Earnings call transcript: BRI International Q2 2025: EPS Misses, Revenue Exceeds Forecast

BRI International, a prominent player in the Banks industry with a market capitalization of $35.1 billion, reported its Q2 2025 earnings, revealing a mixed financial performance. The company’s earnings per share (EPS) fell short of expectations at 83, compared to the forecasted 86.71, a negative surprise of 4.28%. However, revenue surpassed projections, reaching 49.94 trillion, against a forecast of 47.17 trillion, marking a positive surprise of 5.87%. Notable for its attractive 9.3% dividend yield, the stock experienced a 5.36% decline in pre-market trading, reflecting investor concerns over profitability. According to InvestingPro, the company has maintained dividend payments for 22 consecutive years, with several more key insights available to subscribers.

Key Takeaways

• EPS missed expectations, falling to 83 against a forecast of 86.71.
• Revenue exceeded forecasts, reaching 49.94 trillion.
• Stock price dropped 5.36% in pre-market trading.
• Digital channel growth highlighted as a positive trend.
• Concerns about declining net profit and increased cost-to-income ratio.

Company Performance

BRI International’s overall performance in Q2 2025 was characterized by robust revenue growth but was overshadowed by a decline in net profit and an earnings miss. The company reported a 6.5% increase in total assets and a 6% rise in loan growth year-on-year. However, a net profit decline of 11.2% year-on-year and a slight increase in the cost-to-income ratio to 41.9% raised concerns about operational efficiency. Despite these challenges, the company maintained its position as the largest microfinance institution in Indonesia, benefiting from a strong transaction banking infrastructure.

Financial Highlights

• Revenue: 49.94 trillion, up from a forecast of 47.17 trillion.
• Earnings per share: 83, below the forecast of 86.71.
• Net profit: Declined by 11.2% year-on-year.
• Net Interest Margin (NIM): 7.76%.
• Cost-to-income ratio: Increased to 41.9%.

Earnings vs. Forecast

BRI International’s actual EPS of 83 fell short of the forecasted 86.71, resulting in a negative surprise of 4.28%. This miss is significant and may indicate underlying challenges in maintaining profitability. On the other hand, revenue performance was strong, exceeding forecasts by 5.87%, suggesting effective top-line growth strategies.

Market Reaction

Following the earnings announcement, BRI International’s stock price fell by 5.36% in pre-market trading, dropping from 3920 to 3710. This decline contrasts with the recent upward trend, where the stock had seen a 2.16% increase to 3700 before the earnings call. The negative market reaction reflects investor concerns over the earnings miss and potential profitability issues. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with analysts maintaining a consensus "Buy" recommendation and an average upside potential of 27%.

Outlook & Guidance

Looking forward, BRI International has set a loan growth guidance of 7-9%, likely on the lower end, with a NIM guidance of 7.3-7.7%. The company expects an improvement in the micro segment in 2026, despite current challenges. These projections indicate a cautious optimism about future performance, with strategic initiatives focused on digital expansion and operational efficiency. The company maintains a "Fair" overall financial health score of 2.32 out of 5 according to InvestingPro’s comprehensive assessment, which evaluates growth, profitability, and cash flow metrics.

Executive Commentary

"We are continuing to balance social mandate with commercial capability," stated Fahey Gunardi, Group CEO, emphasizing the company’s dual focus on social impact and profitability. Bahramat, Director of Micro, added, "The micro segment has room to grow positively in the future," highlighting potential growth areas. Fahey Gunardi also noted, "The transformation is underway, but it’s still too early to see the full impact," suggesting ongoing strategic shifts.

Risks and Challenges

• Supply chain disruptions could impact cost management.
• Market saturation in the microfinance sector poses growth challenges.
• Macroeconomic pressures, including potential interest rate changes, may affect loan growth.
• Increased competition in digital banking could impact market share.
• Regulatory changes, such as IFRS 17 implementation, may affect financial reporting.

Q&A

During the earnings call, analysts inquired about the implementation of IFRS 17 and its impact on financial reporting. The company also discussed government cooperative financing schemes and addressed challenges in the SME and micro loan segments. Additionally, details about the subsidized housing loan program were provided, highlighting strategic initiatives in affordable housing.

Full transcript - Bank Rakyat Indonesia Persero (BBRI) Q2 2025:

Moderator, BRI International: Before we start, a few housekeeping notes to all of you. For those on the Zoom call, please download all information on the various from the BRI International’s homepage on the link we sent this morning. During the Q and session, kindly submit your question in the chat box along with your name and company. We will select the questions to answer. And additionally,

Fahey Gunardi, Group CEO, BRI International: we will also call on some analysts to unmute and ask the question directly. Now I would like to invite Fahey Gunardi, our Group CEO, to begin the meeting. Thank you, Thiago. Very good morning, everyone. Let me continue the presentations.

Before we discussing our results, I would like to give you some color on the current update on the microeconomic condition in Indonesia. So Indonesia economic growth remain challenging. Purchasing power continue to face pressure validated by DRIMSMEA index that shows a declining trend since the 2024, particularly in the lower income segment. However, inflation has remained relatively stable in 2025, where it was 1.87 year on year in June 2025 within Bangladesh target range driven by control food and energy price. In terms of government spending is expected to accelerate in second half twenty twenty five, mainly through social assistance, MSMA support and also other fiscal program to boost domestic demand.

While we maintain a conservative stance amid global uncertainty, this fiscal tailwind offers selective growth opportunities. BRI have been supporting the key national programs such as QUR, ultra microfinancing, pre nutrition mail, village corporation, cooperative and also upcoming housing program. As the largest microfinance institution in Indonesia, we are continuing to balance social mandate with commercial capability by embedding risk based pricing, strengthening underwriting process and also digitalizing services. This approach ensure that while we expand access to underserved communities, we also maintain asset quality and also long term profitability, referring both social values and also sustainable economic return. First of all, we would like to move into the liquidity and monetary conditions as recent improvement in liquidity supported by Rupiah stability and Central Bank, Bank Indonesia gradual rate cut.

Benchmark rate currently at 5.25% compared to U. S. Fed rate at 4.5. Rate cut reflect for growth stand by Indonesia to support the banking sector, decline in SRBI issuance and also the yield signaling reduced liquidity absorptions by the Central Bank. So in terms of fiscal stimulus outlook, the government spending is projected to rise sharply in the second half two thousand twenty five with the target of 97% for the full year compared to the 39% budget realization as of June 2025.

Increased fiscal spending is expected to support domestic demand and also stimulate economic momentum. Banking industry performance, if you look at into the asset growth remained moderate in line with a slower loan expansion as bank adopted more selective lending amid ongoing macroeconomic uncertainty. Loan growth stood at 8.9% year on year, reflecting continuous credit strategies and also still sub dues MMSA demand. In total deposit grew, it is achieved 4.5% year on year, led by 6.05% growth in staffing account, while demand and time deposit were flat. Deposit growth may accelerate in the second half twenty twenty five supported by raising government spending and also seasonal inflow.

LDR stood at 85.9 and still below the line here indicating the balance funding and also lending dynamic. Internal net interest margin was 4.5% in April, lower year on year due to fast rate hike. However, NIM has begun to improve sequentially driven by better funding cost and also improving liquidity condition. Taro stay robust at 25.4%, comfortably above regulatory minimum, reflecting solid capital buffers. Please note that we started to see liquidity improve in second quarter twenty twenty one supported by stable deposit growth 5.3% as it in the quarter two and quarter one and quarter two.

In June 2025, deposit spiked to 6.9% driven by government stimulus and also fund placement created strong funding best position bank well for second half twenty twenty five. As you may be aware that the new management has two main focus going forward. In the first three months, we have been starting some initiative to ensure the discipline of execution on the ground. So we also established five strategic PMO focused on lending, funding, distribution and operation, government program and also human capital. To enhance the regional also brand oversight, we centralizing and also streamlining operation under the Network and Retail Funding Director positioning regional office and branches as the core engine of the retail funding growth.

We also boosted the result channel productivity by optimizing business margin and also key curies here, performance amid reducing funding outflow to other bank and strengthening BI transaction banking ecosystem. So strengthen micro segment operation by developing additional supervisors and also to micro unit. So we on the way to remodeling the role of loan officers and enhancing underwriting quality through improved pre screening, risk based approval limit by unit grading, and also more structure loan partner process. And as part of the our second transformation pillar, we are revamping our core micro business by strengthening operation, by adding micro unit supervision, redesigning loan officers role and also improving underwriting and pipeline quality. At the same time, we are building the new core.

We call it the new engine by accelerating consumer loan through payroll loan targeting new customers in private sectors and growing mortgages market share by acquiring tier one and tier two, they fall over, which is giving the more quality in terms of credit risk and expanding also the commercial loan in priority sectors like education, healthcare sectors, state budget program and also the potential sectors across the region. So we would like to report the initiative and return funding, transforming funding franchise. We revitalize key merchant ecosystem through targeted activation program at high traffic f and b hotspot. Yeah. For for for example, in Jakarta, we have quite many numbers of place.

They very hectic, you know, in the food and beverage restaurants. For example, in Son Of Senopati Street, Kunawa, Man, yeah, Walter Momon City, Extra. We also going forward into Bandung, Denpasas, yeah, and also different area. They give other program high traffic for FNB as well. So intimate engagement even with the top merchant across the RA regional office.

We push this one more effective, you know, with the regional CEO. Campaign aligned with the emerging lifestyle trend. This effort aim to deepen merchant relationship and also increase the transaction transactional CASA. So we also strengthened the capabilities of the RM relationship managers with targeted upscaling while enforcing discipline execution to the brand level. So collaboration between business unit and also the subsidiaries to leverage share customers ecosystem, bandwidth offering and also coordinate the campaign.

So in terms of the initiative in the asset quality, so we also revamping also the human capital, we rise the requirement standards, rescaling, upscaling loan of business and also enable multi role capabilities. This is process improvement. For example, we deploy unit supervisors in the micro unit and hand bridge spot and also the pipeline management centralizing monitoring. So strengthening risk management, strengthening the bridge training with the sector, regional risk profile, and also implement dynamic of profile limit. While it is still early, we are starting to see encouraging sign of improvement in our retail transaction performance.

First of all, we continue that we have been tracking the performance of digital channel. For example, yeah, such as Primo, Business Merchant, and also Curious to drive retail Casa growth. So with Primo, for example, numbers of user increased by 21.2% year on year reaching 42,700,000. Yeah. But more importantly, we see improvement in monthly active user or MAU from 15,600,000 to 19,300,000, increased by 24% year on year.

And also financial transaction with BMO also increased by 26.4 year on year and transaction value grew by 25.5% year on year. How about the business merchant and key risk? The number of all business merchant reached 306,000. Internal numbers is little bit declined by twenty one seven percent year on year, but is we are and the way to optimizing our merchant outlet, the numbers of private merchant, business merchant increased by 1420% year on year, while sales volume per merchant grew by 62.5% while reflect high usability, security acceptance and also has become the key driver for border broader business merchant transaction of that zone. For our curious search volume also increased by 142.9% year on year and the numbers of transaction grew by 162.5% year on year.

So what I think our initiative to grow retail transaction has supported a manageable cost of deposit and also driven by higher growth in retail CASA. So the next one, the next slide. Not only the leading indicators where you start to see gradual improvement in all funding needs. You can see in the slide and in the screen, in terms of total deposit, we grew 6.7% year on year in the first half twenty twenty five supported by strong 10.6% year on year in CASA growth. CASA ratio remained high at 65.5, well above historical level.

So q to q, quarter to quarter deposit growth was robust driven by a 2.4% increase in Saving Account signaling recovery in Saving behavior. Safran account with balance offer of 500,000,000 rupee grew 11.5% quarter to quarter, pricing their share from 21.1% to 23%, supporting by the strategy to optimize cash out through retail activity and also mess up emerging or emerging affluent customers less expensive. Looking forward, we remain optimistic about funding cost not only because of continuous effort to revamp our funding franchise but also bank in a sense to maintain ample liquidity in the system. So the next slide, so from the asset side, the portfolio mix shifting from macro to consumer, corporate and also commercial segment had a limited impact on the profitability as reflected in resilient intermodal net interest margin or NIM. This was supported by improvement in our funding structure driven by strong CASA growth at 10.6% year on year, which reduced our cost of fund by five basis point year on year and the same time robust yield were maintained supported by the increased contribution from our subsidiaries company, which is PNM also for Gadain within the micro segment.

This balance approach has enabled us to sustain and establish NIM at 7.67676% despite in the shift in Tomo the portfolio composition. So the next one as June 2025, we we are able to book a modest growth in term of balance sheet. Total asset grew 6.5% year on year supported by 6% loan growth, more favorable liquidity situation expected in second half two thousand twenty five. Deposit also grew 6.7% year on year supported by 10.6% year on year increase in CASA, both Car and Acorn and especially Safinacon. So quarter to quarter improved in the quarter two with Car and Acorn growing by 5.8% in quarter two compared to 6.40.6% in quarter one, while staffing grew by 2.4% in the quarter two, a notable recovery from minus 0.2% contraction in the quarter one.

We do hope that we will continue the improvement going forward as well as we want to transform our retail funding franchise. In terms of fee and other, operational income grew 10.4% year on year supported by increase in the core sales and also recovery income is lagging since we had a few working days in first half twenty twenty five. We expect that the growth will accelerate in the second half plus 2025, not only because we have the more working day, but we also already set dedicated team on collection and recovery from micro and small from headquarter office until the VRI unit. From profitability perspective, we are still in the progress to improve our asset quality especially in micro and small segment. But also QOP still grew positively around 2.2%.

This is a positive signal because the PPRP already positive driven by net interest income positive growth at 2.8 year on year and manageable OpEx through only 5.7% year on year. We still booked negative growth in net profit around 11.2% year on year. Please note that in June 2024, we had one off nonloan provisions reversal of around R4.2 4,200,000,000,000.0 due to construction as always restructuring scheme. So I think this is my my last slide. Yeah.

Key tracking as expect as we remain in the debt resolution phase. We are going on green loan quality improvement reflected by declining LAR and also SML. So while profitability metrics had been and also core earning remain stable supported by strong legal funding growth and also increased 40% from Pagoda Yan. So reported NIM was seven point seventy six percent first half twenty twenty five, increased 16 basis point to 7.7 to six quarter to quarter supported by stronger loan yield as an increased 35 basis point quarter to quarter and also manageable cost of fund. LAR declining 31% quarter to quarter and LAR coverage was at 53.17%.

Cost to income ratio slightly increased quarter to quarter to 41.9% from 41.1%, preliminary due to declining net premium income as there was higher insurance result in second quarter twenty twenty five. Cost of credit was three point forty percent first half twenty twenty five. Furthermore, the gross NPL ratio improved year on year to 3.04%. So now I would like to turn the call to Ibu Fiti, our CFO, to discuss on financial more detail. Please, Fiti.

Fiti, CFO, BRI International: Thank you, Bahiri. Good morning, everyone. So I would like to start with our balance sheet as of June 2025. So the total loan grew around six point total asset grew around 6.5% year on year supported by our earning asset, basically, that grew 1.9% year on year. So that the compositions of earning asset to total asset increased to 94% compared to 92.5% in a year ago period.

The main contributors of earning assets still coming from the loan that grew around 6%, 5.97% year on year, or if we break it down into quarter to quarter, it’s 3.1% quarter on quarter. If you recall, our first quarter grew is only 1.4% quarter on on quarter. Contribution actually coming from the subsidiaries. So the contributions of loan coming from Pagani and PNM increased from 9.4% to 10.7 year on year. Quarter on quarter, Pagadian grew 9.21%, increased from 8.8% in the first quarter.

While bank only, actually, quarter on quarter increased by 2.9 2.94% compared to 0.86 in the first quarter two thousand twenty five. And the source of growth in a bank only level for loan actually coming from corporate and also consumer. For consumer, it is coming from mostly from payroll loan and also subsidized mortgage. From for corporate clients, it’s basically coming from the corporate borrowers that already been approved previously, and now they are using their loan. And most of them are tier one clients.

Still talking about the loan growth in Ratia, micro loan grew 1.6% year on year supported by Pagadian that grew 31 year on year. And the main growth from Pagadian is coming from the on lending that grew 40% year on year. In the same time, in a bank only level, our micro segment only grew three minus 3.29% year on year due to the weakening demand in the grassroots. On another side, from liability side, our third party fund grew 6.7% year on year. Our q on q, actually, we grew 4.3% in the 2025, supported by Casa that previously mentioned by Harry that grew 10.6% or 3.8% q on q.

Especially, the growth coming from the saving account that q on q grew 2.4% versus minus 0.2% in the first quarter. So the driver of the saving account coming from the retail segment, basically, that grew 4.2% q on q. But the saving from the threshold economy actually is still growing, but still, like, in in a very low number around 1.2% q on q. The second account that we got from retail segment driven by the emerging affluent or mass affluent like Harry mentioned previously, We try in the last three months, we try to minimize leakage of funds to other banks. So this is basically helping our existing customer saving account balance to increase.

And also, we recognize new funds that we acquire from other banks due to the improving merchant businesses. Then if we are talking about our p and l or profitability as of June 2025, our interest income grew around 2.6% year on year. And I think supported by the contributions from Pokkadian. So Pokkadian contributions in interest income actually improved from 10.27% to 12.77% year on year. And in within the interest income, actually, we have one off reverse mortgage loss due to the write off in a corporate loan around 390 basis points.

And then we also have a reclassification, the SME insurance around 230,000,000,000 rupiah. So the reverse month loss is 390,000,000,000, and the reclass of SME insurance is 230,000,000,000. And if we take into account to this one, so our net interest margin from 7.76% down to 7.69%. Still quite resilient at the moment. The interest expense the interest expense in riot grew to 2.1% year on year, and Q on Q basically improved 8.1% from bank only level and also the subsidiaries still impacted by the liquidity conditions in the second quarter.

And also, one of our our subsidiary, in this case, is Pagadian. The cost of fund is increased to finance their higher loan growth. So the cost of fund of Pagadian increased from 6% to 6.3%. And here we have a net premium net premium income and insurance services that year on year basically grew minus 70%. And this is due to the implementations of the s a k 117 or I IFRS 17, replacing the IFRS of 14.

So the idea of the new the implementations is to recognize it’s accounting treatment, basically, to recognize the premium based on the tenor instead of you book, you know, all of the premium in one time upfront. But it it will be book recognizing according in every year, accrue every year. And also, previously, this p s the the IFRS 14, actually, when we book the promotions related to the insurance product, for example, they will be booked under OPEX. But now, according to the new IFRS, it will be booked under the insurance services. So that is why you see that the growth in this item basically is declining around 70% year on year.

Moving to our OpEx. Our OpEx as of June 2025, basically growing 5.7% year on year or around 4.93% q on q, up from around minus 4.6 if we compare q on q in the first quarter two thousand twenty five. And the increase basically coming from the subsidiaries contributions, Pagadian and PNM. So the contributions from OpEx for coming from Pagadian and PNM increased from 11.1% to 24%, basically. To be more specific, this is basically related to the increase in the personal OpEx in Pagadian because they make a reserve for incentives and salary and bonuses.

And after considering the OpEx, the pay provisions operating profit still grew positively roughly around 2.2% as of June 2025. Then moving to the provisions expenses. Can we go back to the previous slide, the p and m slide, please? The provision expenses, if we look at here, the total provision expenses, basically, grew 25.8%. And if we break it down into loan and non loan, loan is still growing moderate roughly around close to 4%.

But you see the non loan provisions, basically, you know, down very significant from 4.2 a year ago period 4,200,000,000,000.0 a year ago. Now it’s only 287,000,000,000. Basically, this is the normal normal nonloan provisions, basically, for yeah. So that that is why the net profit grew 11 minus 11.2% year on year or quarter on quarter, basically, it’s minus 7.8% or slightly better if you compare with the first quarter where our net profit, basically, minus 9,400,000,000,000.0. Sorry.

9.4%. Then move to the liquidity conditions. In the first quarter, our loan to deposit ratio basically still managed to roughly around 85%. So it’s still below our appetite, basically, right yet might still accept the loan to deposit ratio 90 to 92%. The other indicators that reflecting our liquidity condition is the liquidity coverage ratio still way above the regulations around 100, where we maintain around 150%.

This manageable liquidity conditions basically helps us to manage the cost on deposit where, basically, q on q is flat around 3%. But if we are talking about the marginal margin is, you know, the May to June cost of deposit, it’s continued to decrease. And move to our earning asset, NIM lending yield and Kossol fund. Our consolidated net interest margin, roughly around 7.76% in the first half two thousand twenty five despite a challenging liquidity environment and pressure on micro loan. While the micro loan compositions declined to 44.7%, Acadian and PNM shares within consolidated micro loan increased significantly.

So it helps to raise micro loan yield basically by five basis point to 17.9% in the first half. And if we are talking about other operating income and also operating expenses, fee and commissions actually rose 2.7% year year with recovery income contributing 36% of bank only non interest income. Notably, the net gold fee income surged to roughly around 800,000,000,000 from 200,000,000,000 year on year, driven by Pagetian robust performance. For the recovery income, actually, if we see the year on year, it’s still flat. It’s around 1%, and this is due to several reasons.

The first one is, you know, like, less working days in the first half. So we are expecting an accelerated pace in the second half for a recovery. And from this recovery, around 42% coming from claim, and the rest is coming from nonclaim or based based on our efforts to collect the money from our customers. I think that’s the overall presentations from financials perspective. And next, I will turn the presentations over to our director of risk, Spa Muharram, to discuss our asset quality.

Muharram, Director of Risk, BRI International: Thank you, Buhiti. I will continue the presentation talking about loan quality. Our consolidated and nonperforming loan ratio decreased slightly by one basis point year on year to 3.04 supported by corporate segment, which declined by 146 basis points. This was largely due to the write off of several borrowers in the textile industry, totaling approximately trillion in the first half twenty twenty five. However, we continue to see our pressure on NPLs in the micro segment as we progress further into the 2023 Kubernetes alone cycle.

This particular batch contributed around 35.5% of total micro gross ton grids in the first half twenty twenty five. We expect micro NPLs to remain innovative in the near term. On a positive note, we are starting to see early signs of improvement as microSML declined by 11 basis points year on year. Overall, our SG and A ratio has improved to 5.15% from 5.41% year on year driven by 1.1 year on year reduction in PI bank only as a whole new. This improvement was partially offset by an increase in write offs which rose 10% to 23,300,000,000,000.0 Rupiah.

Our loan provisions stood at 81,400,000,000,000.0, equivalent to 5.7 of the total loans. For the context, between 2015 to 2019 prior to the pandemic, our loans loss reserve ratio never exceeded 4.4%. As credit condition normalized, we expect this ratio gradually return closer to the pre pandemic levels. Our NPL coverage ratio, which peaked in 2022, has continued to normalize and now stands at 188.8%. We anticipate this ratio to remain within the 170% to 200% range throughout 2025.

Our loan average declined to 10.8 as first half twenty twenty five, continuing the downward trend observed since December 2024. The improvement reflects some stabilization in SML formation, particularly in newer CooperTouch loan packages within the micro segment. That said, we remain cautious on asset quality particularly in the micro and small segments, which could lead to potential NPL volatility. In line with this cautious stance, we are maintaining a conservative approach with loan at least with loan at risk coverage at 53.17% as of the first half twenty twenty five. Our cost of credit stood at 3.4% in the first half twenty twenty five.

The elevated level was mainly driven by continued management overly which remain above 2,000,000,000,000 rubies and contributed around 34 basis points. This overlay is primarily allocated to support the restructuring of the 2023 cooperatives portfolio reflecting our prudent approach to managing residual risk in the micro segment. On a quarter on quarter basis, second quarter and this year, provision was declined by 3.98% compared to the first quarter twenty twenty five supported by improved asset quality and micro. Our credit cost in this segment fell by 46% basis point in line with an 18.1% quarter on quarter reduction in the net NPL during credit. However, the 2020 group of debts that continues to be the largest contributor to NPL downgrades accounting for 35.5 in the total in the first quarter in the first half in twenty twenty five.

We remain focused in resolving this portfolio through proactive restructuring, strengthening risk control, and tighter underwriting going forward. Our net cost of credit declined by 27 basis point quarter on quarter to 1.8% in the second quarter this year supported by higher recoveries, which rose 4.8% quarter on quarter. We anticipate this positive trend in recoveries to continue into second half this year. We are off around 23,300,000,000,000.0 in the first half in this year, slightly exceeding our full year annualized target with 5,000,000,000,000 written off in June alone, which was primarily driven by Micro alongside around trillion dollars write off in the corporate segment from a fully reserved external borrower. In parallel, we are strengthening our risk management through transformation aligned with industry perspective.

Key initiatives include segment focused risk organization, more agile and prudent processes, enhanced data analytics for proactive 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, Bahramat, to share more on Ultra Micro and Micro business segments. Please, Bahramat. Thank you.

Bahramat, Director of Micro, BRI International: Thank you, Pa Muharram. This slide shows us that Per and M and Pagoda Jan’s contribution to consolidated micro loans rose to 24.1% in first half twenty five, up from 20.3 last year as Bourifi says previous. For Gadayan, let me the growth with 31.8% year on year increase, driven by 38.6% year on year pricing growth back on lending. In contrast, ten m’s growth slowed to 2.9% year on year as we took a more cautious stance due to its higher cost of credit. This shift in portfolio mix within consolidated micro sported stable micro yields at 18% and boosted their contribution to consolidated NEA to 21.4% from 19% a year ago.

Pogadayan continues to leverage Bell East network to expand gold savings and bond services while also growing its bullion banking business. Now holding nearly £13.8 in gold savings and £2.9 in custodian storage. Stronger global gold prices driven by geopolitical risk and demand for inflation hedging assets have fueled customer demand for gold linked products, providing a strong tailwind for Pugadayan’s growth. Meanwhile, we are deliberately slowing lending at PNM, where cost of credit remains elevated at 4.3% versus 1.6% at Pugadayan. Next slide.

We see that micro loan growth declined by 2.3% year on year in first half twenty twenty five as we deliberately shifted focus from volume to asset quality, collections and funding. This included tightening underwriting standards, adjusting loan officers’ KPIs and streamlining risk and operation across the micro segment. The only growing segment within micro at the bank only level is core, which rose 2.4% year on year. Core is expected to remain the primary disbursement driver until 2026, while growth in creditors will likely remain muted due to ongoing cleanup of the 2023 batch and legacy COVID restructure loans. Nonetheless, we see promising potential in micro briguna or payroll loans with disbursements raising 9.1% quarter on quarter.

Our strategy focuses on increasing payroll penetration and improving loan officers productivity to drive growth. Borrowers per loan officer decreased to 482 from a peak of five twenty eight in 2022 in 2022, in line with our effort to strengthen customer relationships and enable better service as we expand digital capabilities. Loans per officer remains steady at 18,000,000,000 rupees with productivity expected to increase as we execute on our micro transformation agenda. We are currently conducting a holistic review of the micro portfolio, incorporating input from risk operation and network direct rates to enhance processes, integrate risk and integrate rural and urban strategies through digitalization. To support sustainable long term growth, we are focusing on three key areas.

The first area is human capital. We are revamping capabilities through reskilling, retraining and redesigning recruitment and career progression, and remodeling micro loan officer roles. We are also adding supervisors at all micro units to reduce operational burden on branch managers, allowing them to focus more on client relationships. And the second area is in business process. We improve end to end business process and centralized business performance monitoring.

And the third area is risk. We are enhancing credit scoring models and also loan underwriting processes.

Fahey Gunardi, Group CEO, BRI International: On Slide three.

Bahramat, Director of Micro, BRI International: As June 2025, we see that 54,500,000,000,000.0 rupees from the 2023 Cooper Dust disbursements remains on our balance sheet, while 8,700,000,000,000.0 rupees has been written off and 138,400,000,000,000.0 rupees has been paid off. Of the remaining twenty twenty three disbursements, 18.9 are in special mention loan, 11.6% in nonperforming loan, and 16% have been written off, and 16.7 has been restructured. We are seeing that twenty twenty four corporate disadvantages are looking better. But of course, we are still monitoring the portfolio until it has all fully seasoned. Now I would like to turn presentation back to Seagal to organize the question and answer segment.

Thank you.

Moderator, BRI International: Thank you, Parmat. Now I would split the questions into two. The first one is I’d like to read the chat box, the question from chat box. The first one came from Gaurav. The question is the first one is what led to losses in insurance income quarter on quarter?

And the second is, what’s the credit card of the related modification loss taken in the same quarter? If not, when do we

Fahey Gunardi, Group CEO, BRI International: plan to take those? And the third, where is the strong current currency growth coming from? And what are

Moderator, BRI International: the latest current currency rates that you are offering? And the last one is, what was second quarter consolidated exit NIM? Okay.

Fahey Gunardi, Group CEO, BRI International: Well, I think two four question. Right? The first maybe we will start the first question and they didn’t today insurance. Yeah?

Fiti, CFO, BRI International: Thank you, Pat. Hi, Gurus. Thank you for the questions. Like I explained previously, this is related to the implementation of IFRS 17 replacing IFRS 14. It happens in DRI Life and DRI Insurance.

Basically, this is to recognize the premium more equally along with the insurance contract. And also, the recognitions of the OpEx, previously in OpEx, and now they have to move up into the insurance services line item. Even though the premium the net premium and insurance services kind of declining, But on the other hand, the OpEx is impacting on the impact the same way. So the impact to the bottom line actually is very, very minimum, around 20 basis point lower in PayPay. Thank you.

Fahey Gunardi, Group CEO, BRI International: So I think most of the Krakato able, Pipi, can continue to answer the questions.

Fiti, CFO, BRI International: Okay. So the Krakato still restructurization program has I think it’s still not happening in the second quarter. And I don’t know if they will be executed in the third quarter. Of the mandate, basically, is they want to effectively effectively effectively implement the restructuring program this year. But after the transfer of shares to Denantara, I think Denantara would like to review.

So at this moment, I think the best case probably in the 2024.

Fahey Gunardi, Group CEO, BRI International: K. So what is the number three questions? So let me back. Where is the strong current account deposit growth coming from? What are the latest CASAR that you are offering?

So let me come take the to respond the questions. So basically, the strong current account deposit growth coming from both, yes, and not only from the wholesale side but also from the retail side. From the wholesale side, we grow this around 20% year on year and the retail side, we grow about 3.2% year on year. But the cost of current account in June 2025 is around 3.65%, a decline around six basis point year to date compared to December 2024. K.

So the last question is okay. Maybe we’ll if you can take the the consolidated net interest margin.

Fiti, CFO, BRI International: Yeah.

Fahey Gunardi, Group CEO, BRI International: Yeah.

Fiti, CFO, BRI International: So the exit quarterly NIM as of second quarter two thousand twenty four is around 7.84. It’s slightly higher than the the first quarter. Like I mentioned previously, there are several aspects that’s impacting the quarterly net interest margin. So the reverse modification loss coming from the corporate segment, roughly around 390,000,000,000 rupiah, and then reclassifications of SME insurance premium roughly around $230,000,000,000 rupee and both basically impacting roughly around 10 to 14 basis point to the second Q net interest margin. Therefore, if we exclude this one off, the second quarter NIM will be roughly around 7.7%.

Thank you.

Moderator, BRI International: Okay. Thank you, Fahri. And the next question still in the chat box came from Ferry Vijaya. The first question is, could you please highlight the guidance for 2025? And the second one, question regarding the KUR and Copassi Manapuri or written white Felix Cooperatives.

And can you elaborate a CDS scheme and how are you going to execute this? I do. Thank you.

Fahey Gunardi, Group CEO, BRI International: Okay. We’ll continue and answer the question, The guidance. Yeah.

Fiti, CFO, BRI International: Yes. Thank you, Harry. So thank you, Harry, for the questions. So if we are looking at our guidance that we give you previously, I will start with the loan growth. The loan growth guidance is, like, 7% to 9%.

And as of June, our loan growth is around 5.97%. I think if we are looking at the current macroeconomic conditions, Rakyat will continue cautiously monitoring the purchasing power and also the demand from our core segment. In this case, it’s micro and SME customers. So I think if we are looking at the current guidance, probably, we might end up on the lower end of the guidance or slightly lower. The second guidance is on the net interest margin.

We got you with 7.3 until 7.7%. And I feel the guidance will stay because we are expecting better liquidity in the second half of this year, and we’ll try to push our cost of funds lower from the current level that we have. We also expect that the contributions from Pagadian, especially from the bond lending, also continue to improve, so minimizing the impact in the loan yield. The next guidance is on the non performing loan. I think for this one, like previously explained by Ahmad, the director of micro businesses, the net downgrade to NPL basically is still elevated.

So in this case, our NPL guidance probably will will reach roughly around 3% or slightly higher due to, again, the macroeconomic condition. I have to admit that this impacting our efforts, specifically on resolving the bad debt and also restructure the loan. So it might impact the NPL slightly. For the cost of credit, the current guidance is three until 3.2% at the moment. And looking at the current progress, especially in our micro and segment asset quality, we might end up in a slightly higher end of our guidance or slightly higher, actually.

And please note that there are several assumptions when we use the guidance three under 3.2%. It might end up slightly higher. For example, if the loan growth lower for example, if our loan growth is lower by 1%, so the impact to the COC will be roughly around one to three basis point lower. And then the modification loss from Krakapo still, if that’s not happened in this year, that might also impacting the c o c seven to eight basis point. And the last one, actually, if the macroeconomic condition actually is still not favorable enough for our micro and small customers and the net downgrade to NPL continue at the current level.

The current level of monthly net downgrade to micro pro is 2,400,000,000,000.0. So assuming if this condition’s remaining until the 2025, it might impact 12% until 14 sorry. 12 basis point until 14 basis point to our COC. So that’s why, you know, the the our COC might end up in the higher end or slightly higher. Thank you.

Moderator, BRI International: You, Bugatti. So we have

Fahey Gunardi, Group CEO, BRI International: the second question. Right? So can

Fiti, CFO, BRI International: That’s clear.

Fahey Gunardi, Group CEO, BRI International: Yeah. So this is just about the QR and also the KDK, Koprasi Desai Menapudi. So might be Paragos is much more involved in this government projects. You would like to Paragos to respond, you know, the question? Okay.

Thank you, Fahed. So thank you for the question. First, about QR, as you know that this is intended to support the business sectors of the micro segment. We see that this program will still be continued next year. Think the amount the quota for BRI this year is 175,000,000,000,000.

Maybe it will be the same. But now we are trying to ask to the government, the special Minister of Finance, to increase the subsidized because this is according to our overheads, it’s a of a cost, it’s really high. So we are trying to discuss this with the Ministry of Finance whether they can add the subsidized for this quarter. QR. And also for the QR, we are still waiting for the policy of government related to the streaming.

Also, we’ll be use as such as a QR program, but we’re waiting for that because the courts in the government, so we are waiting for that. The second one is about the the cooperative

Moderator, BRI International: program.

Fahey Gunardi, Group CEO, BRI International: The scheme is is financing the the the village cooperative. Yeah. But the liquidity will be provided by the minister of finance. Finance. And the second or maybe several days ago, there’s already announced the Ministry of Finance Rules No.

49, twenty twenty five, is about the financing of this Kadia MP. In this project, BRI also is asked to finance this village cooperative It could be provided by

Muharram, Director of Risk, BRI International: the government. Secondly, the rest

Fahey Gunardi, Group CEO, BRI International: will be charter rate is 6%. And from this exposure, a part of this will be better than as in tariffs of the the liquidity that provided to the bank and the rest be to the banks as to cover the overhead and the margin. And the third one, the reduction in guarantee. Fourth is financing, which the government or of cooperative obligation to the bank. So the government will intercept the Felix Funds.

As you know, the village funds is provided to by the government to the village to support their their development, which this was yearly, yeah, from this cooperative. This fillet fund will be intercepted by the government. And then the bank will ask for the Ministry of Finance to provide this fillet fund to cover arrears or default. So technically, this is zero risk financing scheme. Yeah.

I think the amount, if we talk about what is the magnitude of the loans will be financed through the number, the amount this year. We still it depends on the readiness of the cooperatives in terms of the organization, the business and the system. We are still waiting for that. Thank you. Thank you, Bhagavad.

I think let me add a little bit in some of the corporate, there’s a matter of the village cooperative here. So I think in some of the risk premiums, it’s going to be close to 0% because we have something like the scheme is channeling scheme. The liquidity comes from the government, basically from the Ministry of Finance. And then also we have a guarantee to intercept the felix fund while something happened with the loan from the Felix cooperative. So there is no risk with the bank because the money, the liquidity and also the guarantee for the government.

Thank you. Thank you, Heidi. And for

Moderator, BRI International: the last one, I would call one last

Fahey Gunardi, Group CEO, BRI International: person. Please, Melissa, please unmute yourself.

Melissa, Analyst: Hi. Hi there. Thank you very much for letting me ask. I just had a few questions. SME loans in Retail and SME.

Can you share a little bit more what’s happening there? We’ve seen that also a rising trend for other banks. Secondly, in terms of the subsidized housing loans that you are doing, can you share what the economics of these loans are and how much you’re intending to do as a percentage of your loan book over time? And lastly, the third question is on your micro loan growth. I understand that you’re still cleaning up and you’re still working to slow the growth and the growth is negative.

When do you see you will end the screen up? And what would take it for you to start seeing a growth in the segment again?

Fahey Gunardi, Group CEO, BRI International: All right. Thank you for the questions. Question number one and then maybe you’re involved in so in the FF PayPay, the subsidies for the housing loan. Miss Bo?

Fiti, CFO, BRI International: Thank you, Harry. So hi, Melissa. Thank you for your questions. So regarding your questions that that, you know, in increasing the NPL and also special mentions in the SME sectors. I think we understand that the conditions in the middle and low income currently actually is quite challenging.

So, basically, that’s also impacting some of our clients. In particular, the clients that basically still related to the COVID nineteen back to the 02/2022. And, basically, they have been restructured many times, but the conditions at this moment, actually, is a big struggle for them. So that is why we see, like, increase in the nonperforming loan and also special mention in SME, Melissa.

Fahey Gunardi, Group CEO, BRI International: Go, Nancy.

Fiti, CFO, BRI International: Thank you, Melissa. From the subsidized housing loan, have actually been already disbursed for more than 15,000 units from the about more than 17,000 quota that already committed for BRI. So we believe that during one or the next two months, we can fully disperse for all the quota that already committed to BRI. And also from FRBP program, the government give us give us the competitive funding around 1%. Meanwhile, the public will pay for the interest about 5%.

And, also, we still believe that this program still need by still need by the public and will still continue for the next few years. Thank you. We proceed Thank you, Nancy. The other question is about the micro loan growth is still negative. So when do you see it is flattening out?

And also when will you be ready to grow in

Fahey Gunardi, Group CEO, BRI International: the program. Bahmat, you wanna take your questions? I’ll go to the meeting. We’ll add a little bit.

Fiti, CFO, BRI International: Okay. So I will start and probably Bahmat can add more color on the micro loan growth. Melissa, as as as you mentioned earlier that currently, we are still in the process of resourcing the bad debt by doing a lot of initiatives. And at this this year, I think the focus of the initiatives is on the more on the human capital capability for the micro loan officers, the BRI unit managers, the micro business managers. So I think and we also consider the current economic situations.

You know then. You know that when the GDP ratio is less than 5%, usually, it’s a bit hard for a bank like that yet who focus on the micro segment to grow the micro segment aggressively. So considering the macroeconomic conditions and also the process that we still ongoing to prevent the business process and also human capital capability in micro. So this year, we’ll try to grow micro in bank only level. It’s like flattish.

You know, like, probably zero to 1%. And the driver is still coming from, basically, from KUR. And from the Ferrolene Micro that we call Brighuna Micro, I think this this this particular product also start to continue some improvement by penetrating more into our existing customers. I can next year, 02/1926, we are still on process on, you know, revamping our initiatives in micro. So it might take probably another two years for our micro banking to start our regrow the cooperatives again.

Thank you, Melissa.

Fahey Gunardi, Group CEO, BRI International: Ahmad, maybe you would like to add some color.

Bahramat, Director of Micro, BRI International: Okay. Thank you, Harry. Like, if you say that we are now still revamping the strengthening the business process in micro and but we believe that micro segment has still has room to grow positively in the future. Next year, we hope we can not to be maybe around 2%. I think that I can.

Moderator, BRI International: Thank you, Bengali. Thank you very much. I think that will be the last question for today.

Fahey Gunardi, Group CEO, BRI International: Let me give a closing to the analysts and investors as well. Of all, thank you very much for your cooperation. The questions has taken me. So let me give a little bit of background, sir. The RIS is underway during the transformations.

We know we are facing the problem in the area of the cost of fund, a little bit higher compared to our peer and also the cost of credit. So many things have done, but it’s still too early to see the impact of the transformation we have done so far. So in terms of funding side, already mentioned earlier so many initiative we done. And for example, the way we are strengthening our funding franchise to get a more cheaper funding such as the current fund also that’s having account. And then also the transaction banking.

So BLI is lucky, has a very strong in term of the infrastructure for transaction banking, which is retail and also the wholesale share. So we need to pushing more productive, you know, in terms of usage and so in terms of the capacity in in the market with our customers as well. So the learning side, you know, we are fully aware, you know, we have to return, you know, macro business, mention bookkeeping and also far, but we are on the way to return, Not only the business process, but also related into the mind three people, so people management and also the way we run the business more robust, you know, in some of the the way we get a good pipeline as well and then also the monitoring system. We also already in place, you know, in the region level and also the branch level, the recent client and the risk management and also the operation. Hopefully, next year’s while, you know, the initiative will do implemented better, but I think the result will coming good for us as well.

Again, thank you very much, sir, for your involved questions and attending, you know, the call meeting this morning. Hopefully, you know, we get a good something effort, you know, in the next feature. Thank you very much.

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