately in second quarter 2025 with household consumption and MSME activity still under pressure. Inflation remained within BI target at 2.65% year-on-year, supporting macroeconomic stability. So BRI MSME index indicated continued cautions in the lower segment, but recovery prospects remain positive, supported by higher government spending and ongoing subsidy measures to boost domestic demand, including the new stimulus program of around IDR 30 trillion launched on October 17, covering cash handout for 35.1 million households, expanded interest program to boost yield employment. Accelerated fiscal disbursement in fourth quarter 2025 is expected to boost domestic demand and support a gradual recovery in 2026. BRI remains well positioned to capture this tailwind while maintaining prudent amid global uncertainties. As the largest Micro finance institution in Indonesia, BRI continue to support key national programs such as QR, Ultra Micro financing, Free Nutritious Meal, Village Cooperative and the housing initiative to stimulate inclusive growth. Through risk-based pricing, strengthened underwriting and also digitally enabled Micro services, BRI ensured that financial inclusion continue to generate both social impact and sustainable profitability, positioning the bank for resilient growth into 2026. First of all, while we take a look at liquidity and monetary condition in Indonesia, for instance, liquidity condition continued to improve in the third quarter 2025, supported by accommodative monetary policy and stronger money supply growth. M2 expanded 7.6% year-on-year in September '25, driven by accelerating deposit growth at 8.5% in August 2025 versus 7% in July 2025. That is reflecting improving financial system liquidity. Central Bank or Bank in Indonesia maintained a progressive stand, cutting the policy rate to 4.75% and narrowing the corridors to boost liquidity. However, the benchmark rate was keep unchanged in October, signaling a shift from easing to faster policy transmission to real sectors. On the other hand, as RBI issuance and yield declined indicating reduced liquidity absorption by the Central Bank and further supporting system liquidity. From BRI perspective, ample liquidity and faster transmission aligned with our focus on Micro and retail consumer customers as stronger liquidity support higher economic activity, improved borrower resilience and lending growth opportunities while maintaining asset quality. Overall, a stable rupiah, continued monetary accommodation and accelerated fiscal disbursement are expected to sustain better liquidity and support healthy banking sector growth. So while we take a look at the banking industry performance, we start from the asset growth remained moderate in line with the slower loan expansions as the bank adopted more selective lending amid ongoing macroeconomic uncertainty. Loan growth stood at 7.6% year-on-year, reflecting cautious credit strategies and still subdued MSME demand. Deposit grew strong at 8.5% year-on-year, mostly led by 14.3% growth in current account, while saving and time deposit grew by 5.5% year-on-year and 5.4% year-on-year, respectively. LDR at 86%, indicating balanced funding and lending dynamic. Net interest margin was 4.5% in August 2025, slightly lower year-on-year due to the higher funding costs from earlier liquidity tightening in the first half 2025 and slower loan yield repricing. However, we have seen a gradual sequential improvement in September 2025, supported by easing funding costs and better liquidity condition. Loan at risk and NPL remained stable with the banking industry loan at risk at around 9.73% and gross NPL stood at 2.3% in August 2025, reflecting manageable asset quality. Capital adequacy ratio stayed robust at 26%, comfortably above regulatory minimums, reflecting solid capital buffers. So compared to the BRI, currently, we are continuing initiatives already in place, BRI expanding its transformation agenda to accelerate improvement in funding structure, loan quality, new growth engine and also enabling the capabilities. So established across key strategic area, including lending, funding, distribution, risk and data analytics to drive disciplined execution and measurable impact. [Technical Difficulty] calibrated brand and digital network to improve productivity and customer experience supported by stronger digital channel form that reinforce BRI transaction ecosystem, strengthen Micro operation with specialized offices and improve underwriting while driving consumer loan growth through payroll expansion, mortgage partnership and also the bundling business. And of course, we also slightly to grow in terms of the auto loan as well. So first of all, while we take a look into the initiative we already done until the quarter 3 2025. In the area of merchant ecosystem, revitalization has shown early traction with several activities program launched as key food and beverage hotspot and also merchant engagement event completed across major regional offices. Lifestyle-driven CASA campaign rollout in selected urban cluster have helped increase the transaction balance and deepen merchant relationship. We are also optimizing our territorial coverage and deepening our presence within customers' ecosystem and also value chains. This strategy helped us to penetrate business clusters, capture more transaction flow within its ecosystem and ultimately accelerate CASA acquisition through stronger customers engagement and also the integrated solution. Lastly, strengthen collaboration with subsidiaries to drive bundling product and also integrated customer campaign across ecosystem, for instance, gold shopping and also installment product through BRImo or mobile banking platform, auto loan joint financing through BRI Multifinance and also bank insurance for general and also life insurance. So in terms of the initiative and asset quality update, we would like to inform that recruitment and also reskilling of loan officers continue with rollout of around 450 Micro BRUna loan offices and fewer collection staff across the region. Operational improvement by deploying plus 2,000 Micro Units Supervisors, enhanced BRIspot. This is the underwriting engine and pipeline management and centralized monitoring desk for the real-time tracking, refined prescreening tool using sector and also regional risk model and dynamic approval limit up till applied across Micro and also the SME segment. So maintaining payroll loan business domination. So as you know, for more than 10, 20 years, BRI is very strong in the payroll business among competitors in the banking in Indonesia, we would like to rebalance customers composition within bank, existing to bank and also increase the penetration to optimize yield and also asset quality. So driving value chain synergy through the all segment to increase payroll acquisition. So in terms of rollout in the big cities, for example, to enhance the expanding our mortgages market in Indonesia. So with the cities like Jakara, Surabaya, Bandung, flagship consumers, even the full spectrum of BRI consumer product, focus on Tier 1, deer new-to-bank quality customer acquisitions. So in terms of the synergy, the way we would like to strengthen the auto loan business and wealth management business -- support auto loan joint financing initiative launched to enhance the cross-selling between BRI and BRI Finance, leveraging BRI existing customer base while expanding the new customer acquisition through competitive and also integrated financing solution. So optimization the investment product offering to drive fee income and CASA growth supported by synergy with corporates and commercial segment to capture strategic client and flagship activation program aimed at expanding customer base and growing fund under management. So for Pegadaian, for example, so Pegadaian Bullion Services and Gold Ecosystem offering, pawning, lending, gold installment, gold staffing offers a unique end-to-end gold services value chain from manufacturing to retail and also pawning while leveraging the BRI Group ecosystem to expand reach and strengthen synergies and also drive the sustainable growth. Tring is the new super app of Pegadaian just launched it last month ago. So Pegadaian Tring applications strengthen digital presence and scalability pawn and also gold business financing, enhancing profitability, ecosystem synergy and customer engagement across to the BRI. So actually, Pegadaian promise we'll have the numbers of the users across the company around 4 million at the end of this year. So we continue to monitor our optimized digital channel performance such as BRImo, merchant business, QRIS, which remain a key drivers of retail CASA growth. For BRImo, number of users increased by 19.4% year-on-year, reaching 44.4 million users with 56.7% penetration is quite higher compared to the peer. But more importantly, we see improvement in monthly active users from 16.7 million to 19.9 million, almost 20 million, increased by almost 20% year-on-year. In terms of financial transactions also increased by almost 26.5% year-on-year and transaction value grew by 25.6% year-on-year. The numbers of business merchants reached 314,000, down 6.5% year-on-year, reflecting our effort to streamline non-active merchant and focus on productive outlet. The numbers of active business merchant rose 3.3% year-on-year, while sales volume merchant grew almost 30% year-on-year, supported by our merchant engagement initiative that strengthened usability, trust and also transaction adoption. So our curies sales volume increased by 133.1% year-on-year, and the numbers of transactions grew by 11.4% year-on-year. Our retail transaction initiative has helped drive higher money cost circulation within BRI ecosystem and supporting more efficient funding structure. So we continue to monitor and drive the growth of the second engine in consumer and also the gold business lending and saving by focusing in the quality customers and improving the portfolio traction. Our consumer loan grew 9.7% year-on-year, driven by payroll loan up to 9.8% year-on-year. And then the mortgages also increased up to 14.0% year-on-year, resulting in a 48 basis point year-on-year increase in consumer loan contribution to total loan. BRI remains the market leader in the payroll loan supported by the resilient 3 segments, civil servant, military and police officers and expansion into the private sector payroll focusing on the higher income customers to sustain the quality growth and optimize yield. For auto loan joint financing also grew 347.1 still small in such, but with strong growth potential from the captive market and the fast-moving car segment while maintaining a manageable risk profile. Fund under management grew 10.8% year-on-year, reflecting sustained customer growth transaction. Fee income rebound 40% quarter-to-quarter in the quarter 3 2025, supported by stronger cross-selling and improved product mix, driving higher customer activity. So gold-related product shows strong growth with gold installment loan up to 52.6%, targeting high net worth individual wealth customers as in WI, and gold setting up to 52.7% year-on-year with active customers increasing 28.1% year-on-year, supported by expanded sales channel, B2B transaction and cross-selling to BRI Group customers through BRI extensive distribution network. So as for funding structure, we continue to see improvement in the funding mix, supported by ongoing initiatives and a more profitable liquidity management. Total deposits grew 8.2% year-on-year in the September 2025, supported by strong 14.1% year-on-year CASA growth. CASA ratio remained high at 67.6% that increased by 210 basis points quarter-to-quarter. Quarter-to-quarter deposit growth was robust, driven by a 2.8% CASA and most importantly, saving increased by 1.1% quarter-to-quarter, indicating a maintained momentum in growth transaction. Looking forward, we remain optimistic about the direction of our funding mix and cost supported by our ongoing effort to strengthen the funding franchise as well as Central Bank more accommodative spend and the government expansive fiscal measures which helped maintain the better system and liquidity. So from the loan perspective, Micro lending remains soft with Kupedes contracting by 9.6% year-on-year, reflecting ongoing business consolidation and also focus on loan quality and recoveries. Meanwhile, consumer, commercial and core funding segment dive 1.52% quarter-to-quarter total to loan growth. On the other hand, margin pressures from portfolio mix was contained as the yield remained stable at 13%, supported by higher contribution from Pegadaian and PNM, while a more efficient funding structures lower the cost of interest-bearing liabilities by 6 basis points. The balance approach to help sustain a stable NIM at 7.75%. So as of September 2025, balance sheet growth shows a gradual improvement from June 2025, signaling a positive trend in a good trajectory of expansions remain moderate. So our total asset grew 8.2% year-on-year, supported by 6.3% loan growth. Deposit grew 8.2% year-on-year, supported by a strong 14.1% year-on-year increase in CASA, both current and saving account continue to post quarter-to-quarter growth, reflecting the positive impact of retail funding initiative and improving liquidity environment. Fee and other operating income grew 0.4% year-on-year. supported by higher gold sales fee income and also the treasury activities. However, recovery income softened in the quarter 3 2025. And going forward, we expect recovery income to improve towards the end of the full year 2025. Supported by the deployment of dedicated collection and also recovery team across all levels from head office to the BBRI unit. From a profitability perspective, we remain focused on improving asset quality, particularly in the Micro and small segment PPOP declined slightly 0.96% year-on-year, but it's up 0.02% quarter-to-quarter, supported by stable yield, lowering funding costs and also well-managed operating expenses. We still booked a negative growth of net profit around 9.1% year-on-year. Please note that as of September 2024, we had one-off nonloan provision reversal of around IDR 4.1 trillion due to construction SOA restructuring scheme. So key metrics are tracking as expected as we remain in the bad debt resolution phase. However, we start to see the gradual improvement in NPL and also SML in quarter 3, while the profitability metric faced challenges, core earnings remained stable, supported by strong retail funding growth and also increased contribution from the subsidiaries. So reported NIM stood at 7.75% in the quarter 3 2025, down 10 basis points quarter-to-quarter. However, excluding a one-off corporate client write-off in second quarter 2025. So normally NIM actually improved by 2 basis points, reflecting stable yield and lower funding costs. Cost of the third-party fund improved quarterly from 3% in September 2024 to 2.8% in September 2025, driven by strong nominal CASA growth. LAR declined by 1% year-on-year and LAR profit was at 52.6%. Cost of credit was 3.24% in the third quarter 2024. Furthermore, the gross NPL ratio was flat at 0.03% quarter-to-quarter and SML decreased by 0.14% quarter-to-quarter. So profitability metric improved quarter-to-quarter as return on assets improved 33 basis points quarter-to-quarter and ROA return on equity also improved 160 basis points quarter-to-quarter. Finally, in line with our commitment to effective capital management and value creation for investors, we are progressing with the share buyback program announced at the 2021 AGM with around IDR 2.5 trillion of remaining budget, reflecting our confidence in BRI's solid fundamental and the future growth potential. Now I would like to turn the call over to Ibu Vivi, our CFO, to discuss on our financial in more detail. Please, Ibu Vivi to continue. Thank you very much.

Thank you, Pak Hery. Hi, everyone. Thank you so much for joining the call. So I would like to start with the balance sheet postures of Rakyat as of September 2025. Our asset growth was 8.2%, where loan grew around 6.3% year-on-year or 1.5% quarter-on-quarter, slightly lower than second quarter growth of 3%. And the portions of loan to our earning assets continue to increase from 70% and now 72%. Despite slowing growth in Micro bank level, contributions from PNM and Pegadaian continue to increase from 9.74% of total loan a year ago, now it's already 10.96%. In Micro segment, around 25% of our Micro portfolio now coming from Pegadaian and PNM. Previously, it's around 20%, 21%. We continue to use our loan and financing provisions. As you can see here, the provisions continue declining because we used to absorb the write-off, especially in Micro and small segment. However, our loan loss ratio still 5.6% of total loan, higher than pre-pandemic level of 4.1%. The growth in loan supported by our manageable third-party fund growth at around 8.2% year-on-year or minus 0.5% quarter-on-quarter. We continue our aspirations to move up our CASA while we continue the growth in CASA, our cost of CASA actually declined from 1.67% to 1.62% quarter-on-quarter. From a leverage standpoint, we are able to increase modestly our leverage to 6.3x in September 2025 from 6x a year ago. Move to the P&L. In September 2025, the net interest income grew 2.9%, supported by a stronger yield contributions from PNM and Pegadaian. Like I mentioned previously, the contribution now is around 25%. This has helped maintain a stable loan yield actually around 13%. The NIM declined 10 basis points quarter-on-quarter. If you remember in the second quarter this year, there was a one-off corporate clients write-off that inflated the second Q NIM actually. We previously communicated this during first half earnings call. If we exclude this, actually, the NIM improved 2 basis points Q-on-Q. Noninterest income rose slightly by 0.4% year-on-year, driven by higher fee-based income and also stronger sales and treasury gain, while loan recovery moderated. The recovery income from claim, the composition now is around 40% to 40% decline from previously around 46% a year ago. It shows that actually our internal capability to do recovery start to improve. And now the composition from our internal recovery up to increased to around 58%. However, please note that the economy -- the current economic conditions make it more challenging for us to do higher recovery income internally. On operating expenses remain well controlled, up 5.1% year-on-year. I think it is still within our range of 6% to 8% year-on-year for OpEx growth. The cost-to-income ratio still within our target around 42.8%. Due to the softer recovery income, like I mentioned previously, the PPOP declined 1% despite a solid net interest income that we had in September 2025. However, on a sequential basis, actually quarter-on-quarter, the PPOP increased around 2 basis points and net profit rebound 15.5% Q-on-Q, indicating improving operational performance. Move to the next slide. We will talk about the liquidity conditions. As of September 2025, our loan-to-deposit ratio was 86.5%, up slightly from 84.9% in the first half. We have managed liquidity conservatively supported by growth in retail CASA driven by retail transactions providing us with a cost-effective funding base. Our loan-to-deposit ratio appetite actually is 90% to 92%. So we still have room actually to optimize our loan and deposits. And liquidity metrics remain adequate with both liquidity risk ratio or LCR and net stable funding ratio staying well above the minimum regulatory requirement at 141.3% and 122.9%. Next slide. If you see in this slide, our consolidated net interest margin steady around 7.75% despite pressures in asset quality and portfolio mix in bank-only. This is again supported by the increasing composition of Pegadaian and PNM in our Micro mix. So it helps to keep the yield in Micro segment stable around 18% . Our consolidated lending yield, like I mentioned, for the third quarter decreased by 19 basis points to 13%. As mentioned earlier, the second Q figure basically elevated because of the one-off corporate client write-off. Next slide. Noninterest income was broadly flat due to the softer recovery income. The core operating expenses well controlled, 5.1% year-on-year. We remain on track basically with our rule of thumb to keep the OpEx to asset ratio relatively around 4%. Fee and commissions income increased 2.6% year-on-year and contributing around 39% of bank-only noninterest income, up from 38% in the same period last year. Notably, the net fee income surged to IDR 1.3 trillion from IDR 457 billion year-on-year, reflecting Pegadaian's strong performance. On the expense side, the other operating costs increased mainly driven by the higher insurance reserve, especially in our subsidiary following the adoption of IFRS 17 in second Q of 2025. Next slide. At the bank only level, we continue to improve cost efficiency with OpEx to asset ratio maintained 3.2% in 9 months 2025, in line with the 5 years average of 3.22%. At a consolidated level, however, the operating expenses increased 17.4% mainly driven by higher costs in the subsidiaries. The increase was primarily attributable to Pegadaian higher G&A expenses because of -- due to the bullion banking activities and then also PNM, and this is because PNM expansions on number of new loan officers to strengthen the customer engagement and improve repayment performance. If you see the bank-only other expenses, we also see an increase. I think this is because we intensify our recovery efforts. So we hire roughly around 2,500 field collectors and also using third-party partners to improve our recovery income going forward. We also readjust our compensations for the nonpermanent employees. And also, we are building up provisions basically for operational risk. Next slide. Our capital positions remain robust with a total capital adequacy ratio 25.4% and Tier 1 is 24.3% is way above our appetite for Tier 1 ratio actually is around 19%. The full year 2025 dividend payout ratio increased to 86%, and we have an opportunity basically to have another increase in dividend payout ratio that will be paid in 2026. Over medium term, we aim to gradually bring our total CAR to close to around 20%. I would like now to turn the presentation over to our Director of Risk Pak Mucharom to discuss our asset quality.

Thank you, Ibu Vivi. Let me to continue to discuss about the asset quality. [Technical Difficulty] our consolidated by 18 basis points year-on-year to 3.8%, driven by higher NPLs across most segments, except corporate, which improved by 93 basis points year-on-year. The increase in consumer NPLs was mainly driven by the implementation of the One Obligor Principle in third quarter in this year, where credit card exposure are now consolidated with other consumer products, resulting in some temporary uptick in NPLs across the portfolio. Mortgage NPLs increased by 54 basis points year-on-year to 4.31%, affected by weaker household purchasing power and softer property market liquidity. Over the past decade, Indonesia's property market has recorded only modest nominal growth of around 17% from 2016 to 2024, which when adjusted for inflation translated to an effective price decline of about 6%. Payroll loan NPLs also edged up by 38 basis points year-on-year. Overall asset quality in this segment remains relatively resilient, supported by a strong contribution from specific borrowers like civil servants, military and police. SME NPL increased by 39 basis points, largely coming from legacy pre-COVID disbursement, which account for 33.5% of SME NPLs and are being gradually resolved given the collateralized nature of this loan. Micro NPL remained under pressure as the 2023 loan cycle matured, contributing 32.7% of total Micro gross loans in 9 months in this year. While we expect NPLs to stay elevated in the early signs of improvement are evident with Micro SME declining 20 basis points year-on-year. We continue to focus on resolving the 2023 Kupedes portfolio through proactive with restructuring, extensions and also write-offs and expect this batch to be largely resolved by the first half next year. Overall, the consolidated SML ratio improved to 5% from 5.56% year-on-year, supported by 1.7% year-on-year reduction in bank-only SML volume. This improvement was partly offset by higher write-offs, which increased 2.4% year-on-year to IDR 4.4 trillion. Our loan provision stood at IDR 80.9 trillion equivalent to 5.6% of total loans between 2010 and 2019 prior to the pandemic. Our loan loss risk ratio never exceeded 44.1%. As credit condition normalize, we expect this ratio will gradually return closer to pre-pandemic levels. Our NPL coverage ratio, which peaked in 2022 has continued to normalize and now stand at 183.1%. We anticipate this ratio remain within the range of 170% to 1000% range throughout this year. Our [ loan ] declined to 10.7% as of third quarter this year, continuing the trend since December last year. The improvement reflects stabilization in SML formation, particularly in the newer loans. We are now focused on resolving asset quality issues in Micro and SME segments while maintaining conservative stance with loan at risk coverage at 42.6% as of third quarter in this year. So we discussed about the credit -- our cost of credit. Our cost of credit stood at 3.24% in the third quarter this year, down by 48% quarter-on-quarter, driving an improvement in net cost of credit, which declined by 30 basis points quarter-on-quarter to 1.51% in third quarter in this year. This was supported by lower utilized for Micro write-offs and incremental improvement in asset quality within the Micro segment reflected in 81.9% year-on-year decline in SML change, indicating lower new delinquency formation, consistent with early indicators showing better forge to SML in 9 months after booking in 2024 in Kupedes loans. We wrote off around IDR 34.4 trillion in the quarter this year with IDR 4 trillion in September alone, mainly from the Micro segment. Plus [indiscernible] bad debt resolution covering both the 2023 Kupedes and pre-2023 disbursement, we plan an additional IDR 2 trillion Micro write-off budget in this year, bringing total write-offs in this year around IDR 41 trillion or maybe similar to the last year. We continue to strengthen our risk management through transformation aligned with industry best practices key initiatives include segment focus and risk organization, 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 Pak Akhmad, to share on the ultra Micro and also Micro business segments. Please, Pak Akhmad.

Thank you, Mucharom. Good morning, everyone. I try to share around 3 pages of slides. First slide, PNM and Pegadaian's contribution to consolidated Micro loans rose to 24.9% in third quarter 2025 up from 21% last year. Pegadaian led the growth with 29.4% year-on-year increase driven by 37.4% year-on-year rise in gold back pound lending. In contrast, PNM's growth slowed to 2.8% year-on-year, more in line with BRI's Micro loan performance. Overall, the shift in portfolio mix within consolidated Micro supported stable Micro yields at 18.1% and boosted their contribution to consolidated NEE to 21.9% from 19.3% a year ago. As mentioned by Pak Hery before, gold bank lending and saving will be part of our second engine of growth along with consumer segment. Pegadaian continues to leverage BRI's network and group ecosystem to expand gold-based business in savings and pawn services while also growing its bullion banking business, now holding nearly 13.7 tons in gold savings and 2.9 tons in custodian storage. We expect Pegadaian to have steady growth in 2026 as gold prices remain relatively elevated. Lower real interest rates, continued monetary easing and ongoing geopolitical risk and Central Bank gold purchase are likely to support demand for gold. However, stronger global growth and the XY could moderate the pace of growth. Meanwhile, we are deliberately slowing lending at PNM, where cost of credit remains elevated. Next slide, we see that Micro loan growth declined by 4.3% year-on-year in September '25 as we continue to focus on asset quality collections. This included strengthening operation by adding supervisors in all Micro units, deploying field collection staff, tightening underwriting standards and streamlining risk and operation across the Micro segment. Micro payroll loan or Briguna disbursement up 18.8% year-on-year. This reflects its role as part of our second growth engine, supported by introduction of dedicated monthly Briguna our Micro payroll loan staff of around 450 staff since July 2025 and stronger partnerships with civil servants, military and police. These partnerships expand reach into rural areas where BRI's Micro network is already strong. Core slightly contracted at 3 basis points year-on-year and reached 72.6% of 2025 allocation as of September 2023. Core and Briguna are expected to be the main driver of Micro disbursement through 2026. Meanwhile, Kupedes growth will likely stay subdued as we continue to clean up the 2023 batch and resolve legacy COVID restructured loan. Borrowers per loan officer decreased further to 476 from a peak of 528 in 2022, in line with our effort to strengthen customer relationships and enable better service as we expand digital capabilities. Loans per officers remain steady at IDR 17.9 billion with productivity expected to increase as we execute on our Micro transformation agenda. To strengthen this Micro foundation, we are focusing on 3 key areas. In first areas in human capital, we are strengthening organizational capabilities through extensive reskilling and retraining programs, redesign recruitment and career journey and remodeling of Micro loan officer roles to improve productivity and credit discipline. In business process areas, we are enhancing credit culture and operational discipline by mandating on-site customers visits by loan officers and Micro unit heads before loan approval while optimizing daily workflows to improve efficiency and controls. In risk management area, we are advancing credit risk management through improved credit scoring models. strengthened underwriting process and added fuel collection to ensure better collection. Next slide. At September 2025, IDR 44.5 trillion from the 2023 Kupedes disbursements remains on our balance sheet, while IDR 10.9 trillion has been written off and IDR 146.2 trillion has been paid off. Of the remaining 2023 disbursement, 19.9% are in special mention loan, 12.9% in nonperforming loan and IDR 24.6 has been written off and 19.8% have been restructured. We are seeing that 2024 Kupedes vintages are looking better than 2023 Kupedes, but we are still monitoring the portfolio until it has been fully seasoned. Now I'd like to turn the presentation back to Syaga to organize the question-and-answer segment. Thank you.

Thank you, Pak Akhmad. Now we will move on to the Q&A session. [Operator Instructions]

Purwakajaya, can you hear me?

Yes.

I have several questions here. First one on the Micro loan growth is negative. And if I look at the disbursement trend, it has been on the declining trend. Is this a new norm going into '26? So that's the first one. Second one is on the CAR. Ibu Vivi mentioned earlier that your long-term target CAR will be 20%. So my question is the 20% from 25% is going to reflect a higher payout ratio or is a change in the loan mix towards the corporate portfolio where the risk-weighted assets factor will be higher. The third one, the last one is on the write-off trend, which has been stable towards improving trends. You mentioned earlier full year this year will be more or less towards IDR 41 trillion to IDR 45 trillion. So that shows a downtrend in the write-off on a quarterly basis. Does this mean that the credit cost will be declining as well from around 3.5% to maybe towards 3%.

Now I will invite Pak Hery to assign the question.

Yes. So thank you, Pak Ivan, for questions. Basically, we have the 3 questions here. So what I think Ibu Vivi can take to respond to questions.

Okay., thank you so much. For the first question, for the Micro loan growth, I think, yes, you're right. I think especially in Kupedes, the disbursement, if we see like on a quarterly basis, you're right, it's declining. And in 2025, I think it is due to 2 factors. The first one actually is you know that we are still on the process of revamping the business process, improving the capability [Technical Difficulty] and also put the underwriting methodology more strict. So intentionally, the Kupedes growth will slower. And the second one, I have to say that the environment for Micro currently is not supportive enough basically to drive the Micro loan growth higher. But when you ask whether this is a new normal, I would say no in the short term, probably yes. But actually, we -- for example, like 2026, we want to exercise whether Kupedes can start to grow like a positive, probably like 1%. And we do hope that we can revamp normalizing the growth in 2027 and going forward. normalizing the growth doesn't mean that Micro will grow like 14%, 16% like we had like previous years ago, but it's more on the modest pace roughly around 9% to 10% in the long run. And the second question is about the capital adequacy ratio. I think the first thing that we always think we always -- before we decided actually if we have an opportunity to grow healthier, then we will use the capital to grow. Otherwise, we will give the capital back to the shareholders. Whether this is through higher dividend payout or a higher buyback. I think so far, that is still the plan. For the last one is the write-off trend. So the write-off trend, I think this year, yes, it will be roughly around IDR 38 trillion to IDR 40 trillion or slightly declining than 2024. And you're right, the -- I think the 4Q, when we are looking at the trend of our cost of credit part, we have a room basically to increase the write-off as well. So when your question actually is asking whether the COC will decline from 3.5% to 3%, it will depend on the time frame that we are talking. If the time frame is until December 2025, so I will say no. Like I mentioned previously the [Technical Difficulty] on 2025. In 2026, I think we are still finalizing the budget. And I think, of course, because we will see that Kupedes 2023 actually very minimum in our balance sheet. So at this moment, we are talking somewhere around 2.9% until 3.2% for 2026. But we will finalize our numbers first, and we will announce in 2026.

Now I will mix the questions from the chat box also. There is one question from Harsh Modi and the question is regarding the [indiscernible] in the consumer loan segment basically. Hery? The question from Harsh Modi is the [indiscernible] classification from consumer industry or something is changing more recently?

Ibu Vivi can respond the question. This one obligor.

Okay. Thank you, Harsh. I think you're right. I mean the concept of one debtor actually is already implemented. For consumer, I think what happens in September, it's the deadline for the implementation for credit card customers. So that's why it impacts the consumer segment. And in September, I think we already integrate the data from the card with our financial system using the ID number of our customers. So that's why as a conservative nature, we implement the debtor for the credit card as of September.

Now I will take one question live from Jayden. And I think Jayden will be the final question for today's earnings call.

Can you hear me, okay, Syaga?

Yes.

Okay. Great. I have 2 questions. The first is on the funding cost. If I look at deposits, it looks like they were steady at 3% all 3 quarters this year. [Technical Difficulty] improvement? Any thoughts on how much the funding cost could go down next year as we've had a lot of improvement in the environment? My second question is on some of the government programs. So I think the government is looking at the [indiscernible] which seems like a step-up from before. Any comments on how much BRI will participate? And will that move the loan growth much into next year? Those are my two questions.

So thank you, Jayden, for the questions. So we start from the question #2, but [indiscernible] will respond to your questions, please.

Thank you for the question, government program. Regarding your question about the KMP, the first stages of the financing that the government expected is for the capital expenditure on building the infrastructure of the itself. So out of from the IDR 200 trillion that needed this year, probably our share will be around IDR 55 trillion, which is almost similar with the other big banks. And for the next year, we will come to the second stage where we're going to finance the operating of the cooperative. The numbers are not on the table yet, but I think it's around 500 million to 1 billion for each cooperative depends on the economic that we want to grow.

Ibu Vivi, can you take the question number one, the cost of fund?

Yes. Thank you so much, Jayden. When we are looking at the cost of third-party fund quarterly basis, it's like a manageable around 3%. However, if we are looking at the marginal, marginal is like the month-on-month basis, there is a significant improve -- sorry, declining basically like July, the cost of the third-party fund is 3.15% and then the August is 3.12% September is roughly around 2.8%. And this is basically if the conditions of the liquidity is continue to be favorable like this, we believe that it will give us more room to manage the cost of third-party fund going forward entering and it's a very important muscle for us to enter 2026.

Thank you. Now I think the question from the audience concludes our earnings call today. And thank you, everyone, for taking the time to join our earnings call. And we appreciate your support of BRI. And to wrap up today's call. I'll now hand it over to Pak Hery, our Group CEO, for his closing remarks.

Okay. Thank you, Syaga. Thank you, everyone, for joining us conference today from anywhere, Jakarta or from overseas. So for your questions and during the analyst meeting today. Before we close, I would like to take a moment to highlight what we have been doing to strengthen our performance and ensure sustainable growth going forward. Over the past 2 quarters, we have taken significant steps to improve our portfolio quality and productivity through enhanced business process, tighter end-to-end risk management and stronger operational execution. We have also continued to enhance our digital capabilities and customers' experience while maintaining disciplined cost control and also the healthy capital position. Looking ahead, we remain optimistic government and Central Bank initiative to support the economy, combined with BRI's strong fundamental and extensive economic ecosystem give us confidence that we are well positioned to capture recovery momentum in 2026 and beyond. Once again, thank you for your continued trust and partnership with BRI. We appreciate your support and look forward to updating you again next quarters. Might be next year. Normally, we're doing the analyst meeting in January around January or February 2026. Once again, because the due to the limitation of the time and schedule, while some of you still have the questions in regard of the out performance can directly contact into the Investor Relations at Indonesia. Again, thank you very much. Have a good day. Thank you.