Earnings call transcript: Bank Rakyat Indonesia Q1 2025 sees net profit decline

Bank Rakyat Indonesia (BRI), a prominent player in the Banks industry with a market capitalization of $34.9 billion, reported its first-quarter 2025 financial results, highlighting a decline in net profit and a steady growth in total assets and loans. The company’s focus on digital transformation and risk management improvements was also emphasized. Despite some challenges, BRI remains committed to expanding its retail banking and digital services. According to InvestingPro analysis, the bank currently trades at an attractive P/E ratio of 9.65, suggesting potential value for investors.

Key Takeaways

• Total assets grew by 5.5% year-on-year.
• Loan growth was recorded at 5%.
• Net profit fell by 9.7% quarter-on-quarter.
• Digital transformation continues with the BRIMO app reaching 40 million users.

Company Performance

BRI’s performance in Q1 2025 was marked by a mixed set of results. While the bank achieved a 5.5% increase in total assets and a 5% growth in loans, its net profit saw a decline of 9.7% compared to the previous quarter. The bank’s focus on digital transformation is evident, with significant growth in users of its BRIMO app.

Financial Highlights

• Total assets: Increased by 5.5% year-on-year.
• Loan growth: 5%.
• Net Interest Margin: Increased to 7.68%.
• Cost to income ratio: Increased to 40.7%.
• CASA growth: 7.1%.
• Loan Deposit Ratio: 86%.

Outlook & Guidance

BRI has set a loan growth guidance of 7-9% and expects its Net Interest Margin to be between 7.3-7.7%. The bank aims to keep its Non-Performing Loans (NPL) below 3% and projects a cost to income ratio of 41-43%.

Executive Commentary

"We are excited to lead BRI into the next phase, building on our strong retail base to create a more dynamic and customer-driven institution," said Harry Gurnady, Group CEO. He also emphasized the focus on fixing micro and small businesses while driving consumer business growth through payroll loans.

Risks and Challenges

• Slowing micro lending growth due to tightened lending standards.
• Potential impacts from Chinese imports, particularly in the textile sector.
• Asset quality concerns affecting Return on Asset and Equity.
• Managing cost of credit within the projected range of 3-3.2%.

Q&A

During the earnings call, analysts inquired about the restructuring of micro loans and the potential for lending rate repricing. The management addressed minimal impacts expected from U.S. tariffs and reiterated their focus on improving asset quality.

Full transcript - Bank Rakyat Indonesia Persero (BBRI) Q1 2025:

Thiago, Moderator/Investor Relations, BRI: Good morning, everyone. We would like to thank you for joining us for Barragan Indonesia’s first quarter of twenty twenty five earnings call. We’d like to begin the meeting now. First, I would like to introduce the members of our Board of Directors who are joining us today. Our recently appointed group CEO, Harry Gurnady our debt of finance at the Gboo Vivi our debt of risk management, Pat Mukarom I would like to mention a few points before we get started.

First, for everyone joining us on the Zoom call, I would strongly encourage you to download a copy of our presentation materials currently available either from the Investor Relations homepage of Bangladesh or from the link we sent this morning. Secondly, during Q and A session, please submit your question via chat box along with your name and company. We will select the questions to be answered. I would now like to introduce Fahey Gunardi, our Group CEO to begin the meeting.

Harry Gurnady, Group CEO, BRI: Thank you, Thiago, and good morning everyone. As approved at the March, VRI has welcomed a new management team. I bring experience from a long career in banking, including leadership role at Bank Mandiri, where I served as Directors Micro and Retail Banking, then first CEO and most recently as the CEO of BSI for over four years. Continuing the role are Agus Nusanto as Deputy CEO Pa Solihin, Director of Human Capital and Compliance and Eva Vipin, on my left, Director of Finance. Joining me are nine new directors.

It’s bringing strong expertise to support BRI in your phase of growth. The first one is Ahmad Purwaka Jaya. He’s the Director of Micro, former CEO of Jam Grindo. This is something like government insurance and long time BR leader with deep experience in micro and regional banking. The second one is by Alexander Depot, he is a Director of Commercial Banking, come from Bank Mandiri with strong expertise in small and commercial business segment.

And the third one is Buparida Tamrin as a Director of Treasury International Banking, formerly with Bank Mandiri and Bukit Asam with a strong background in treasury and finance. The last the the next one is Pariko Tasmeya, directors of corporate banking, being nearly over thirty years experience from HSBC Citibank, most recently as president directors of HSBC Indonesia. The next one is Paragua Rudianto, Directors of Network and Retail Funding, previously lead network development at Bank Mandiri and bring valuable experience in retail funding. The next one is Nessi Adityasari, Director of Consumer Banking joined from Bank BGB, where she served as Managing Directors for the past four years while purposely working in BankManiri as well. Pahakim Putratama is Director of Operations, previously Directors of Operations at BTN, another one of State Owned Bank, with over twenty five years’ both domestic and so global bank experience.

Pat Muharram, director of risk management, former risk directors at Bank BNI, we offered to dedicate of the experience in risk and governance. And the last one is Salin Nefendi, He’s director of IT, joined from BSI, joining with me together, parallel role in Bandh Mandiri and several international bank bringing deep IT and transformation expertise. Now, let discuss the current macro situation. We see limited direct impact from tariff. I understand so many question about the tariff, yeah, with only 8.4% of VRI corporate loan tied to export oriented borrowers.

Furthermore, the talk may ease the short term pressures. For 2025, we expect GDP growth is of 4.9%, in line with the 2024. Key factors to watch is first one is fiscal policy. A slightly wider deficit in 2025 should support domestic demand in our core segments. Second one is the monetary policy.

Despite currency depreciation, BI has helped rate suggesting possible cut off the market stabilize or guidance assume no further rate cut. Inflation expected to remain moderate at 2.65% to 3.03%. Purchasing power still below pre pandemic level for the middle and lower segments. So we continue to monitor this trend closely to stay agile in our strategy. First of all, I’m excited to lead BRI into the next phase building on our strong retail base to create a more dynamic and customer driven institution.

Our focus in our strengthening our funding franchise to support sustainable asset growth beyond micro, aiming to grow our serving market share above 21%. Ahead of our second quarter twenty twenty five, more detailed update here are our immediate priorities. The first one is funding transformation. We would like to boost brands and also the relationship manager productivity. Aligned under the retail funding and network directors.

This one is under AquaRudianto. Different cross segment collaboration and launch product targeting in the emerging affluent drive low cost funding growth through better retail and wholesale synergy. The second one is a core revamp, the recalibrate or micro model with a surfer focus in asset quality and loan officers productivity. And then we also like to strengthen talent through upscaling and also improve the credit fact. We also like to expand payroll lending and unlock value in pounding and also bullion bank.

As we know, two months ago, to Gadayan, we get a license approval from OGK as a bullion bank or one of subsidiaries under BRI. And the third one is building strong foundation, enhanced capabilities across business, risk and also operation. We have to implement a very strong three pillars here, including business, risk and operation to make sure our business is running well and invest in scalable system and stronger execution discipline. Currently, we remain within the guidance and are monitoring asset quality closely. No immediate change will be made without full impact assessment.

The writer of Micro will soon share further detail of the some initiative on improving asset quality in Micro and regrow Micro once the asset quality is manageable. The total asset grew 5.5% year on year supported by 5% loan growth and a temporarily rise in liquidity for the Ramadan season. Excess liquidity is expected to normalize in second quarter twenty twenty five supporting margins. So loan to earning asset declined to 70.9% from 71.4% year on year, while earning asset rose to 92.3% of the total asset from 92.1% year on year, reflecting improved efficiency. P and M and Pokadayan contribute 10.6% of the total loan.

Pokadayan loan rose 29% year on year, boosting overall loan growth. Loan loss reserve declined to 6.1% as pandemic era buffer utilized provision remained elevated at 5.9% versus 4.9% pre pandemic. Deposit strategically slowed down year on year to 0.4%. CASA grew 7.1%, increasing LDR to 86% plus two seventy three basis points year on year. LDR May is higher than in 2025.

PBS income, fee and commission income rose 6.3% year on year, led by loan admin and e channel fees. PBS income are set to drive non interest income growth in 2025 as recovery income is low. Life rate increased to 6.9x from 2.7x, following a higher FARO ratio of 86, leverage expected to rise further over the next year. As of first quarter twenty twenty five very key metric in line with our expectation. Reported net interest margin increased by 16 basis points to 7.68% quarter to quarter, which is at the upper end our guidance for 2025 supported by more efficient cost of fund and declined by 15 basis points to 3.48% as we continue to optimize our liabilities.

Cost to income ratio increased a little bit year on year to 40.7% from 37.4, primarily due to holiday pay being disbursed in first quarter twenty twenty five versus second quarter twenty twenty four, implying cost growth stood slow in second quarter twenty twenty five. Cost of credit was 3.53% in first quarter twenty twenty five, while our net cost to not cost of credit in first quarter twenty twenty five was much lower at 2.07%, both representing improvement year on year. Furthermore, the gross NPL ratio improved 14 basis points year on year 2.97%. Now I would like to turn the call over to Bupi P, our CFO, to discuss our financial in more detail. Bupi P, please, your turn.

Thank you.

Bupi P, CFO, BRI: Thank you, Harry. Good morning, everyone. I would like to start to discuss about our balance sheet and also P and L. So our loan book fell below our guidance, growing by 5% year on year. I think you might aware that since second half of twenty twenty four, we slowed down our micro business in, bank only level due to the asset quality.

The growth in micro business contributed by Pagadian that grew 29% year on year, especially upon lending, that grew 37% due to the increase in the gold price. While in the same time, P and M grew only 4.5% year on year. As of March, both subsidiaries contributed 10.5% to our portfolio. Micro growth remained slow but showed some increase in disbursement month on month basis in March. Micro loan growth at bank only level saw first quarter negative 2.8% year on year after deducting with around $5,700,000,000,000 write off.

Our consumer portfolio grew slow to 8.8% year on year, primarily due to BRI finance subsidiary, while the bank only growth in consumer was 11.5% as payroll growth reached 10.6% and mortgage growth stood at 14% year on year. Our corporate portfolio growth rate slowed in the first quarter to 13% year on year. In this quarter, the largest drawdowns on corporate loans came from Agriculture’s and Mining segment throwing down over $28,000,000,000,000 among our top five borrowers. We still hold our long term aspirations that we will maintain the compositions of corporate segment between 18% to 20% out of our total loan. We understand that having this corporate business is very important.

So going forward, it will generate wholesale transaction that, at the end, will bring more CASA to the bank. Next, we move to liability side. Our overall deposit growth year on year slowed to 0.4%. CASA increased 6.7% as our CASA ratio reached 65.8% and continued to be maintained well above historical levels. As our loan slowing down, RAYAT have more opportunities to manage our liquidity so that our loan deposit ratio decreased by 200 more than 200 basis points actually to 86%, our cost of funds also decreasing.

We had strong deposit growth Q on Q to prepare liquidity for the festive seasons. In first quarter twenty twenty five, we took on time deposit up to 9% Q on Q and 5% current account growth. We saw a positive improvement on the compositions of current account and time deposit. So the compositions of retail current account improved to 32.27%. Last year, it was only 25.6%.

For time deposit, retail portion also improved to 42.6%. Last year, was only 38%. But we believe, more importantly, going forward, is the increase in the saving account. As of first quarter, the saving account grew 4.7%. This is a positive indicators that we could be seeing improvement actually in the saving growth.

If you can see here, if we want to break it down, the retail saving account growth roughly around 7% and then the micro saving account roughly around 2.4. Our cost of CASA stood at 1.64% as 58% of our CASA is saving account with an average marginal interest expense in the first quarter of 0.32%. We are positive on the outlook of COSO fund given the decrease in the SRBI issuance and the rate of Central Bank. However, please note that our net interest margin guidance does take into account the high loan deposit ratios at our peers. Next is our capital positions remain elevated with total CAR of 24%.

Tier one CAR is also close to 23%. Our full year dividend payout ratio increased to 86% and was paid via interim dividend in January and final dividend, I think it’s a couple of days ago. Over the medium term, we would like to see that our capital adequacy ratio decreased from the current level. The appetite actually is to have the capital adequacy ratio roughly around 20% for stronger future loan growth. I would like to discuss our income statement.

So here in the first quarter twenty twenty five, we saw improvement on quarter on quarter basis of our net interest margin, nearly 20 basis point to 7.68% compared to the fourth quarter twenty twenty four as the lending yield increased by nearly 50 basis point to 12.87% in the quarter. If you remember, there were no modification loss in the first quarter, but we do have a modification loss in the fourth quarter twenty twenty four. We need to remind you that in the second quarter twenty twenty five, we might have modification loss around 1,000,000,000,000, and it will impact it to our net interest margin year to date roughly around seven to 10 basis points. The revenue driver, along with a decrease in a quarterly OpEx of 4.6%, helped to support higher PPOP growth of 2.2% to $29,900,000,000,000 quarter on quarter. However, we would note that the increase in intentionally higher credit costs offset the stronger PPOP data.

As a result, our net profit declined 9.7% Q on Q. The asset quality impacted our profitability measures as of return on asset and also return on equity. Going forward, we expect our NII to grow positively by accelerating growth in consumer and also manage our cost of fund better. Move to the next slide. Our consolidated NIM stood at 7.68%, with the decrease in year on year NIM being a function of no onetime payment that we received last year, roughly around $691,000,000,000.

And NIM at PNM and Pagadian subsidiaries contributed roughly around 100 basis points to this consolidated NIM. Our consolidated lending yield in the first quarter increased to 12.87%. However, we are cautious that this could decrease going forward as we have modification losses and might continuing weaker loan growth in micro due to the revamping in the business model. Next slide. Non interest income continued to report a strong growth, while the core operating expenses growth was seasonally high up to 11.7% due to the Ramadan incentives that moving to the first quarter last year was on April 2024.

We believe we are still able to maintain our guidance 3% to 4% OpEx to asset as our target. I would note that fee and commissions up to 6.3% year on year and recovery income contributes 77% of bank only noninterest income. We did experience a sizable increase in net gold fee income as Pagadian business remained very strong, so increasing to around 400,000,000,000 from 87,000,000,000 year on year. On the OpEx side, aside from the personnel, we also see increase in other OpEx growth, and this is caused by the CooperDesk insurance premium. So this is not the CooperDesk that we disbursed in 2025, actually, but it’s the CooperDesk that we disbursed in 2024.

So we amortize the expense every year. Our cost to income ratio was in line with our guidance, 40% to 40.7% in the first quarter. We believe it will stay within guidance up to December 2025. I would now like to turn the presentations over to our Director of Respa, Muharram, to discuss our asset quality.

Pat Muharram, Director of Risk Management, BRI: Thank you, Buffifi. I would like to discuss our asset quality and how it will perform through the remainder of 2025. Our consolidated NPL ratio decreased by 14 basis points to 2.97% year on year as we continue to see improvement in corporate asset quality and seeing early signs of better small business performance as NPLs in these segments decreased by 97 basis points and 77 basis points to 2.44.7% respectively. We still see NPLs rising in micro lending and our subsidiaries on a year on year basis, which we anticipate will remain elevated in micro and neutral micro subsidiaries, but positively we are already starting to see improvements in the NPL ratio for Small Business as we guided in last year. Our special maintenance loans are improving, decreasing to 5.32% from 5.68% in the year ago period.

The decrease was primarily driven by higher restock loan, which in micro totaled more than 25,000,000,000,000, while write offs increased by 7% or billion year on year to RUB10.3 trillion. As we forecast 2025, we anticipate write offs of restructuring will remain around this level, but we did front load some cost of credit in January, as we mentioned was likely during our last earning calls. We anticipate that first quarter will be in the peak and cost of credit can decline through in the second half of twenty twenty five. We carefully conducting portfolio reviews practically so that we can inform you if anything could change in this assessment. Talking about the provision, our provision for loan and financings to that 81,800,000,000,000, representing 6% of total loans.

From 2015 till 2019 before the pandemic, our loan loss reserve to loans never over 4.4%. And we anticipate that this reserve will revert back to a level closer to our pre pandemic ratio of loan loss reserve to loans. Our coverage ratio remains elevated at 201% and we would expect this can remain around 190% to 200% in twenty eighteen, twenty twenty five as our portfolio is much less tied to corporate lending than our peers. Our loans at risk ratio seasonally increased by 120 basis points to 11.5% from 10.7% quarter to quarter as special mention and NPL stock increased by over GBP 8,000,000,000,000 and 3,000,000,000,000 respectively. This is in line with our guideline that last quarter, where we said that we expect the decreasing trend and loan at risk to continue, but the first half of twenty twenty five will be a little challenging due to the seasonality.

And our cost of credit stood at 3.53% in the first quarter twenty twenty five and is above full year 2025 target of 3% to 3.2% because of the management overlay from January that is currently at trillion dollars We anticipate the cost of credit based on normal operation would continue to trend lower through 2025. Our net cost of credit was 2.07% in the first quarter of twenty twenty five as we show over 55% of write offs in March and anticipate that recovery income will pick up in the second quarter twenty twenty five. We write off trillion dollars in first quarter twenty twenty five, which is slightly above our full year annualized target as we saw elevated write offs in March of 4,200,000,000,000.0, mainly led by micro and small, but also impacted by around billion in corporate write off of textile company that had been fully reserved. Based on our data, we do not see asset quality deteriorating further, but we do believe that cost of credit will remain around 3% till 3.2% for full year 2025. And we will we could see a similar trend to full year last year with a high cost of credit in the first quarter and then declining as the years move on.

Now I will turn the presentation over to our Director of Micro, Bahramad to discuss our ultra micro and also micro business.

Bahamat, Director of Micro, BRI: Bahamad, your turn. Thank you, Muharram. The contribution of PNM and Pugadayan to consolidated micro loans increased to 23%, while at Pan Am, the growth slowed to 4.5% and Pagadayan grew 29.9%. Berry remains committed to maximizing Pagadayan and Pan Am’s contributions through strategic synergies. Pagodaian leverages Bear East network to expand gold savings and gold pawning service while accelerating cashless transaction.

Paglian also is showing strong growth in its bullion banking business, which now reports nearly 800 kilograms of gold deposits and nearly 2,300 kilograms of gold custodian storage. The current global demand for gold denominated products has been a tailwind for Pogadayan and continues to drive their growth, while we have been deliberately slowing loan growth at PNM as we are cautious on higher cost of credit at the business, which currently stands at 4.6% versus only 2.3% at Pugadayan. I would note that the net interest margin at PNM in the first quarter stood at seasonally low 24.9% and at Pugadayan was 19.7%. Next slide. Our micro loan growth in the first quarter of twenty twenty five decreased by 2.8% year on year as we have tightened lending standards, increased KPIs related to asset quality and required loan officers with high NPL ratios to focus on collection.

Only COR micro is growing at the bank only business, up 3.8% year on year. CORE is expected to be the primary micro disbursement source in the first nine months of this year as we anticipate that CooperDesk growth can improve as the year progresses from negative 8.9% currently as CooperDesk disbursements stood at the modest R31 trillion dollars the first quarter of twenty twenty five. We are seeing borrowers per loan officer decrease to four eighty three from a high in 2022 of 05/28. This is in line with our intention to prioritize the relationship between loan officer and customer while we work to improve digitalization. Additionally, we have seen loans per loan officer remaining relatively stable at 18,100,000,000.0, a figure that will start to rise as we improve our micro performance.

We are in the process of reviewing our micro portfolio more holistically with input from risk, operations and our network direct rates to prioritize process improvements, risk mitigation and digital implementation to integrate rural and urban micro strategies. To sustain long term growth, we continue to focus on three main areas: first, human capital by revamping the capability to retrain, reskill and upskill and redesign the recruitment and career progression in micro. And second, we also focus on operations by adding supervisors to all our micro units to reduce micro branch managers, workload in operations so they can focus on building relationship with micro clients. And the third focus is on risk by improving credit risk scoring and loan underwriting process. In the next slide, we talk about the number.

Currently, trillion remains on our balance sheet at March 2025 of the twenty twenty three CooperDes disbursement, while trillion were written off and RUB129.5 trillion were paid off. Of remaining twenty twenty three disbursements, there are currently 18.2% in special mention and 8.8% in nonperforming and 11% has been written off and 13.7% has been restructured. We are seeing that 2024 Cooper Dress vintages are looking better than 2023 Cooper Dust, but we are still monitoring the portfolio until it all has fully seasoned. Now I would like to turn the presentation back to Shiagar to organize the question and answer segment. Thank you.

Thiago, Moderator/Investor Relations, BRI: Thank you, Bahamat. We’d like to now move to the Q and A segment. We are changing the format at the moment of our Q and A for those of you who have been on the past calls before. We’ll ask that any question from each one be submitted in writing to the chat box. We like to ask the questions.

And now I’m reading the first question submitted in the chat box from Raymond. Many of us has under have understood issues and challenges that BBR is facing now. And perhaps, can you share with us your offers your offers with regards to key issues and our challenges that BBR is facing now such as retail or tight funding? Micro value chain transactions as the qualities, I. E.

Micro loan cleanups or human capital to name a few. Harry, could you please assign the questions?

Harry Gurnady, Group CEO, BRI: All right. Thank you very much, Ramon, for the questions. First of all, to respond your question, in regard to your question, we basically identify several items that will become the game changers for BRI going forward. It’s in line with your statement. It’s not fair.

We’re just less than one month joining the BRI, you know, the new teams. Basically, we in in this case, we just, you know, would like to identify what is the big problem to bring BRI in term of the financial performance is much better in the future. So the first one is, how do we lowering, cost of fund. We will focus in retail funding by boosting the engine such as Salesforce, campaign, value proposition and also increasing the productivity of our digital channels. So basically, in terms of the digital channel, BRI is very strong.

For example, banking, BRIMO, currently, we have almost 40,000,000 registered users. And then the next one is the POS, the ADC. So we have currently more than 340,000 ADC. We have queries almost 5,000,000. And also the agent banking, call it the BRILLINK.

This is something like digital infrastructure that we have. We have to push more in the future. So of course, we will make Vimeo as a leading super app by delivering superior retail transaction enabled by exceptional customer experience, UI, UI embedded finance, conversation AI and seamless integration with corporate banking. So we also drive subsidiary synergy to drive cross sell product holding ratio and also to build stronger primary bank relationship with the retail customers. For example, with BRI Finance for auto loan and SME, BRI Life for consumer and micro insurance, BRIIN for commercial insurance.

So we also would like to transform the transaction banking business model across cash management. For example, we would like to upgrade Keylola seamless online to offline integration, trade, digital trade system, token based documentation, and settlement, and also the treasury, for instance, advanced treasury management system. That the first one. Yeah. The second one is, basically, we are we are facing a little bit problem with the internal cost of credit.

Yeah. We know we would like to improving COC with the build the new engine. We will focus on fixing micro in small businesses, while driving consumer business growth through payroll loan. So we are a very strong in term of number of payroll currently. So Micro two point o, we actually would like to reinvent micro business model enabled by micro sales force revamp customer lifecycle management, including also the graduation, organization, and distribution transformation, and core on the specialization capability building and leadership, and also the credit risk excellent.

We also like to drive sales force productivity, for small and upper small segment by strengthening the value chains capture, revamping the people model, for instance, performance management, reward and consequences, and also the upgrading of our sales and risk capability of the Salesforce. The the last one is we will rebuild the foundations. This is basically the second mention in TomoD, how do we manage better cost of fund and also the better of cost of credits. Yeah. So, of course, we’ll support also by an enabler in TomoD how we revamp our people model.

Yeah. People management, talent management, training, and also education for sales force, you know, who are running the business in the field. And also, can we empower very strength, strong risk management, not only for enterprise risk management, but also including also the retail consumer risk and also the wholesale risk. So the next one, operation centralization and improve customer experience. Those three, what I think we already identify that we would like to overcome, you know, next couple of month.

Hopefully, you know, the result, of course, will be gradually improved. We will meet in the second quarter on June 2025 next year.

Thiago, Moderator/Investor Relations, BRI: Thank you, Harry. And this other additional question from Raymond. Over the past three years, broad lending rates have been very competitive despite funding costs were higher. How do you see major banks such as PPRI opportunities to reprice our lending rates? If yes, vertical lending rate be repriced towards consumer or mortgages versus corporate versus commercial or SMEs.

Buffi P?

Bupi P, CFO, BRI: Raymond, thank you for the questions. Of course, opportunities to reprice up lending is a very ideal situation for banks. And I think we also understand that we need to consider other factors. Competitions, I think, is one of them. Talking about competitions, bigger banks like Raiya, Nandiri, BNI probably has a higher opportunity to reprice up lending rate.

But then we will have two options. If we want to pursue growth, usually, we will keep our lending rate low. If we want to keep margin, then keeping lending rate or increasing is very important. And in this case, for RAYAT, I believe, considering the current situations, we would not aggressively push growth. And talking separately about each segment, consumer is very, very competitive.

I think most player in this segment using pricing strategy. However, we saw potentials going forward to reprice up the yield actually by doing some diversifications, especially on a payroll loan. Currently, 60% of our payroll disbursed to civil servant, police and army or we know as an AASRI, while disbursement to SOE and private only contribute around six probably 60 sorry, 16%. And pricing to the Asthree Borrowers Group is very, very competitive. So we aim to increase the consumer yield by continue to acquire new payrolls, notably from private or SOE group companies.

And talking about the other product like commercial mortgage, our strategy is also diversifying the target market to help improving the yield in mortgage as well. For SME and commercial segment, probably it’s a bit tricky because we cannot only talk about lending rate, but probably more on ecosystem profitability or customers’ profitability since most of, the client sources is coming from the value chains. So yes, we do have a potential or an opportunities to reprice, but we’re also considering other factors. Thank you, Parayman.

Thiago, Moderator/Investor Relations, BRI: Thank you, Bube. And the next one, we got a question from Jaden. Any revised financial guidance following the revised U. Tariff regime and slower growth prospects? And any views from the incoming management on how quickly to resolve outstanding restructured micro loans?

Parekho, would you please to respond?

Pariko, Unspecified Executive, BRI: Thank you, Thiago. Good morning, Jaden. Thank you for the questions. Let me address you first on the first question about The U. S.

Tariff impact. If you look at BRI exposures as of March 2025, the exports oriented is all borrowers to U. S. Is about 8% of the total corporate borrowers, which is around $60,000,000,000,000 in loans to exporters, about R20.8 trillion dollars exported to U. S.

Out of the R20.8 trillion dollars most of our borrowers export less than 10% of their products to U. S. And the rise of the majority of their exports is go to China, India, Europe, Japan and also ASEAN countries. Additionally, from the overall $60,000,000,000,000 approximately R49 trillion dollars is from the palm oils, about R9 trillion dollars is from the pulp and paper and nearly R6 trillion dollars is from coal and about R1.5 trillion is sugar and fishery. Now, if you break down the loan portfolio by sector, there is 31.9% of our portfolio is in trading sectors.

But this can spend a lot of agricultural related trading because we are still more rural in portfolio mix than our peers. We are cautious on the impact of from the Chinese products, of course, particularly in textile. So yes, it is a concern. I think we also have to keep in mind that borrowers at the MSME level tend to adapt to changes in the in the operating environment and pivot the areas of opportunities. And as of now, I can share that there’s no revised financial guidance from us.

On the second question on the restructure micro loans, currently, we are assessing the portfolio very carefully. We also reviewing our policy related to the maximum tenure of the restructuring. And based of based on our findings, we see that there are plenty of customers who are willing to repay their loan. However, they require also longer tenure. Current policy is at the maximum of 1.5 times of the rest of the tenor.

We also look at it how to mitigate against failure in destruct restructuring. So so we have increased these bucket provisions through MO, which increase their coverage close to 40%. Now the the step that we’re also doing is we implement several conditions for loans and structure in in micro with set with the with the four condition that we are we are we are we are implemented in the in this action. First one is the the customer still have a good business prospects. Second one is customers still have payment capacity.

Third one is customer have a good intention to repair the loan. And the last one is the customer has collateral that is sufficient to cover their loans. And we do not allow restructuring to improve loan collectability. So that’s for me, Jadenov. I hope this clarify your questions.

Thank you so much.

Thiago, Moderator/Investor Relations, BRI: Thank you, Bariko. The next one, we got a question from Ferry Wong. The question is like loan growth forecast in 2025 and 2026 and the credit cost outlook, there’s any changes versus last time? And the second question is like, the tariff force continued and GDP growth fall to 4.5%? What do you think about your loan growth and NPL and the liquidity position so far?

Bupi P, CFO, BRI: Okay. Thank you, Ferry. I think if we are talking about loan growth forecast in twenty twenty five, twenty twenty six, you know that the loan growth our guidance for 2025 loan growth is 7% to 9%. And if we are talking about the following year, probably it’s too early to tell now, but positively, probably like 1% higher. That is what our current estimations, but it’s too early to tell about 2025, ’20 ’20 ’6.

For credit cost outlook, I think so far, the first quarter cost of credit was 3.5%. And as you may aware that usually in RAEIAT, the first quarter COC is the highest. And hopefully, it will continue to decrease by the December 2025. I think last year, we written off around 39,000,000,000,000 to $40,000,000,000,000 and we need provisions. And I think the level of write off this year probably still similar like what we had in 2024.

So I think it will require provision cost similar to into last year provisions. So the provision should be similar. And I think the COC guidance should be still within the guidance 3% until 3.2%. However, probably, it might be end up in the higher end of the guidance. Is the next question?

Thiago, Moderator/Investor Relations, BRI: Should tariff wash continued and GDP growth fall to 4%, what the loan growth was?

Bupi P, CFO, BRI: Okay. So your next question is about the GDP growth if it is below 5%. So we do have our internal research that, especially for MSME, the MSME loan has a stronger and positive correlations to GDP growth as opposed to the interest rate. So if the MSME loan growth actually has a positive, I think it’s 0.6% correlations with the GDP growth. So this shows that the MSME loan growth depends more on the economic condition.

Therefore, if your question is GDP growth fell to 4.5%, it would result in a slowing down in the MSME loan growth as well. However, we are estimating that the GDP growth this year remain relatively manageable of 4.9 to 5%, slightly declined from last year due to the global macro dynamic.

Harry Gurnady, Group CEO, BRI: Okay. Thank you very much Before we close the presentation, I would like to explain and also mention the 2025 guidance. Basically, the guidance still remain the same with the previous guidance that we already make. So the loan growth will keep between 7% to 9%.

Net interest margin, we will still keep growth between 7.3% to 7.7%. And the cost of credit mentioned earlier by both VP as well, we can keep from 3% to 3.2%. And then the NPL, below than 3%. And the last one is the cost to income ratio, we will keep between 41% to 43%. Okay.

So hopefully, the analysts, investors can see the guidance that we already have until today. Yeah. Thank you. Thank you very much.

Thiago, Moderator/Investor Relations, BRI: Thank you, Perry, for the remarks on the guidance for full year 2025. And since we are running out of time, I think the last question from Perry would be our last question of today’s earnings call. Next, after the call, we would address the existing or the remaining outstanding questions through emails. And of course, thank you for joining us today at our earnings call for first quarter twenty twenty five, and we appreciate your continued comfort for BRI. Please do not hesitate to reach out to us at Investor Relations through one on one meetings or emails or call if you need additional information or follow-up.

Thank you, everyone, and have a good day.

Harry Gurnady, Group CEO, BRI: Thank you.

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