Earnings call transcript: Bank Rakyat Indonesia Q4 2024 shows steady growth

Bank Rakyat Indonesia (BRI), with a market capitalization of $36.3 billion, reported its Q4 2024 earnings, revealing a modest increase in net profit and stable financial performance. The company’s net profit for the full year 2024 rose by 0.4% to IDR 16.7 trillion, while total assets grew by 1.4%. Despite a slowdown in loan growth to 7%, the bank maintained a net interest margin of 7.74%. The stock price saw a slight increase, reflecting positive market sentiment. According to InvestingPro analysis, BRI maintains a FAIR financial health score, with particularly strong profitability metrics.

Key Takeaways

• BRI’s net profit increased by 0.4% in 2024.
• Loan growth slowed to 7%, but net interest margin remained strong.
• The bank is focusing on SME and Consumer segments as part of its diversification strategy.
• Market sentiment remains positive, with a minor stock price increase.

Company Performance

Bank Rakyat Indonesia demonstrated resilience in its financial performance for Q4 2024. The bank’s net profit rose marginally, reflecting stable growth despite challenges in the macroeconomic environment. Loan growth decelerated to 7%, but the bank successfully maintained a net interest margin of 7.74%. With a P/E ratio of 9.82 and a significant dividend yield of 9.44%, the bank offers compelling value metrics. The strategic focus on diversifying into SME and Consumer segments is expected to drive future growth, with analysts forecasting 4% revenue growth for FY2025.

Financial Highlights

• Revenue: IDR 50.79 trillion (actual) vs. IDR 48.62 trillion (forecast)
• Earnings per share: IDR 100 (actual) vs. IDR 100.91 (forecast)
• Return on Assets: 3.1% in Q4 2024
• Return on Equity: 18.5%
• Cost to Income Ratio: 41.6%

Earnings vs. Forecast

BRI’s earnings per share (EPS) of IDR 100 slightly missed the forecast of IDR 100.91. However, the revenue of IDR 50.79 trillion exceeded expectations of IDR 48.62 trillion, marking a significant revenue beat. The marginal miss in EPS is overshadowed by the strong revenue performance, which signals robust operational efficiency.

Market Reaction

Post-earnings, BRI’s stock price increased by 0.77%, closing at IDR 3,920. This movement aligns with the positive revenue surprise and reflects investor confidence in the bank’s strategic initiatives. InvestingPro analysis indicates the stock is currently trading near its 52-week low, with additional ProTips and detailed valuations available to subscribers. The bank has maintained dividend payments for 21 consecutive years, demonstrating strong commitment to shareholder returns. According to InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels.

Outlook & Guidance

For 2025, BRI targets a loan growth of 7% to 9% and aims to maintain its net interest margin between 7.3% and 7.7%. The bank plans to keep its cost of credit between 3% and 3.2% while focusing on maintaining a non-performing loan ratio below 3%. These targets underscore BRI’s commitment to sustainable growth and asset quality improvement. With a return on equity of 19% and analyst consensus indicating strong potential, detailed financial projections and comprehensive analysis are available through InvestingPro’s exclusive research reports.

Executive Commentary

"We will continue to focus on the micro segment, but as part of business diversification, we will also have SME and Consumer as growth engines," stated Pazu Naso, CEO of BRI. CFO Bhu Vivi added, "Our approach on disbursing wholesale loans has been changing to customer profitability account and a better account planning."

Risks and Challenges

• Macroeconomic pressures could impact loan growth and asset quality.
• Inflationary trends and currency fluctuations may affect financial stability.
• Regulatory changes in banking policies could pose compliance challenges.
• Increased competition in the banking sector may pressure profit margins.

Q&A

During the earnings call, analysts inquired about BRI’s strategies for micro loan migration and corporate loan growth. The management addressed concerns about potential dividend payout increases and explained their gradual approach to loan write-offs, highlighting a focus on asset quality and profitability.

Overall, Bank Rakyat Indonesia’s Q4 2024 performance reflects a stable financial position with strategic initiatives poised to drive future growth. The bank’s focus on diversification and digital innovation positions it well against macroeconomic challenges and competitive pressures.

Full transcript - Bank Rakyat Indonesia Persero (BBRI) Q4 2024:

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Good morning. We would like to thank you for joining us for Bancrokket Indonesia’s twenty twenty four Earnings Call. We would like to begin the meeting now. And first, I would like to introduce the members of our Board of Directors who are joining us today. Our CEO, Pazu Naso our Vice CEO, Paz Chatur our CFO, Bu Vivi our Director of Risk, Paagus Sudiarto our Director of Microbanking, Pa Supari our Director of Networks, Pa Andrianto our Director of Consumer, Igo Handayani our Director of SME, Pa Aman Secrianto our Director of Corporate Banking, Pa Auguste Norsanto our Director of Compliance, Pa Solihin our Director of IT and Digital Banking, Pa Argo and our Director of Human Capital, Pa Agus Winardono.

I would like to mention a few points before we get started. First, for everyone joining us on the Zoom (NASDAQ:ZM) call, I would strongly encourage you to download a copy of our presentation materials currently available either from the Investor Relations homepage of Bank Rockhat or from the link that we sent to you early this morning. Second, as this is in a webinar format, for Q and A, we will invite you as a speaker to the panel. When called upon, we will ask you to please unmute your microphone and then state your name and the company that you work for before asking questions during the Q and A segment. I would now like to introduce Pazu Naso, our CEO, to begin the meeting.

Pazu Naso, CEO, Bancrokket Indonesia: Thank you, Brett, and good morning, everyone. First of all, I would share about the macro situation macroeconomic situation and then follow the full year result. And of course, we will share about the guidance for this year. In recent macro, economic situation remains stable and the outlook is still attractive with our projection of 2025 GDP growth of 4.9% to 5.2%, relatively in line with 2024 GDP growth of 5.03%. Our forecast for 2025 is a fiscal deficit of 2.5% of GDP in 2025, slightly larger than the 2024 deficit of 2.29%.

We anticipate one additional rate cut in full year 2025, and we are forecasting moderate inflation of 2.65% to 3.03% in line with PI’s target of 1.5% to 3.5%. Finally, following the surprise rate cut in January, the rupiah has remained relatively stable in the RMB 16,200 to RMB 16,500 given the strong U. S. Dollar. Now let’s discuss a few macro data points directly impacting bear in.

Within GDP composition, we are seeing a shift away from household consumption and an increase in net export, reflecting not only the mineral down streaming, but weak consumption as the middle and lower income segment remain under pressure. The new government’s policy can provide a catalyst to improve the situation, But at present, it remain a challenge. As we can see by the C score data, the middle and lower segment purchasing power index is still below zero, meaning the purchasing power of the middle and lower class is still below the pre pandemic average. Now I would like to review 2024 as we experienced a year of volatility led by asset quality deterioration and, need to adjust our full year 2024 target and strategy. Initially, we identified the problem in micro asset quality, derived from a spike in micro SML of 177 basis points year on year to 5.72% primarily from the full year 2023 portfolio, followed by higher than historical net downgrades to NPL in first quarter twenty four of RUB 7,300,000,000,000.0.

We observed that the problem was due to several factor, but primarily due to customer offer extension in 2023 when we were over optimistic about the macroeconomic rebound potential and compounded by the impact of a spike in food price year on year. We expedite that the resolution of most bad debt due to COVID-nineteen restructured loan and implemented restructuring and began to write off the 2023 Cooper Dust Disbursement. Currently, we believe we are well into the two years resolution process that started in Q1 twenty twenty four. We responded to micro asset quality problem by implementing strategic initiative to fix loan underwriting, enhance loan officer capability and adjust their KPIs that significantly slowed down micro loan growth. Despite having one of the most volatile years, we managed to maintain profitability as we grew

Bhu Vivi, CFO, Bancrokket Indonesia: 6% and

Pazu Naso, CEO, Bancrokket Indonesia: key metrics such as return on asset and return on equity in 2024 were strong. In 2025, we will launch our new corporate strategy with a focus on the funding structure by increasing retail shipping and improving asset quality as two key profitability drivers. We will continue to focus on the micro segment, but as part of business diversification, we will also have SME and Consumer as growth engine driven by medium, mortgage and payroll lending. In Q4 twenty twenty four, we did not have the benefit of cash basis payment to support our revenues as we experienced in Q3 twenty twenty four, leading to QN on Q decline in PIPOC of 4% and stood at INR 29,200,000,000,000.0 in Q4 twenty twenty four. However, year on year PIPOC increased by 9.6%.

We would note an accounting change that Bouffivi will explain later in the call the impacted reported net interest margin and non interest income figures within this presentation, all number in 2024 and 2023 have been adjusted to reflect the change. Our net interest margin remained quite strong at 7.8% in the quarter And with the recent BABI rate cut and SRBI rates falling, we are hopeful for some cost of fund improvement in first quarter twenty twenty four twenty twenty five. Profitability remained strong as our return on assets stood at 3.1% in Q4 twenty twenty four. Most of this is due to our ability to optimize our balance sheet from a while paying in interim dividend in the quarter. While paying in interim dividend in the quarter.

Our capital adequacy ratio remained quite elevated, implying that our 18.5% return on equity would be much higher if our capital level were at industry averages for the top 10 banks in Indonesia. Our lending yield of 13.1% remained elevated despite the shift in our loan and higher NPLs as our subsidiaries became a larger contributor to revenues. Our strong ability to generate recoveries of write down off loan has lead to 0.52% net cost of credit in Q4 twenty twenty four, which fell by 41 basis points Q on Q. There was a slight decrease of three forty nine basis points Q on Q in subsidiaries gross cost of credit to 2.06 as PNM cost of credit normalized following the Q3 twenty twenty four front loading of provision. In 2024, our loan growth slowed to 7% as our consolidated loan reached RUB1355 trillion.

Growth was driven by corporate and medium, which grew by twenty three point six percent and twenty one point six percent respectively. We experienced lower than historical loan growth in our Micro and Small business segment, which slowed to 2.7% and minus 0.7% respectively. Our microloan decreased to 46.3% of total loan, down by 200 basis points year on year as we are focusing on collection and the impact of tighter scoring standard. Our net interest margin was maintained at 7.74%, which is in line with our guidance for 2024 as we were not impacted by our largest modification loss in Q4 twenty twenty four. We felt that a recent rate cap and declining SRBI rate are potential catalyst to support cost of fund improvement in the coming months.

Moreover, our CASA ratio increased by two ninety five basis points year on year to 70 sorry, 67.3. Our cost to income ratio decreased year on year to 41.6% from 41.9% as we are effectively managing our personnel and G and A expenses. Our cost of credit was 3.23% in 2024 and modest 2.76% in Q4 ’twenty four, while our net cost of credit in 2024 was much lower at 1.32% and only 0.54% in Q4 twenty twenty four. Furthermore, the gross NPL ratio improved 17 basis points year on year to 2.78%. Finally, our net profit in full year 2024 increased by 0.4% to RUB 16,700,000,000,000.0.

Turning to our guidance, I want to review our 2024 guidance and provide 2025 guidance. For 2024, it was a mixed result. We achieved our guidance for net interest margin, non performing loan and cost to income ratio and miss for loan growth and cost to credit cost of credit. Starting with our loan growth, we saw a continuous slowdown in second half twenty twenty four, particularly from micro and small, leading us to come in below guidance at 7%. For 2025, we anticipate loan growth will reach 7% to 9% supported by consumer and corporate lending.

For net interest margin, we were in the midpoint of our guidance despite seeing a surprise rate high in 2024 and high SRBI issuance. We were boosted slightly by the delay in modification loss that is likely to impact, full year 2025 net interest margin. Our 2025 guidance is for 7.3 to 7.7% net interest margin as we are anticipating one or two rate cap, supporting our liability sensitive balance sheet. Our cost of credit of 3.23% was above our guidance of 3%, but it has improved throughout the years. The biggest driver of cost of credit being above our guidance were the slower loan growth.

Higher provision at our subsidiaries and the delay in modification loss on a largest corporate debt to be expect will occur in 2025. We are targeting a cost of credit of 3% to 3.2% for 2025 as we continue to clean up the asset quality issues in micro. This is in line with our commentary to investor since April 2024. For our NPL ratio, we made the guidance as we saw some year end 2024 improvement as write off surpasses our target. We anticipate for the 2025, we can maintain NPLs below 3% as well.

But we could see a shift in the composition with a little higher amount from micro and lower Cost to income ratio was in line with guidance in 2024 at 41.59%. For full year 2025, we believe it will increase to 41% to 43% as we continue to invest in our workforce and digitalization. And I would now like to turn the call over to Bhu Phiti, our CFO, to discuss our financial in more detail. Mubiti, please.

Bhu Vivi, CFO, Bancrokket Indonesia: Thank you, Sonarso. I would like now to discuss about our balance sheet and P and L. So year on year, our total asset growth was 1.4%, supported by loan growth 7% and loan to earning asset actually has continued to improve from 71% in 2023 and now is like 74%. Moreover, we continue to make our balance sheet more efficient as earning asset increased 92.4% of total asset. If you remember, 2023 is roughly around 90%.

At a consolidated level, the contributions from BNM and Bagadean are roughly around 10% of our total loan and helped to drive the loan growth in the micro level. Deposit growth strategically slowed down year on year to 0.5 and CASA increased 5.1%, leading to a strategic increase into our loan to deposit ratio to 88.9% year on year. We anticipate our loan to deposit ratio in 2025 could move slightly higher from these current levels. I would note that we experienced no changes in our leverage 6.2x as we declare a larger interim dividend that should driven the leverage to increase. But I think weak asset growth as we reposition the asset base more than offset this.

We anticipate that over the next twelve months, we can continue to increase our leverage and hopefully, we can increase our payout ratio to 85% or higher. But we will remain relatively conservative in capital management. Talking about our loan book portfolio here. Our loan book fell below our guidance, 7%. So several things.

The first one is our corporate portfolio’s growth rate picked up in the fourth quarter of twenty twenty four as we expected actually because strategically, at least within two years, we might expect that the corporate segment might grow a bit higher. So the corporate segment grew 23.6% year on year and primarily driven by base effect on last quarter base effect. And then but if we talk about the fourth quarter twenty twenty four itself, corporate loan declined by 1.37%. In 2024, actually, we lend out to corporate clients in Agribusiness, FMCG and Mining, as we saw opportunity in these sectors. Our intentions, I think, micro growth started not started micro growth actually is slowing down as consolidated growth in the year stood at 2.6% and bank only growth actually is minus 1.1%.

And this is also along with elevated in write off in 2024. We anticipate in 2025 that we can see improvement in microloan growth as we start to grow Copades very carefully. All new underwriting methodology that we implement in 2024 will be still applied in 2025. We also saw slow growth in small business, which contracted nearly 1% year on year as we have implemented more stringent lending criteria. We did write off an SME roughly around KRW 6,000,000,000,000 to clean up COVID-nineteen portfolio.

We anticipate growth in this segment will improve in 2025 as our loan officers become more familiar and adaptive with the new underwriting methodology as well as the readiness in the infrastructure of SME segment. Our consumer portfolio grows slow to 10% year on year as mortgage growth decreased. And payroll lending growth is around 9.1% year on year. In 2025, we expect to grow consumer business in a mid double digit by boosting mortgage growth through leveraging strategic partnership with sorry, it’s a bit noisy here with top tier developers and reinforcing our role in the upcoming government programs. As you can see here, there has been a strategic shift in our portfolio mix toward wholesale banking.

Around 70% of our wholesale clients now are private companies that are private companies compared with probably like several years ago, it will be dominated it was dominated by SOE. Our approach on disbursing wholesale loans has been changing to customer profitability account and a better account planning. We have been doing a lot of syndications with other big banks, focus on short term and big value chains clients. And now we are moving into the deposit compositions. Our overall deposit growth year on year slowed to 0.5% year on year as deposit were flat Q on Q as we allow higher cost time deposit total of the books and primarily replaced by CASA in the fourth quarter last year.

CASA increased 3% year on year. CASA ratio improved to 67.3%. And I think it’s continued to be maintained well above historical levels despite the rising rate environment. On Q on Q basis, we are seeing CASA ratio increase by three ten basis points and LDR 88.9%. While current account increased year on year by 8.2%, we believe more importantly the year on year increase in saving of 3.1% is a positive indicator that we could be seeing improvement in consumer and micro customer strength.

We would like to highlight our current account that consistently especially in retail segment that consistently growing double digit. And this is due to the introductions of kilo light to our SME clients so that these additional services give them additional value to use our current account. We will continue to implement this as a part of strengthen our retail banking capabilities. I think the cost of Casa continue to rise due to higher cost current account growth in wholesale. We do hope that going forward, the BI rate cut probably will give more opportunity in 2025 along with decrease in SRBI.

However, if you see our NIM guidance actually does take into account the high LDR at our peers and their guidance that was presented over the previous week. At least, we will see the liquidity conditions in the first half. At least first quarter will still remain very, very tight. Our capital positions remain elevated with total CAR of 26.6%. And this is because of impact from Basel III implementations of market risk weighting adjustment.

And over the medium term, we would like to see our total CAR decrease from the current levels to closer to 19% to 20% through stronger future loan growth, and we continue to return cash to our shareholders. Now I would like to discuss now our income statement and key items that impact our profitability. So our net interest income increased by 3.4% year on year. In the fourth quarter twenty twenty four, we would note that interest income did not benefit from corporate borrowers that are on cash accrual basis like we saw last quarter. And that is a factor in the lower Q on Q interest income, not to mention about additional adjustment of the modification loss from Wika and Vazquita, both around JPY560 billion and also Bullock repayment.

And I think this impacted our Q on Q lending yield as well. The net interest margin decreased, although the consolidated full year NIM stood at 7.74%, in line with our full year guidance of 7.6% to 8%. On a year on year basis, our NIM has decreased by 41 basis points due to the increase in the cost of funds. But with Indonesia entering an expansionary policy cycle, we are hopeful that the COF could stabilize in 2025 and beyond. I think Patson Arso mentioned earlier that we have like a slightly different accounting method in the fourth quarter.

Actually, we reallocate the supply chains financing or SCF revenue move into interest income roughly around KRW2.4 trillion. So previously, this item was booked under fee income, But to be aligned with the industry best practices, we reallocate supply chain financing into net interest income. Okay. So our non interest income rose 24.8% year on year as we continue to see strong recovery growth actually and expect this level of elevated recoveries could be maintained into 2025 but likely does not grow as aggressive as recoveries could be driven by higher rate of Copartes write off in 2025. So in 2025, I think the recovery in a bank only level roughly around JPY 24,200,000,000,000.0.

In 2025, we also expected higher than JPY 20,000,000,000,000 recovery for this year. Our operating expenses remain in line with our target, increased by 8.2% year on year as our core components like personnel expense and G and A rose by three point five percent and four point one percent, respectively. On Q on Q basis, you might see the personnel decline 36.2%, And this is due to the adjustment of average effective tariff on income tax to our employees. So if you remember, every beginning of years, we calculate the average effective tariff using the highest bracket of the in the tax bracket. And along the year, we adjusted with the fact or the real numbers.

So actually, the rate is declining. And also the second items that also impacting the personnel decline is the employee leave allowance. So if you remember last quarter, there was an increase in employee leave allowance that in the fourth quarter not happens again. Our cost to income ratio is 41.6%, which is in line with our guidance 41% to 42% consolidated guidance. This led to PPOP increasing 9.6% year on year.

However, this increase was primarily offset by the increase in loan provision expenses year on year, so leading to flat earning around KRW 60,640,000,000,000.00. Okay. So this is basically about our earning asset yield and margin. So I previously mentioned that there is a reclassifications on supply chain financing. And there is keep in mind and also please keep in mind that in the third quarter twenty twenty four was impacted by the cash payment from some of our large corporates.

NIM at our PNM and Pagadean contribute 116 basis points to this consolidated NIM, up seven basis points from 109 basis points in a year ago period. With portfolio mix is shifting more and more into wholesale segment, our consolidated lending yield in full year 2024 stood at 13.2%. I think in fourth quarter twenty twenty four, lending yield slightly declining to 12.5% because of the cash accrual like I mentioned previously. Our marginal cost of funds were flat Q on Q, 3.48% as we did see less pressure on funding costs in the last quarter. In the last quarter, we saw our cost of deposit in Rupiah terms increase six basis points on a marginal basis.

This is actually one of the reason why we are still very cautious with the funding costs entering 2025. Non interest income continued to report strong growth, while core operating expense growth was in line with 6% to 8% full year 2024 growth target. I think most of the part of this slide I already explained previously. Next (LON:NXT) slide, please. Okay.

Next slide. Okay. This is about the operating expense breakdown. Our cost to asset, full year 2024, slightly increased than our guidance 3% to 4% OpEx to asset. And I think we have been trying to deliver the message that we hiring more people, so you might expect something like this last year and this year.

But I think furthermore, the reported bank only cost to income ratio has decreased to 37.2%. Our subsidiary are keeping cost growth under control so far, and I think they are reporting positive operating leverage as well, helping to lower their cost to income ratio. I would like now to turn the presentations over to our Director of Risk, Bakus Sudiarto, to discuss our asset quality.

Bagus Sudiarto, Director of Risk, Bancrokket Indonesia: Thank you, Ibu Fifi. Good day to all of you. Now I would like to discuss on our asset quality and outlook for full year 2025. On the consolidated end by ratio as mentioned by Faso Naso decreased by 17 basis points to 2.78% year on year. As we continue to see improvement in corporate asset quality as NPLs in this segment decreased by 126 basis points to 2.6%.

Moreover, we continue to resolve the CAFE treasury loan portfolio where the NPLs start by 66% year on year to RUB3.2 trillion from accelerated downgrade of our CAFE treasury loan book. We still see the NPLs rising in Micro Lending and our subsidiaries on a year on year basis, which we anticipate will remain elevated in Micro and Ultra Micro subsidiaries. But positively, we are already starting to see improvement in the NPL ratio for small business as we guided to in third quarter twenty twenty four. And our special mentioned loans are improving, decreasing to 4.82% from 4.9% in the year ago period. The decrease was primarily driven by higher restructuring of over INR 49,000,000,000,000 in loans in full year 2024, while write off increased by 33.5% or RUB 11,400,000,000,000.0 year on year to RUB 45,400,000,000,000.0.

As before cash 2025, we anticipate trade off and restructuring will remain around these levels, but we will try to front loan cost of credit similar to 2024. We anticipate that first quarter will be the peak and cost of credit can decline through second half twenty twenty five.

Supari, Director of Microbanking, Bancrokket Indonesia: On the

Bagus Sudiarto, Director of Risk, Bancrokket Indonesia: provision for loans and financing stood at INR 81.13 representing around 6% of the total loans. From 2015 to 2019 before the pandemic, our loan loss reserve to loans never surpassed 4.4% and we anticipate that this reserve will revert back to a level closer to our pre pandemic ratio of loan loss reserve ratio. Our coverage ratio remain elevated at 215% and we would expect this can more lower in 2025 likely to 200% as our portfolio is much less tied to corporate lending than our peers. Our loan at risk ratio decreased by 100 basis points to 10.7% from 11.7 quarter on quarter, especially our mentioned loan decreased by over INR 10,000,000,000,000. That said, we expect the decreasing trend in loan at risk to continue, but the first half of twenty twenty five might be a little challenging as we anticipate seasonally higher SML ratio in first half twenty twenty five.

And the cost of credit stood at 3.23% at year end 2024 and decreased to 2.76% in the fourth quarter, but was still above our full year target of 3% due to the delayed modification loans and higher cost of credit at our subsidiaries. And our net cost of credit was 1.32% in 2024 and in fourth quarter decreased to 0.45% as a result of strong recoveries. Period of RUB 45,400,000,000,000.0 in 2024 above our target of RUB 40,000,000,000,000 as micro write off will be elevated in fourth quarter twenty twenty four. However, we also surpassed our full year 2024 recoveries target of RUB 22,000,000,000,000 to RUB 24,000,000,000,000 and reached RUB 25,400,000,000,000.0 or RUB 2,500,000,000,000.0 per month, leading to the very low net COC for fourth quarter and full year 2024. Based on our data, we do not see asset quality deteriorating further, but we do believe that cost of freight will remain at 3% to 3.2% for full year and that we could see a similar trend to full year 2024 with a high credit cost in the first quarter and then declining as the year moves on.

At year end 2024, total outstanding COVID-nineteen restarted loans decreased to 1.8% of total loans and 0.9% of total borrowers from 4.830.2% respectively at December 2023. The COVID-nineteen research portfolio totaled RUB19.2 trillion at year end 2024, representing a decline of 64% year on year, mostly driven by improvement in the Micro and Small segment and write off of RUB 11.93. We anticipate most of this portfolio will be resolved by year end 2025 and will possibly no longer provide this slide in future presentation as the relevancy has subsided. The COVID restarted portfolio continues to decrease composed primary of small and micro loans that account for 54% of the total. At year end 2024, ’40 ’2 point ’1 percent were current in payment with 40.8 percent in special mention and 35% in 9% in nonperforming loans.

We feel the coverage of 28.1% in adequate to absorb any losses. As 32% of the loans are corporate restructuring that we do not see we do not see having payment issue. Now I would like to turn to the presentation to Supari to discuss on our micro portfolio. Please pass by.

Supari, Director of Microbanking, Bancrokket Indonesia: Thank you, Bagus. Now I will explain the contribution of Ultra Micro and Micro business to BRI performance full year 2024. The contribution of BNM and Bagatian to consolidated microloan increased to 21.6%, while at PNM, the growth slowed to 6.2% and Bougain grew 26.3%. Pierry is committed to maximizing Bougain and PNM contribution through strategy synergy. Bugattian leverage the area network to expand goods setting and goods owning service while accelerating cashless transaction.

Guardian also gradually introduced woodwind services, including quote deposit, loan, trading and custody. PanEn enhanced to Ultra Amico customer journey by strengthening risk management, optimizing weekly group lending, group meeting and expanding Ultra Micro insurance for new crude. This initiative positions the area for sustainable crude and greater value creation. Our micro loan growth in 2024 decreased by 1.1% year on year as we have tightened lending standard increase KPI related to asset quality and required loan officer with high NPL ratio to focus on collection. This strategy is deliver positive result with a recovery rate of 57.5% wanting to RUB12.6 trillion, which has also contributed to the overall performance PFE (NYSE:PFE).

QR is driving year on year growth, up 5.2% as displacement reached RUB 167,800,000,000,000.0. To sustain long term growth, we focus on human capital, organizational enhancement, business process improvement and risk management. Over 27,000 loan officers receive training to enhance marketing and leadership skill. We strengthened regional organization structure to accelerate ecosystem acquisition and business growth. Additionally, we tightened credit risk scoring, ensured stronger pace management.

This strategy initiative reinforced their commitment to sustainable growth balancing expansion with risk control to drive long term success. Currently, RUB 79,000,000,000,000 Rupiah remained on our balance sheet at December twenty twenty four of twenty twenty three corporate divestment. Across this fintech, the weakest performance is seen in the new borrower, which maintained as SMLN NPL ratio of over 1660% as year ended 2024. In 2024, new borrower account for only 12% of displacement, torn from 17% in 2023. Of remaining 2023 displacement, DERA currently 15.3% in SML and 5.9% in NPL and 5.9% has been written off and 11%, thirteen point eight % has been restructured.

I would like now to turn the presentation back to Brett to organize the Q and A. Thank you.

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Thank you, Pasipari. We would now like to move to the Q and A segment. First, we have a question from the Zoom that we will address. This is coming from Melissa Huang at Goldman Sachs. The question is one, it’s a two part question.

Would this year be the last year for the micro cleanup? And when can we expect micro growth, especially bank only, to return to low teens levels? And question two, for Coupe Des loans, are the new loans still insured? And how do you provision for Coupe Des insured loans? I think Bouvivi and Pa Agus Sudiarto can take this question.

Bhu Vivi, CFO, Bancrokket Indonesia: Okay. Thank you, Brett. Hi, Melissa. Thank you for your questions. So I think since last year, we have been delivering the message that we want to resolve the 2023 bad debt within two years, twenty twenty four and 2025.

So this year actually is the last year for us to do cleanup for 2023 patch. So if you recall, in Copartes 2023, now I think as of December 2024, it’s only around Rupiah 80,000,000,000,000 left. So if we are using this flow rate, so by the end of twenty twenty five, these budgets will end up with below than KRW 30,000,000,000,000. So hopefully, it’s already rolled off from our balance sheet. And that’s for the first question.

And then when can we expect micro growth, especially in the bank only to be double digit? Please keep in mind that when we are talking with micro, we will have two product, KUR and Copadesse. KUR will continue flat or even negative because it’s depend on the government, while Copadesse actually in 2025, this year, we want to start to grow Copades again very carefully by looking at the demand on the grassroots, the trend of the micro deposit itself with using the same or more improved underwriting methodology that we already implementing in 2024. We want to continue in 2025. In short, we would like to push Copadesse actually at least 7% in 2025.

So we are aiming to have 7% to 10% in 2025 for Copades. The whole micro together with Pagade and NPNM would grow roughly around three percent to 5% this year. And in the medium term, we might expect like a high single digit or like lower double digit in the medium term for the micro segment. For Copades Insurance, I think now we starting January 2025, actually, we are in the process of negotiating with Credit Insurance, in particular, discussing about the stop loss features. While this negotiation is still ongoing since January 2025, actually, we did not cover the insurance in Copates anymore.

So we stopped temporary the credit insurance in Copates since January 2025.

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Thank you, Bavibi and Paradis. Okay.

Bagus Sudiarto, Director of Risk, Bancrokket Indonesia: Brett, I will add some explanation about how we provision on our Copartes loan. Actually, in how we calculate in provision in Copartes, same with the other products, the insurance company just impacted on our loss given default. Currently, our Copadust loss given default is still at 53% as we maintain conservative stance. This LGD has not taken into account the insurance for the product. Therefore, the suspension of the Cooperatives insurance will have no impact to the provisioning of the loan.

Thank you.

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Thank you, Pagus. The next question we’ll take from the call will be from Jaden. Jaden, please unmute your line.

Jaden, Analyst: Yes, sure. Can you hear me okay?

Bagus Sudiarto, Director of Risk, Bancrokket Indonesia: Yes, we can.

Jaden, Analyst: Paying. Great. Thank you so much for taking my questions. I guess this is more of a big picture question just on KUR and the migration. I think one of the slides you showed had a huge pickup in those that were migrated in 2023 and are now sort of causing some asset quality stress.

How do you manage the push to migrate these customers going forward? I mean, surely there are just some that should not have a Coupetus loan. How do you sort of ensure that the government sort of understands that and you’re able to sort of not repeat the same mistakes of 2023? And then the second question is just on provisions and the balance of provisions. Why not just do a larger write off and get it over with?

It looks like the guidance is basically for fairly flat provisions overall and a fairly steady year. Why not just accelerate it and move on and then hit the growth per Melissa’s question?

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Jaden, Vivi is going to answer your question. I just wanted to add a little bit to your second question about maybe doing something, I guess, in terms like a kitchen sinking. But if you look at the fiscal year ’twenty four numbers, we did have a write back of about $4,700,000,000,000 coming from the a couple of bank guarantees that were paid off, but also from a couple of bank guarantees on the corporate side that moved over to loans. So some of the provisioning on the corporate side that you see, some of the cost of credit is actually associated with these loans. It would imply that when you look at a 3% to 3.2% cost of credit for 2025, that that could imply that you see a higher cost of credit for micro in 2025 than you do in 2024 because a couple of trillion of this could be shifted towards micro instead of being towards some of the corporate that was moved over.

But maybe Vivi can continue on your first question and further commentary on the kitchen sink.

Bhu Vivi, CFO, Bancrokket Indonesia: Okay. Thank you, Chetan. It’s about the migrations, especially in 2023. One of the lesson learned that we got in 2023 is about how we determine the criteria on this graduation from KUR to Copartes. One of the push in 2023 actually is because of the government put a new KPI to all the banks who disperse KUR.

One of the KPI of the success of KUR dispersion actually is for graduation. That’s why in 2023, we are a bit aggressive on these migrations. But lesson learned from that, actually now we are implementing more strict criteria for KUR borrower that can be graduated into Copartes. The first one is the KUR borrower should be eligible to be graduated into Copartes if he or she already enjoy at least Rup 70,000,000 for two cycles, right? So it’s probably a two cycles, it’s how many years, right?

Supari, Director of Microbanking, Bancrokket Indonesia: Ten years.

Bhu Vivi, CFO, Bancrokket Indonesia: Ten years, roughly around ten years sorry, six to ten years. So he or he has to enjoy at least Rp70 million for two cycles, six to seven years. The second one, we always consider the repayment capacity as the main decisions function before we decided whether he or she can be graduated into Copartes. And another aspect that we improved in 2024 actually is we want to mitigate the loan that switching among the family members. So from the previously the husband, then because using the now is the wife, next is like probably the uncle.

Now we are trying to have like a single identity. So for one family, it’s only eligible one KUR. So that’s also another measurement that we implement to make the graduations from KUR to Copartes more prudent. Yes, regarding your second questions about the kitchen sinking, I totally understand how you all of you guys thinking about this since 2024. You always give us a lot of questions and also insight why Rakyat not doing kitchen sinking, doing a massive right off in 2024.

It’s probably, it’s a bit hard for me to explain, but we are talking about a portfolio management here. So like for example, the first one, we cannot just write off a lot of people in the same time because it will impact their credibility in the FSA. So we do not want basically all of our customers basically become bad debt customers. The second one, since the very beginning, we understand that most of them basically, they have a willingness to pay. So we give them an opportunity to do restructuring, but we limit the number of restructuring of Copartes twenty twenty three.

So it’s a part of our effort basically to help them to recover. And I think now this is the second year of yet to resolve the 2023 basis. And I think so far, it is still aligned with our aspirations that it could, the COC for two years could be above 3%. So March ’20 ’20 ’4. ’20 ’20 ’5, you might expect probably the same level of COC.

But I would note that since second half twenty twenty four, we are adding rules into our management overlay, specifically into to add more provisions into Coupertest 2023 that being restructured in 2024. So because we start in second half twenty twenty four, you might expect that in 2025, at least in the first quarter, you might see our provision, MCOC, will spike, will increase significantly because we try to do a front loading in 2025. And that will getting alone and lesser and lesser toward December 2025. So I need to emphasize this. So I do not want you to get surprised with our posture of proficient COC, for example, including profitability in the first quarter twenty twenty five because the new rules has been implementing in management overlay since second half twenty twenty four.

It might impact the provisions level at least in the first quarter. So please do not be surprised with these conditions. If you are very familiar with the pattern, the first quarter every year in Riyadh is always spiked. Not to mention that in the first quarter twenty twenty five, we will have lesser working days. So it will impact the collection effort from our monthly NRM.

The new rules in management overlay, it will put pressures in the provisions, at least in the first quarter. So I just want to deliver this message earlier. So you might imagine that the Professions posture, the profitability of posture of RAYAT might get pressure at least in the first quarter, not to mention about the liquidity conditions. Thank you, Jatin.

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Thank you for your question, Jatin. The next question we have is coming from Ferry Wong. Ferry, if you can unmute your microphone.

Ferry Wong, Analyst: Yes. Hi. Thank you for the opportunities. Can you hear me?

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Yes, we can hear you clearly.

Ferry Wong, Analyst: Yes, thank you. Yes, I just had one question. Practically, I think this is more on the still on the credit costs, because you’re expecting that credit costs will be 3% to 3.2%. Can you elaborate more on this? How much is going to be bank only compared to non bank?

And could you please elaborate how much that you’re going to expect in terms of one, the reversal, the recovery and also the loan modification losses on your 3% to 3.2% credit costs. That’s all from me. Yes. Thank you.

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Okay. Thank you. Bovivi, would you like to start and then Auguste Diarto maybe can add in? [SPEAKER UNIDENTIFIED

Bhu Vivi, CFO, Bancrokket Indonesia: COMPANY REPRESENTATIVE:] Okay. I will start. Okay. So Faree, thank you for your questions. So I will talk about the COC growth first.

The guidance here is COC growth, 3% under 3.2%. So I think for probably, I will talk about the absolute amount. Oh, percentage is okay. So the bank only will take up probably RUB 38 to RUB 40,000,000,000,000. The rest will go to the subsidiaries.

Please note that PMM, they plan to write off roughly around RUB 4,000,000,000,000 in 2025. So that’s also put additional pressure in the COC. That’s why COC is still 3% until 3.2%. That with assumption that PNM COC roughly around 6% until 7%. Okay.

So that’s and the second assumption is the modification loss like you mentioned from Krakato Steel. Modification loss from Krakato Steel hopefully in the first quarter roughly around KRW1 trillion. The impact roughly is around seven basis point. That’s a modification loss. So another assumption is the write off.

Write off 2025, probably still bank only close to around JPY 40,000,000,000,000 probably. Probably, August can explain or add more information on this. And this COC falls with assumption that the loan growth actually 7% to 9%. Any numbers below that then might impact the COC as well. And I think another assumption is about the net downgrade in NPL.

Net downgrade, we are estimating roughly TRY 3,000 to TRY 3,500,000,000,000.0 per month. So that’s the basic assumptions for the three until 3.2% COC for recovery.

Bagus Sudiarto, Director of Risk, Bancrokket Indonesia: Okay. Thank you, Perry. I think the question from you about the reversal on the provisioning in the corporate segment coming from the opportunity that we see from our restructured loan on the corporate segment. We see there is one or two customer that will have an opportunity to upgrading from now from the NPL to the performing loans. So because of the upgrading of the classification loan classification of them, then we can see the opportunity also to refresh our provision, not to fulfill right now because right now all the entire customer, even though it is special mention loan customer incorporate, the provision around 80% to 100%.

So once they upgrade into the performing loan, we see the opportunity to reverse the provisioning, the reversal from the corporate segment, Ferry.

Ferry Wong, Analyst: Okay. Thank you.

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Thank you, Farri. There’s one question from the Zoom about the $4,800,000,000,000 write back that we had on the non loan provisioning. I mentioned it a little bit earlier, but just to clarify on that, just under $2,000,000,000,000 of that was related to when we had the Vijaya Karya loan that was a bank guarantee before we moved that to a loan in the second quarter, which we notified you of at that time. When we did that, it went from bank guarantee to a loan, the provision moved. So, it’s a write back on the non loan side, but it’s additional provisioning at the loan side.

The other portion of it, about $2,000,000,000,000 of that write back is because the company’s paid back the bank guarantees in line of credit that was outstanding. So that was the rationale behind that write back. The next question we have from the call was from Selvi Jussmann. Selvi, can you unmute your line and ask your question? Hey, Salve.

Selvi Jussmann, Analyst: Hi. Can you hear me?

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Yes. We can hear you clearly.

Selvi Jussmann, Analyst: All right. Thanks for taking my question. Thank you for the clear presentations. I just have two questions. So I think in terms of like your loan growth guidance of 7% to 9%, I understand where it is coming from.

But if I were to find out just by segment, especially in corporate as you have been growing quite strongly in that aspect, What is your expectations of loan growth for corporate this year? And also given that traditionally you haven’t been growing as quickly in the private sector, what has changed or where have you been focusing? Is it like more on the lending yield or is it more like on the service, the RM? Or where what is the what are the factors that you have been paying more attention to? And my second question is in terms of like the dividend payout, because I think Buffify earlier mentioned that you were like you want to increase this further to 85 or even more.

And I guess that has been an ongoing discussion. But could you give us like kind of like an update just in terms of how regulators kind of viewing that payout level and the potential for it to actually be higher for full year for the full year 2024? Those are my two questions. Thank you.

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Thank you, Salvi. Bouvivi will answer those questions.

Bhu Vivi, CFO, Bancrokket Indonesia: Probably, I will take the easiest one, but it’s the payoff ratio. I still see. Thank you. So payout ratio will be determined next month. I think the basis now is 85%.

And the potential upside is there, especially with the acquisition of Denantara probably. So yes, we might expect that higher than that. But yes, it’s still being discussed between us and SOE and not to mention about FSA because under new regulations, they also have a say on dividend payout ratio. So that’s the dividend payout ratio. For the corporate, Paragas, you want to Is

Pazu Naso, CEO, Bancrokket Indonesia: it our Paragas portfolio?

Pankaj, Corporate Banking Representative, Bancrokket Indonesia: Thank you for I think to support our growth in corporate segment. We try to have sound growth in corporate with set up the criteria such as we select our target market as top market leader and then especially have good ecosystem business throughout the country. So can support also not only growth in corporate but also in getting or increase our Casa, yes. Also and not only in agribusiness, agriculture also, we try to expand our corporates in mining and also in gas. So it’s we mix both in agriculture and other sectors, which also can support us to expand our acquisition in transaction in Casa.

I think that’s my addition. Thank you.

Bhu Vivi, CFO, Bancrokket Indonesia: Thank you, Pankaj. Probably, I will add some more information, Sophie. So you are asking about the corporate target on growth. So I think 2025, we are aiming to have 6% to 10% growth year on year, but you might expect that it will be higher than that, right? But in terms of compositions, in any scenario, the composition will be roughly around 19% to 20% of our total loan portfolio.

So that’s probably more a wiser way to see the portfolio in a wholesale. So you asked about what changes actually in the way Riyadh financing the wholesale segment. The first thing is our perceptions on how we see a corporate clients. Previously, we are more and more on a lending side. But by using a better account planning, now we are seeing a customer as a whole.

We are using the customer profitability analysis. So we can be more competitive in the lending trade side because we see other opportunity from fee based or funding, for example. And that’s the first thing that changed in dryad. The second one is also the capability of the our RM itself. Now they become more and more customized to each customers.

So they understand their clients very well from asset and balance sheet. So probably that’s two of the changes that we have been trying to implement so far.

Brett, Moderator/Investor Relations, Bancrokket Indonesia: Thank you, Bouvivi. I want to make a couple of announcements just before we end the call. I know there’s a couple of more questions. We’ll get back to you later on that because it’s been a while that we’ve been on already. But I think first, our AGMS is going to be held in March.

It was originally scheduled for March 11, but it may be delayed a little bit due to some events that are outside of our control. So it may be closer to the March, likely around March 24, but we will get back to you on a final date for that. And then we will report our first quarter results the April most likely. So, I want to thank all of you for joining and to thank our directors and team for preparing the call. I hope you all have a nice morning and please feel free to reach out to us with any questions that you have.

Thank you.

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