Good morning, everyone. Thank you for joining BNI's third quarter of 2025 earnings call. My name is Sigit, and I will be your host for today's session. We truly appreciate your time and your continued confidence towards BNI. Today's call provides us with an opportunity to share our progress over the past quarter, how we have navigated an evolving macroeconomic environment, maintained our solid business momentum, and continued to strengthen our fundamentals across key segments. Joining us today are members of BNI directors.
First, we have Putrama Wahju Setyawan, President Director. Ibu Alexandra Askandar, Deputy President Director. Hussein Paolo Kartadjoemena, Finance and Strategy Director. Abu Santosa Sudradjat, Treasury & International Banking Director. David Pirzada, Risk Management Director. And other members of the management team. Thank you all for being here.
In today's session, we will present our financial performance for the third quarter of 2025, business strategy and outlook focusing on our growth in the medium and SME segments, digital transformation, liquidity improvement and funding strategy, and finally, our guidance for the rest of this year. [Non-English content] . Please, Putrama.
Thank you, Sigit. Good morning, analysts and investors. Thank you for joining BNI's third quarter earnings call. We know the first nine months have been challenging for the banking sector. Profitability has been under pressure, as you may have seen from the August results of Indonesian banks. Today, I will not focus too much on our P&L. Instead, I want to share how we are building a stronger bank for the future by navigating change with discipline. Let me start with our loan portfolio strategy. Over the past five years, most of our growth came from the corporate segment.
As we promised, we are now expanding into other segments. This year, that shift is happening. Corporate loans grew a healthy 12.4% year-on-year. This is in line with our five-year average of 10.6%. At the same time, we are seeing good momentum in middle and SME non-KUR loans. They grew 14% this year after five years of no growth. On the other hand, consumer loans and KUR grew more slowly. Consumer loans grew 10%, slightly below the historical average of 11%. KUR loans fell 24% this year compared to their usual 6% growth.
As many of you know, asset quality in consumer and micro-banking has been challenging. That is why we believe our current growth strategy is the right one. It helps us keep a healthy balance sheet. The second area of progress is our funding franchise. Low-cost deposit growth has reached double digits after many years of single-digit growth. We believe our improved digital services have helped drive this result. Going forward, growing our low-cost deposit base will remain a key goal.
We will use our large branch network to gain more market share in low-cost funding. This will also help us compete better in lending. Third, our non-interest income is getting stronger. In the past, it came mostly from treasury activities. But this quarter, we saw good contribution from transactional banking, which is more stable and recurring. We are also often asked about OpEx. I am pleased to say that our OpEx growth remained low at 4% this year. It has stayed around this level for several years. We are targeting mid-single digit growth for full-year OpEx budget.
Finally, as a systemic bank, we must stay prudent, especially in today's uncertainty global environment. Our capital ratio remains among the top three of major Indonesian banks. Our loan-to-deposit ratio is healthy, giving us room to grow asset while making our funding more cost-effective. Asset quality is stable in terms of credit cost and NPL. Our Loan-at-Risk ratio has also improved. We believe our consistent focus on de-risking over the past five years has made our loan portfolio stronger and more resilient.
Let's take a deeper look at the recent growth in our middle and SME segments. It is important to clarify that this is not a sudden aggressive shift away from our strong corporate business. Instead, it represents a gradual and disciplined expansion where we prioritize long-term profitability over sheer volume. This growth comes from a historical low base. Our medium segment, for instance, was essentially stagnant for five years, with new disbursements only offsetting write-offs. Since the pandemic, we've written off 18% of that portfolio and have since been meticulously rebuilding it with higher quality loans.
The net expansion was a cautious IDR 18 trillion over five years, but has accelerated to a more meaningful IDR 13 trillion year- to- date. This turnaround is the result of a five-year transformation of our end-to-end credit process, including the successful implementation of a robust credit scoring system for SMEs. We recognize that competition in this segment is intense. To ensure profitability, we employ a comprehensive relationship banking model.
Through detailed tactical planning for each client, we can offset competitive lending rates by securing other available business such as fee income, low-cost funding, and payroll accounts. Furthermore, we are leveraging BNI's core strength by fostering strong collaboration between our corporate and institutional arm and our smaller business segment to fully capture value chain opportunities. Operational excellence is key. We streamline our loan approval process, cutting it by two weeks through technology and process re-engineering.
Finally, our latest initiative empowers our extensive branch network to become active sales hubs with a new focus on revenue generation, moving beyond their traditional service-only role. Next, our Director of Treasury International Banking will elaborate more on the third quarter pre-liquidity condition. Please, Abu.
Thank you [Non-English content] . I would like to take a moment to highlight a very encouraging development in the market environment. Over the past two years, we have been navigating an intense period of funding competition, one that pushed up the cost of funds across the entire banking sectors. Today, we are finally seeing light at the end of the tunnel. This positive shift is being driven by decisive and coordinated policy actions. The central bank has proactively lowered its benchmark rate by a significant 125 basis points year to date, bringing it down to 4.75%.
This has had a direct and tangible impact on market liquidity. We have seen yields on instruments such as SRBI decline sharply from their peak of 7.3% to around 4.8%. Even more telling, this outstanding SRBI balance has contracted by more than IDR 200 trillion this year alone. This is not just a statistic. It represents a substantial injection of liquidity back into the financial system. This liquidity boost is being reinforced by strong fiscal monetary coordination. The government's accelerated spending and discipline, yet supportive fiscal management, have both contributed to the improved liquidity in the market.
Together, these measures form a powerful tailwind for the entire banking industry. What does this mean for BNI? The improving liquidity environment, when combined with our own strong strategic execution, particularly in digital transaction banking, has created a powerful synergy. We are now in a rare and highly favorable position where CASA growth has outpaced loan growth. Year to date, low-cost CASA deposits have increased by IDR 50 trillion compared with IDR 36 trillion of loan growth.
This strong inflow of low-cost funding has provided us with a strategic advantage, enabling us to proactively reprice deposit rates downwards starting in September. The results are feasible. Our monthly cost of funds peaked in August, and as of September, it has begun a gradual but steady decline. We believe that this marks a turning point. We are supported by a more accommodative policy environment and our continued execution discipline. BNI is now well-positioned to strengthen margins and sustain profitable growth in the coming quarters.
Next, our CFO will explain more about our financial performance. Please, Paolo . Thank you.
Thank you, Abu. Following the successful launch of our wondr and BNIdirect platforms last year, we are now seeing their powerful impact across our business. The momentum begins with exceptional customer adoption. wondr now serves 10.5 million users, while BNIdirect has grown its user base by 23% year- on- year. This strong adoption is translating directly into core banking growth. We have seen a 20% year- on- year increase in retail savings accounts, and crucially, a 19% year to date rise in payroll accounts, a key foundation of our future consumer banking business.
Engagement is also deepening, with transaction frequency on BNIdirect up 15% year- on- year. Most importantly, these digital initiatives are delivering tangible financial results. In terms of funding, we are seeing a robust 13% growth in CASA, driven equally by retail savings and institutional current accounts. In terms of fee income, we have tracked four key fee income lines directly linked to our digital platforms, which together contributed IDR 3.6 trillion or 30% of our total fee income. The first one is account maintenance fee, up by over 10%, was driven by our expanding customer base.
Our e-channel fee increased by 9%, is a direct result of increased transaction volume on wondr apps. Investment fee grew by over 49% as more of our customers use wondr for mutual funds and bond transactions. Our API-related fees at over 18% growth rate reflects growing adoption of BNIdirect for our business banking clients. This data confirms that our digital strategy is not just about technology, but it is also a key driver of sustainable, high-quality financial performance.
Now, if we turn to the balance sheet and our profit and loss, I'd like to walk you through some of the key movements this quarter. As you will see on the slide, there are a few significant items on a quarter-on-quarter basis that I want to highlight. First, you will notice an increase in our current account with the central bank, which rose from IDR 36 trillion in June to IDR 93 trillion. The increase has mainly reflected higher overall liquidity in the banking system, driven by government fund movements across the state-owned banking sector.
To support our ongoing credit expansion plans, we have accordingly adjusted our internal liquidity allocation. On the lending front, we are pleased with the momentum. We posted a solid 4.3% growth quarter on quarter, which translates to a healthy 10.5% year-on-year expansion. We will delve into the details of our loan portfolio performance in the upcoming slides. A note on our third-party deposits. During the third quarter, there was a shift in fund composition within our third-party deposits. The decline in current account balances mainly reflected the utilization of operational funds by several corporate clients.
At the same time, term deposits increased following the inflow of government-related funds during the period. Overall, the total level of third-party funds remains stable, with changes primarily reflecting timing differences in fund movements across customer segments. You will also see an increase in our marketable securities issued. This reflects our successful issuance of IDR 5 trillion in sustainable bonds this past quarter, a strategic move that aligns with our commitment to ESG principles and diversifies our funding base. So what is the overall picture?
The story of our balance sheet tells one of strength and strategic positioning. With our solid low-cost CASA growth of 13% year- on- year, combined with the additional liquidity from the Ministry of Finance, we have a powerful foundation. This positions us perfectly to do two things simultaneously: confidently achieve our loan growth targets and continue to drive down our cost of funds in the near term. Given how dynamic this year has been, with so many moving parts, we believe that looking at the quarterly numbers gives you the clearest picture of our current business momentum, and that momentum is encouraging.
In the third quarter, we saw a solid improvement in our bottom line, growing 6.5% compared to the previous quarter. A key point here is that our net interest income was flat quarter on quarter. This is because of the benefits of our lower cost of funds only really started to materialize in the final months of the quarter. The full positive impact is still ahead of us. We were very pleased with our fee income, which saw a strong 25% increase this quarter.
As our CEO mentioned, while our treasury team continues to deliver, we are also now seeing an additional and very exciting contributor, transactional fees from our growing digital platform. This is a strategic win for BNI. We also saw a healthy 20% quarterly increase in recovery income. I should note, however, that on a cumulative nine-month basis, recoveries are still trailing our initial targets, largely due to the weaker business sentiment that we saw in the first half. We expect this trend to improve, and we anticipate even stronger recovery income in the fourth quarter.
Putting it all together, our total operating income grew a robust 8.7% this quarter. With that strong revenue momentum, we made a deliberate decision to exercise a conservative approach to our accounting. We used this window of strength to bring forward two key expenses from the fourth quarter into the third quarter. The first one is we accrued early for employee variable remuneration. As a result, our overall OPEX increased by 8.9% for the quarter, but remained low at 4% year-on-year growth for the cumulative nine months.
Secondly, on provisioning, I want to be clear, we remain fully confident in our full year guidance of around 1% for credit cost. However, we proactively decided to take a slightly higher charge in the third quarter, which came in at 1.1%. This is a prudent measure to strengthen our position. In summary, we are driving strong revenue momentum and using that strength to make conservative, forward-looking decisions for the health of the business. Year- on- year, our total portfolio grew by a solid 10.5%.
The engine of this growth continues to be our corporate segment, which expanded by 12.4%. The demand here was also primarily driven by government institutions, telecommunications, and key infrastructure projects. We are seeing some very encouraging signs in the other business banking segments. Our medium enterprise and non-KUR SME segments have returned to positive growth, posting a 14% increase. It is important to note this is from a relatively low base after a prolonged period of contraction, but we see this as a clear and positive inflection point.
On the consumer side, you will notice a more modest growth figure of just below 10%. I want to be clear that this is also a deliberate and strategic choice. We have been consciously moderating our growth in consumer and KUR lending as we closely monitor asset quality trends in the broader market. This is a sign of our disciplined approach to risk. As you would expect in a declining interest rate environment, we have seen a gradual softening of loan yields.
In the corporate segment, this is a direct result of a lower rate environment, and to win business in the recovering medium and SME segment, we have had to be competitive on pricing. However, we are not just competing based on price. Our teams are also focused on tactical account planning to ensure that when we win a loan mandate, we also win the client's broader business, their transaction banking, their fee income-based services, making the overall relationship profitable for BNI.
We are also driving growth where it makes strategic sense, maintaining discipline in more uncertain segments and managing yields by deepening client relationships. This year, we have made significant strides in strengthening our core funding base. A key achievement has been the 13% year-on-year growth in low-cost funding, a direct result of our customers increasingly choosing BNIdirect and wondr as their primary platforms for daily transactions. To support this digital shift, we are strategically investing in the customer experience.
This commitment is reflected in our operational spending, where expenses related to digitalization and transactions grew by 12%. However, we have balanced this necessary investment with a sharp focus on efficiency elsewhere. By streamlining our general and admin expenses, which actually contracted by 2%, we have capped our overall operating expense growth to a modest 4%. You may have also noticed a temporary dip in our CASA ratio in the third quarter.
This was primarily due to a substantial IDR 55 trillion deposit from the Ministry of Finance, which was placed as a six-month term deposit starting in mid-September. The positive news is that the financial impact of this was short-lived. By mid-October, we have already disbursed more than half of these funds as loans to our customers. Finally, on the cost of funding, while we faced general pressure in July and August, we took decisive action starting in December.
We began by repricing down special deposit rates, and then in October, we took the confident step of lowering our savings account counter rate by approximately 15 basis points. This decision underscores our confidence in the improved strength and stability of our overall funding franchise. Based on our third quarter performance, we are confident in achieving our full-year loan growth target of 8%-10%, and we expect to maintain credit costs at approximately 1%. However, we are making a prudent adjustment to our net interest margin or NIM guidance.
While the near-term outlook for funding costs is positive, we are revising our full-year NIM target by 10 basis points to around 3.7%. This revision reflects two key factors. First, our NIM for the first nine months came in below our initial target, which weighs on the full-year average. Secondly, we are maintaining a conservative stance on our lending yield assumptions given the current lower interest rate environment. For a deeper dive into our asset quality metrics, I'll now hand over to our Risk Management Director, David.
Thank you, Paolo . We are pleased to report a continued and positive trend in the overall health of our loan portfolio this quarter. Our key risk indicators are moving in the right direction. The Loan-at-Risk ratio has improved to 10.4%, which is down from 11% in June and 11.8% last year. Similarly, loans in the special mention category have also decreased to a 3.6% ratio compared to 4% last quarter and 4.8% a year ago. This tells a clear story of strengthening asset quality across the vast majority of our book.
Amidst the challenging economic environment, where we are also focused on growth, our priority has been to maintain stability. Our NPL ratio has held steady at around 2%, and our aim is to carefully balance new lending with prudent risk management to keep it within this range. This story of improvement was consistent across most business segments. However, we are also closely monitoring some pressure points within the consumer segment, where the NPL ratio has risen from 2.1% to 2.6% in the past three months.
The most significant increases have been in mortgage and credit card portfolios. We attribute this primarily to the broader economic weakness, which is disproportionately affecting lower-income customers, particularly those working for smaller enterprises or who are self-employed. We are addressing these specific areas with focused strategies, even as the broader portfolio remains robust. As we outlined at the start of the year, we have been proactively cleaning up our legacy loan book by accelerating write-offs.
This strategic move is why our write-off year- to- date stand at IDR 11.8 trillion, which is higher than our provisioning charges. While this has slightly reduced our loan loss reserve ratio, it is important to note that our reserve remains robust at 4.4%, a level that continues to be strong relative to our peers. With this accelerated cleanup largely behind us, we expect write-off to decline meaningfully next year, allowing our reserve ratio to stabilize. The good news is that this hasn't been a reaction to new problems.
Our underlying asset quality is solid, with a stable NPL ratio in a weak economy and improving Loan-at-Risk ratio. This strength is what gives us the confidence to allow our coverage ratio to normalize gradually. Our credit costs remain firmly on target at around 1%, with improvement across almost all segments. The exception is consumer, where we have consciously increased provisions to reflect the recent sector-wide softness. This brings us to the end of our presentation. I will now return the floor to the moderator for Q&A. Thank you.
Thank you, all directors, for the insightful presentation. We will now proceed to the Q&A. As a reminder, you may submit your question through the chat function on your apps. Our management team will be happy to address as many questions as time permits. Just a quick note, if any responses are delivered in Bahasa Indonesia, a summary translation in English will follow right after. All you have to do is simply click the interpretation button on your Zoom app. Each question will be addressed by our respective directors, and since there are some questions with the same topic, please allow us to merge the questions into one session.
All right, let's begin. Our first question today is regarding our guidance or outlook for next year, coming from Bloomberg, Grow Investment, and also from UOB. What is the management expectation for full year 2026 in terms of loan growth, profitability, and also asset quality? I would like to pass this question to Putrama. Please .
Thank you. Thank you, Kresna Hutabarat from Mandiri Sekuritas, and Sarah Jane from Bloomberg. We are currently finalizing our 2026 budget and will provide official guidance during our upcoming earning calls. Qualitatively speaking, we anticipate stronger loan growth than in 2025, fueled by the government's intensified focus to turbocharge economic growth. Profitability, as measured by net interest margin, will rely on the pace of the loan demand recovery, though we expect continued improvement in our cost of funds.
As we strategically expand into higher-yielding segments, naturally credit costs should follow. However, we will continue to ensure that risk-adjusted margin remains attractive.
Thank you, Putrama. Next question touches on a topic that has been widely discussed across the market, which is the fund injection from the Ministry of Finance of Indonesia. There is a strong interest towards this topic. The question is from Ox Capital, UOB, Citi, Sun Life, and also from CGSI. The question is: Could you give us some color regarding the usage of the liquidity injection from the Ministry of Finance to BNI, such as from business segment or sector-wise? Is there any impact of the injection to earnings for the rest of the year? I would like to pass over this question to Paolo. Please .
Thank you for the question. The liquidity injection from the Ministry of Finance has been strategically allocated to support our lending activities across our key business segments. We have already utilized IDR 27.6 trillion, or about 50% of the total IDR 55 trillion of MOF funds that we received as of 30 September 2025. The disbursement has been directed primarily to the manufacturing industry, wholesale and retail trade, natural resources, as well as the agriculture and telco sectors, reflecting our focus on productive and strategic areas of the economy.
The placement of the Ministry of Finance funds is actually a positive development for our cost structure. These funds came in at a rate of 4%, which is significantly lower than our incremental cost of deposit at the time, which was running at 6%-7%. Our strategy is twofold. First, we are using this opportunity to reprofile our deposit base by actively managing down our most expensive deposits. This will create a lasting improvement in our overall cost of funds. Secondly, we are focused on quickly deploying these funds into loans to maximize the temporary drag on our net interest margin.
Given that we have already disbursed 50% of the funds within one month, we are confident that the pressure on our NIM will be short-lived, likely resolving within the next couple of months, assuming that everything else is being equal. Risk to our NIM may come from loan yield competition.
Thank you, Paolo, for the clear answer. Let's move on to the question. This one is on Koperasi Desa Merah Putih, coming from Ferry Wong from Citi and also Andrey Wijaya from RHP. The question is: Could you provide more information on your participation and structure of the Koperasi Desa Merah Putih program, and how is your strategy to mitigate the loan loss risk? I believe Putrama will give a clear answer for this one. Please .
Okay. Thank you for the question. The government aims to accelerate the execution of the Village Cooperative programs, KDMP. In this initiative, PT Agrinas has been assigned to construct the physical buildings and related infrastructure for the cooperatives. The bank's role is to provide CAPEX loans to PT Agrinas with the funding source from government placement in SOE banks, ensuring that this does not disrupt the bank's core lending activities to other customers. From an asset quality side, loan repayment will be secured through the interception of village funds, providing an additional layer of credit risk mitigation. Thank you.
Thank you, Putrama. Move on to another question. This came from Ferry Wong from Citi and also Jayden from Macquarie. How has the trend in funding costs moved monthly during the quarter and so far for October? Are there any improvements, and are we looking for better cost of fund in the last quarter of this year? I'd like to hand over this question to Abu. Please .
Thank you for the questions. Our cost of funds has begun to show clear signs of easing, reaching 2.8% as of September month to date, representing a 30 basis points decline compared to August. This positive trend reflects our continued efforts to optimize our funding structure through accelerated growth in low-cost transactional CASA and more selective approach to special rate deposits gathering.
We are selectively managing down special rate deposits to enhance our funding mix, while also reducing savings account rates by approximately 15 basis points effective October to further improve our funding efficiency. At the same time, we are leveraging stronger corporate and retail cash management activities to deepen CASA balances and strengthen the stability of our funding base. These strategic initiatives, coupled with disciplined pricing adjustments and the support of recently accommodative fiscal and monetary policies, are expected to drive a further easing in our cost of fund through the fourth quarters and beyond.
That said, the pace of improvement will continue to depend on overall liquidity conditions and competitive dynamics within the banking industry. Thank you.
Thank you, Abu. Please stand by , because I still have one more question for you. This one is from Sarah Jane from Bloomberg and also Kresna Hutabarat from Mandiri Sekuritas. The question is: How should we see net interest margin trend in the coming quarters and the sensitivity for a 25 basis points rate cut and the risk of loan repricing? Please, Abu.
Okay. Thank you. This is indeed a challenging question given the highly dynamic operating environment. On one hand, we are gaining greater clarity and confidence as our cost of funds continues to trend lower, supported by accommodative monetary and fiscal policies and our strategic focus on capturing low-cost funding market share. On the other hand, the loan yield outlook may come under renewed pressures amid a declining interest rate environment and intensifying competition. To mitigate this risk, we are taking a strategic and disciplined approach.
We are strengthening tactical account planning to ensure that every lending relationship extends beyond credit, encompassing transaction banking, cash management, and fee-based solutions, thereby enhancing the overall profitability of each client relationship. Our focus remains on growth and in strategically sound areas, preserving yield quality and deepening client relationships to sustain long-term margin resilience even as the market environment evolves. Thank you.
Thank you, Abu. Moving on to the next question, this one from Kresna Hutabarat of Mandiri Sekuritas and also from Handi Noverdianus from CGSI. The question is: Is there any color on the loan demand going into the last quarter of this year? Which business sector that has strong pipeline? I am sure Paolo has a strong answer for this one. Please .
Thank you for the question. Loan demand should be seasonably stronger in the last quarter of the year. This has been the case in past years, and we think this will be the case this year. We are seeing a robust pipeline in our business banking segment. Sector-wise, our pipeline for Q4 mainly comes from manufacturing, transportation, telecommunication, as well as the healthcare sectors from both private and SOE clients. On the consumer side, we have not seen a strong sign of recovery.
As the consumer segment only represents 20% of our loan portfolio, we remain optimistic about achieving our full year loan growth target of 8%-10%, supported by corporate and medium segments.
Thank you, Paolo . Next, I have a question from Kresna Hutabarat from Mandiri Sekuritas. The question is: How much of BNI loan growth will be driven by government-backed loan programs, Danantara-led investment, and private sector investment in the second half of 2025, and also for next year? Paolo , would you please give us some color for this topic ?
So far this year, our loan growth has been primarily driven by corporates, both from the private sector and SOE. The government-backed program in our balance sheet is limited to KUR and subsidized housing program amounting to about IDR 29 trillion or equivalent of 3% of the loan portfolio. Going forward, in addition to enterprise clients, government-backed loan program will be another source of loan growth. Some of the major programs include the Koperasi Desa Merah Putih program and the Housing KUR.
We are still awaiting for clarity regarding the size of the program. It is worth noting that in our understanding, when designing the program scheme, the government wants to ensure that the intermediary role of the major banks will remain intact. Hence, for large scale programs, the government is considering to provide full funding support. Gradually, the media starts to write about Danantara investment in various initiatives.
One of them is a waste-to-energy project that potentially spends approximately IDR 90 trillion. Currently, there are no official details revealed regarding the financing scheme for this program.
Thank you, Paolo . Moving on to the next question. This one is from Handi Noverdianus from CGSI. The question is, how do we see the competition on the wholesale loan yield plus the liquidity injection of Ministry of Finance, and also after the recent policy rate cut? I believe Paolo could give us some clear answer for this one. Please, Paolo .
Thanks for the question. I think overall, we see loan demand is relatively the same the past few months. I think to achieve our loan growth target of 8%-10%, we rely on our existing loan pipeline, primarily in the wholesale segment. We observe that the loan demand from clients is still relatively soft, and major banks are still lagging in terms of loan growth achievement versus their internal targets. This situation, combined with a lower rate environment, may translate to further pressure in loan yields.
Thank you, Paolo . Now a question from Jayden of Macquarie. The question is, intra quarter credit costs are tracking below 1%, but the bank is topping allowance at the quarter end. Why is this being done? Is BNI expecting a higher level of NPL formation? Given the nature of this question, I am sure David will give a clear answer for this question. Please.
Thank you for the question, Jayden. Our credit cost target this year remains around 1%. If run rate for monthly credit cost is below 1%, we prefer to top up provision charges in subsequent months. We believe this is the prudent approach to minimize pressure on professional coverage, given our write-off is still elevated this year before coming off in 2026. In addition, we had a strong business momentum on the third quarter, where total revenue increased by 9% quarter-on-quarter, which allowing us to front-load some of the provisioning charges into third quarter.
We are still comfortable with overall asset quality outlook, even after taking into account the deterioration in consumer segment, because this segment contribute only 20% of loan portfolio. Thank you.
Thank you, David. Still from Jayden from Macquarie, but this one is about dividend. I believe Paolo could give us a clear answer for this. Paolo , what are the plans for the dividend with the level of net profit declines? Will BNI maintain an absolute dividend for the final full year 2025 dividend? Please, Paolo .
Yeah. Thank you, Jayden, for the question. Looking ahead, our dividend policy targets a payout ratio of no less than 65% for next year. This provides a clear baseline for shareholder returns. However, I must say that the details on the dividend are still yet to be discussed with our majority shareholder, so it is still subject to changes. Our capital strategy is designed to be dynamic. We will manage our capital levels to strike the right balance between funding our profitable growth initiatives, as well as upholding this attractive dividend commitment to our shareholders.
Our priority is to maintain a healthy capital ratio, both CAR and Tier 1, well above regulatory requirements and providing a buffer for both growth and for dividends.
Thank you, Paolo . I still have another question . This is from Yulinda from BNI Sekuritas. The question is, can we share the view on the latest BI macro-prudential policies, both lending channels, forward-looking, and interest rate channel. Both fiscal and monetary policies have favored for loan growth. Do you expect loan growth shall accelerate to teens level again next year? I believe Paolo could give us some clear answer for this one. Please, Paolo .
Yeah. Thanks, Yulinda, for the question. I think firstly on loan growth, we do expect loan growth to be slightly higher next year. I think in the current decreasing policy rate environment, we also expect loan yields to continue to be under pressure. I think that's generally our outlook for next year. I think in terms of the measures from the central bank, our understanding is that Bank Indonesia is planning to enhance the reserve requirement discount policy to around 550 basis points in December.
The incentives will consist of lending channel incentives and interest rate channel incentives. I think the Bank Indonesia plan is we'll incorporate the elasticity of the lending rates for new loans to the Bank Indonesia rate, and this should encourage banks to adjust their lending rates faster. Meanwhile, the lending channel incentives, the central banks did provide some adjustments to the sector composition. There's more incentives for loans to transportation, storage, tourism, education, and healthcare sectors.
This will provide more flexible sector choices. All in all, a combination of a more expensive fiscal policy, loan growth momentum should pick up, as I mentioned, late this year and for next year. In fact, money supply growth has rebounded to 8% year-on-year. Thank you.
Thank you, Paolo . I have another question. This is still regarding the funding from Ministry of Finance that half has been lent out. Where has the other half have been deployed? In bonds or Bank Indonesia overnight deposits? Also, are the loans related to this injection liquidity or duration match? I believe Abu will give us some color for this topic. Please, Abu.
Thank you. Sorry, hold on. The Ministry of Finance basically periodically places funds in selected banks, as we see that usually the state-owned banks under the government funds placement program. Basically, this one is intended to support the credit expansion, particularly to priority sectors or regions. This basically help manage liquidity in the banking system. If you see that the placements are typically time deposit from MOF at participating banks, often short to medium terms, and come with a commitment requirements to recipient banks must on-lend or multiple.
If we see that the current deployment basically half has been lent out, if roughly about 50% of the MOF funds have been on lend, the remaining half is typically deployed as a liquid low-risk asset such as government securities, SBN, both short and medium-term duration. Usually, this one is part of the liquidity management and to maintain eligibility for the repo with Bank Indonesia. If we see that inter-bank placement usually have a small portion given the counterparty and liquidity considerations.
The choice between SBN, the government bonds, and BI instrument depends on rate differentials and liquidity strategy. In short, I see that the other half of MOF funds are mostly packed in government bonds or BI overnight facilities. Does that answer the questions? Thank you.
Thank you, Abu. I have another question. This one is from Harsh Modi from JPMorgan. I believe David could give us a very colorful insight for this one. Please, David, the question is: If loan demand is weak, what is the probability of higher credit risk as the banking system tries to meet elevated growth targets? What early warning signs that are we looking at? Please, David.
Okay. Thank you for the question. I think our strategy to elevate or to increase the loan, it only not depending on the loan demand. I think what we have done so far in the past five years, that we grow or we give loans to the sector that we think are still growing or still healthy. Our loan portfolio management has also been strategically doing the going for more portion on the sector that is still prospective. I think our strategy will continue in the next year. Looking into the past, we have also seen that the loan demand also going up and down.
We also always try to go to the sector that we think still will continue or still have a growing expectation in the future. What I can say for this question is that we have seen quite a lot of or experiencing quite a lot of up and downs in the economy. So we have also improved our credit process, end-to-end credit process. We have also improved our credit scoring in SME, also in consumer. I think we have quite a lot of opportunity that we can still go into for the loan growth.
Even if the sum of the sector loan demand are decreasing, I think we can still have some opportunity in other sectors or other segments. We have also been able to improve the loan demand or loan growth in SME and also in the commercial sector, which also show that our strategy to have expand the value chain business from our corporate clients has also been successful. And I think this is also a part of our strategy in the next year. Thank you.
Thank you, all directors. That brings us to the conclusion of today's session. On behalf of the entire BNI team, we extend our sincere gratitude for your available time and also engaging questions. While our scheduled hour is over, our IR team remains at your disposal for any further discussion. Please email us at ir@bni.co.id if you have any questions. We are excited about the path ahead that we are looking forward to sharing our continued progress with you. Thank you, and have a nice weekend.