Good morning, ladies and gentlemen. Welcome to PT Bank Negara Indonesia (Persero) Tbk analyst meeting, full year 2021. Thank you for your participation, and we believe you are well during this difficult time. We will proudly introduce our members of board of directors who are here with us virtually or live in our head office building. First, we have Mr. Royke Tumilaar, our President Director or CEO. Next, we have Mrs. Adi Sulistyowati, our Vice President Director. Mrs. Novita Widya Anggraini, Managing Director of Finance. Mr. Henry Panjaitan, Managing Director of Treasury and International Banking. Mr. Silvano Rumantir, Managing Director of Corporate Banking. Mr. David Pirzada, Managing Director of Risk Management. Mr. Y.B. Hariantono, Managing Director of IT and Operation. Mrs. Corina Leyla Karnalies, Managing Director of Consumer Banking. Mr. Muhammad Iqbal, Managing Director of Micro Small-Medium Enterprise. Mr. Sis Apik Wijayanto, Managing Director of Institutional Relations.
Mr. Ronny Venir, Managing Director of Service and Network. Mr. Royke Tumilaar will begin the presentation with several management highlights. Mr. Silvano Rumantir will expound on corporate transformation progress, wholesale banking highlight, and our best-in-class ESG. Mrs. Novita Widya Anggraini will proceed the presentation with the detail of our full year 2021 results, and following that, Mr. Henry Panjaitan will address our liquidity update. Mr. David Pirzada will describe the bank's approach to loan quality and risk management strategy. Last but not least, Pak Y.B. Hariantono will wrap the presentation with our digital initiatives. Ladies and gentlemen, our corporate presentation can be downloaded through the link we provide in the chat room. Should you have any issues, please kindly contact our investor relation team at ir@bni.go.id. Any questions are appreciated.
Please send your question to our email address, or you can simply send your question in the Q&A section on your Zoom apps during the Q&A session. Please remain silent during this presentation, which will last around 30 minutes-45 minutes. For today's event, we provide interpreter or translator feature for you. However, all the presentation will begin in English. Therefore, all attendees do not have to click the interpreter button during the presentation. The interpreter button will work during the Q&A session if the answer delivered in Bahasa Indonesia. Now, to begin the presentation, please welcome our CEO, Mr. Royke Tumilaar.
Thank you, moderator. Good morning, ladies and gentlemen. We closed 2021 with a net profit of IDR 10.9 trillion, triple than the 2020 profit, and we believe it is almost 10% above the market expectation. This is supported by a healthy loan growth at 5.3%, resilient net interest margin at 4.7%, and the asset quality improvement that resulted in cost of credit construction to 3.3%. While these ratios met the 2021 guidance, we totally understand that there is room for improvement going forward. For this year, we expect loan growth to accelerate to high single-digit level and the credit cost to improve significantly by more than 1 percentage point. As for net interest margin, we saw some pressure on quarter 4 last year as we built liquidity buffer in low-yielding government bonds and central bank placement.
This decision was taken to secure our liquidity ahead of potential hike in interest rate this year. Our loan-to-deposit ratio was very healthy at only 79.7%. A glance of our recent quarterly performance, PPOP was resilient quarter-on-quarter. This enabled us to build slightly higher provision coverage for the sake of being prudent as the world is still grappling with the threat from Omicron variant. We believe this is a conservative approach as our loan at risk were actually improving by 2 percentage points during last quarter. Ladies and gentlemen, entering 2022, there are three key economic themes that we are anticipating. First one is GDP growth recovery momentum driven by government vaccination program that should achieve national herd immunity by second quarter this year. Second, we expect inflation rate to accelerate up to 4% level, which we believe is still a moderate level of inflation for developing country.
Lastly, as a result of U.S. tapering, we assume around 50 basis point benchmark rate hike in Indonesia, which should be able to contain exchange rate volatility risk, while at the same time, not hurting economy recovery momentum too much. The implication of these economic themes to our bank is stronger loan growth and better asset quality, obviously. On a static basis, BNI is a net beneficiary of interest rate hike as the amount of our floating rate loan is bigger than the amount of our floating rate liabilities. During this rate hike cycle, we see opportunities to grab market share in lending, especially toward low-risk customers, supported by our competitive advantage in term of funding costs. We don't expect to see margin expansion this year, but we expect to build a bigger and stronger, good customer base for the long term.
Ladies and gentlemen, our vision is to be a financial institution to excel in service and performance on sustainable basis. This will be supported by our DNA, which a reliable provider of digital-based integrated financial solution with international network advantage. Our five-year strategic planning is divided into three steps. For the first two years, including this year, 2022, that strategic initiative prioritize on improving asset quality, strengthening digital capability, building a sustainable business in lending and funding, strengthening our capital structure, as well as upgrading our talent management. After we build a strong foundation in the first two years, we aim to have a best class in capabilities by 2023, 2024. This included a capability in a bionic or hybrid banking to deliver superior customer journey, a capability to offer a holistic business solution by focusing on multinational companies, as well as data analytic capability and culture.
By having the best capabilities in the industry, we have a vision that by 2025, BNI will be ready to become a financial institution that provides solution beyond banking. With the advantage of an integrated wholesale business, market lending subsidiaries, as well as strong international network to connect local companies with global markets. The vision and strategic target roadmap are prepared to ensure optimal value creation for the all stakeholders. We estimate that BNI ROE will gradually increase to above 18% by 2025. The main underlying assumption are, one is healthy and quality loan growth with CAGR of 10% per year. Second, we continue to make a mix shift low-risk customers and promote solution beyond lending that generates superior fee income. Fee income will be higher than 25% of total revenue in 2025.
Third, we also expect gradual improvement in operational cost efficiency with the cost-to-income ratio to be below 42% by 2025. This will be achieved through digital transformation and agile business models. Four, asset quality is the main priority with the optimal level of NPL being strived to reach a percentage below 1.5%, so that in the long term, the credit cost will be able to approach 1% in the next three years. I would now like to turn the presentation over to Mr. Silvano Rumantir, our MD, Corporate Banking, to highlight some upgrade on corporate transformation and also wholesale business. Mr. Silvano Rumantir, please.
Thank you, Pak Royke. Ladies and gentlemen, good morning. As we stated earlier, we are currently rolling out a corporate transformation program as an important foundation of our corporate plan until 2025. As you know, we have made several important progress, and that includes throughout last year, we have consistently acquired top-tier corporate clients in resilient and selected sectors, such as FMCG, telecommunications, mining, and services. We will continue to optimize this strategy because the room is still ample for BNI. These acquisitions were followed by optimization of other businesses from the entire client ecosystem, so not limited to just loan growth. In the SME segment, we launched Xpora, which targets the businesses of SME exporters and diaspora with service excellence that focuses on developing the production and operational aspects of medium and SMEs, as well as business matching with global markets through optimization of our overseas branch network.
Within three months of the implementation of Xpora, we observe already more than IDR 2 trillion of financing that we provided to export-oriented medium and SMEs, and we have built so far seven Xpora hubs throughout Indonesia to support this program. On the retail side, we have been accelerating our digital transformation through strengthening our mobile banking, as well as optimizing the B2B and B2C ecosystem through APIs. We have also strengthened our beyond lending business capabilities by promoting our cash management platform, including BNI Direct.
We have also strengthened our capital markets and investment banking platform in BNI Sekuritas and the establishment of BNI Sekuritas in Singapore. On the other hand, we are also in the early stages of developing independent digital bank that supports inorganic growth. Our efforts to strengthen our capital are carried out through the issuance of Tier 2 bonds and Additional Tier 1 capital securities in 2021.
The impact of this is that our Tier 1 has been improved to the level of 17.7%. Further, to provide a solid base, we strengthen our fundamentals as reflected in our cost of funds, which we were able to reduce to the level of 1.6%. Of course, our asset quality have continued to improve. Ladies and gentlemen, BNI is committed to align our business with ESG principles. We have institutionalized ESG into a formal committee led by risk management group to monitor the initiative and the execution. We try to accommodate as many ESG framework as possible, which fits with Indonesia banking landscape, and make sure that the frameworks are aligned with OJK guidelines on sustainable finance action plans.
In monitoring the result, one indicator that we have been using so far is MSCI ESG Rating, which now for us stands at single A, the highest rating amongst Indonesian banks. On environmental aspects, we have already incorporated environmental aspects into our underwriting standards and practices. Specifically in palm oil, we require new palm oil borrowers to have RSPO or ISPO certification, and around 40% of our borrowers are already ISPO or RSPO certified or in the process of obtaining certification in the near term. In the coal sectors, our borrowers must have either gold, green or blue category from the Ministry of Environment and Forestry. BNI does not provide loans to business owners with a red or black ratings. At the moment, there is no specific timeline imposed on banks in Indonesia regarding new coal financing policy and palm oil RSPO, ISPO, full compliant policy.
This is understandable, as these sectors are still crucial for the economic development, and it has continued to bring a significant social impact to the community. However, we will take serious initiatives to be at the forefront of Indonesian banks in terms of managing exposure and policies relating to coal and palm oil sectors. As we are shifting our wholesale banking portfolio into top-tier corporate clients, margins will naturally be lower as well. However, in the long term, we believe this strategy will deliver sustainable and less volatile profitability due to better asset quality that will translate to lower credit cost. In addition, there are other sources of profitability coming from fee income and low-cost funding potentials. Last year, we successfully increased our CASA to loan ratio in corporate banking from 52% - 67%. Our fee income contribution to total revenue also improved, and now stands at almost 20%.
These levels are far from ideal. We will continue to invest in our wholesale transaction banking digital solution, as well as sharpening our capabilities in value-added services beyond lending. A quick look into recent trend of our wholesale loan book. Manufacturing sector showed a significant pickup in loan demand during the last quarter, followed by infrastructure and telecommunications. The next presentation is about our financial highlight, and is going to be delivered by our CFO, Ibu Novita Widya Anggraini. Ibu Novita, please. Thank you.
Thank you, Mr. Silvano Rumantir. Ladies and gentlemen, now we will discuss the 2021 financial result in more detail. On the balance sheet side, we were in ample liquidity situation on 2021, with third-party funds grew by 15.5% year-on-year, and loan growth at 5.3% year-on-year. On the P&L side, our cost of fund right now is around 1.6%, and it is significantly reduced from the 2022 by 1 percentage point. Our lower cost of fund has enabled us to not only to grow sustainably by targeting a low risk, low yield segment, but also to partially help NIM recovery by 20 basis point year-on-year to be at 4.7% on full year 2021. Non-interest income grew moderately at 12.8%, supported by across the board improvement in client transaction activities. Profitability and efficiency.
Our cost-to-income ratio improved by 80 basis points to be 43.3% last year, despite significant investment in human capital and corporate transformation agenda. Healthy loan growth, margin recovery, and cost saving initiative has enabled our PPOP to grow by 14.8% year-on-year. Full year PPOP at IDR 31.1 trillion was all-time high level, even 10% higher than pre-pandemic PPOP. On the asset quality, our cost of credit was set at 3.3% as compared to 4.1% on 2020. Despite lower credit costs, we managed to boost loan at risk coverage to 37% by end of year of 2021. Thanks to conservative accounting policy, as well as continued improvement in loan at risk, which declined by 5.4 percentage points last year. Tier 1 capital increased to 17.7%, while total capital adequacy ratio, or CAR ratio, reached 19.7%.
As a result of sharp profit recovery, with 10.4% ROE book last year, as well as the issuance of Tier 2 and AT1 capital securities. Last year, our loan growth at 5.3% was relatively in line with industry growth rate. The key driver in our loan growth was private sector corporates at 7.6% year-on-year, large commercial at 10.4% year-on-year, subsidized microloan KUR at 35% year-on-year, and consumer loan at 10.1% year-on-year. It is worth to highlight again that large commercial segment started to grow again on the back of asset quality getting more stable, as well as strong demand from manufacturing and agriculture sectors.
During fourth quarter 2021, pressure on rupiah loan yield was smaller than in the first nine months of 2021, except for a small segment where the loan yield contraction came as a result of delayed payment for KUR subsidy from government. Last year, net interest income grew by 12.4% year-on-year, thanks to strong funding inflow that enabled us to cut deposit rates and save more than IDR 6 trillion in interest expense. The slight contraction in the interest revenue was due to portfolio mix shift to lower yield asset. First, the composition of interest earning assets shift more toward bond and banks placement as we are building stronger liquidity buffer. Secondly, within our loan book, we shifted toward less risky borrower and segment.
Non-interest income grew by 12.8% year-on-year due to recovery in retail transaction activity, as well as our deliberate effort to focus on non-lending product to wholesale client to generate fee income. For example, trade service fee grew by 8% and syndication fee grew by 37% year-on-year. Cash recovery income jumped by 66.7% year-on-year. If we net it off with provisioning expense, then net credit costs would have been around 2.7%, or 40 basis points below reported gross credit costs. As we already expected in the previous analyst meeting, there will be a positive trend in the terms of recovery income, and we believe this trend to continue. Operating expense grew by 12.3% year-on-year, mainly from personal expense, which grew by 31% year-on-year.
The sharp increase in personal expense was a strategic decision by the management team to build a strong talent base in order to ensure the success of our transformation agenda. There was no increase in the number of headcount during 2021. Provisioning expense declined by 70% year-on-year, despite a higher loan loss coverage ratio. Please note that the quarter-on-quarter increase in provisioning expense was only for the sake of being prudent. With rising Omicron cases across the globe, the fundamental asset quality indicators such as loan at risk was indeed continuing to improve during the quarter. Bottom line profit increased by more than threefold to IDR 10.9 trillion, which we believe is above consensus estimate. Next presentation on third-party fund liquidity update will be delivered by our Managing Director of Treasury and International, Bapak Henry Panjaitan. Please, Pak Henry.
Thank you, Novi. Ladies and gentlemen, in BNI, we were seeing an encouraging trend of strong liquidity inflow, especially during the fourth quarter last year. Quarter-on-quarter, we received more than IDR 60 trillion of third-party funds, despite of a lower rate on time deposit by 10 basis points-25 basis points than in the third quarter. However, on the asset side, even though there was loan demand pickup during the last quarter of 2021, we still ended up with massive excess liquidity, which we temporarily park it mostly in banks placement and some in short-term fixed income instrument. On one hand, the situation I just described resulted in short-term margin compression, where quarterly NIM was only at 4.4%. However, in the medium-term horizon, it means that we have a formidable liquidity reserve ready to deploy when loan demand picks up or when the bond market turns to more favorable.
In other words, we will have more flexibility to manage our net interest margin during uncertain interest rate environment this year. Cost of fund on the fourth quarter last year slightly improved by 8 basis points, driven by reduction in time deposit rate, effectively by 21 basis points quarter-on-quarter. Yet we were still seeing strong inflow of third-party fund, not only time deposit, which grew by 10% quarter-on-quarter, but also CASA at 8.7% quarter-on-quarter. As our liquidity remains ample, we make further rate cut on January and February this year. Interest rate on high-tier business saving account rate, which total amount is around IDR 25 trillion, is reduced by 115 basis points, as you could see on the gray line of the bottom right chart on your screen. Interest rate on high-tier saving account is also reduced by 40 basis points.
This high-tier saving account nominal amount is around IDR 29 trillion. Lastly, we also lower time deposit rate by 25 basis points-35 basis points to be 2.25%. We hope our strategy will translate to margin improvement in the first half this year. As a result of stronger than expected fund flow to our bank, loan-to-deposit ratio declined to 79.7% by December last year. This is a very healthy level of LDR to begin the year of 2020. Low LDR level will allow us to be more flexible in navigating the rising interest rate environment in order to optimize our margin. Liquidity position as measured by Liquidity Coverage Ratio and Net Stable Funding Ratio, at the top of the slide remains strong. Next presentation about asset quality, risk management, and loan restructuring will be delivered by our MD of Risk Management, Pak David. Please, Pak David.
Thank you, Mr. Henry. Ladies and gentlemen. As expected, the total amount of COVID restructured loan continued to decline. The biggest improvement quarter-on-quarter came from our corporate segment, especially from customers in construction and electricity, gas and water sector. As of December last year, COVID restructured book represented 12.4% of total loan, with the majority of these borrowers have already started regular installment payment.
This could be a proxy that default rate from this restructured loan could be very low once the Otoritas Jasa Keuangan relaxation will be removed by April 2023. Total loan at risk on December last year was 23.3%, down from 25.2% in September 2021, and declined quite significantly from its peak at 28.7% in December 2020. The improvement in total loan at risk was driven mainly by improvement in collectibility 2 ratio, as well as restructured collectibility 1. Considering initial concern on asset quality during the third quarter of social and mobility restriction, this improvement in every component of loan at risk was a positive surprise to us that led to lower provisioning expense. Despite good economic recovery and encouraging trend on asset quality, we still build higher loan at risk coverage at 37% and NPL coverage at 2.3 x by December 2021.
As the world is still grappling with Omicron, we prefer to maintain the coverage level more or less at this level. Combining it with expectation of gradual reduction in loan at risk, it should translate to material reduction in credit cost this year. Next presentation on digital initiative will be delivered by our MD of IT, Mr. Y.B. Hariantono. Please, Mr. Y.B.
Thank you, Mr. David. Ladies and gentlemen, digital transformation is crucial not only to stay relevant in the business, but also could be a game changer to win the competition in the longer term. Beside taking an early initiative toward digital bank development, we keep executing organic growth on our digital transformations within the BNI itself, with three focus areas, which are to digitize the internal platform, develop digital-native products and modernize existing services, and to leverage digital ecosystem with API open banking. For retail, we continue to elevate our mobile banking applications. The number of BNI mobile banking customers continue to grow by 38.9% year-on-year, reaching 10.9 million users, which is bigger than most other digital bank app users in Indonesia. Our strength and advantage compared to peers is the completeness of features in it.
The number of transactions made through BNI mobile banking was 434 million in 2021, an increase of 43% year-on-year. Furthermore, transaction value in the fourth quarter reached IDR 160 trillion, surpassing our ATM transactions. For further improvement, our mobile banking users will have complete financial and lifestyles features, personal financial management, and SME solutions integrations. Beside retail customers, we also keep improving our products and services for our business banking clients through digital platform as well. For business banking clients, BNI offers its cash management flagship product called BNI Direct, available in both mobile apps and web based. To facilitate transaction of our wholesale clients, we also develop an integrated portal called BNIDirect, where customers could do various types of transactions such as payment management, collection management, value chain management, and open banking solutions. Even this platform has covered our subsidiaries products and services.
One example of our key features, often getting complimented by our clients, is the integrated taxation management platform within the BNI Direct itself. For SME clients, BNI Direct can be a powerful platform, not only for regular banking transactions, but also for export-import transactions, including bank guarantee, foreign exchange, and trade services. Number wise, we still see strong momentum of our wholesale cash management platform with 17.8% year-on-year growth in the number of users, with also a significant of 115.3% growth of transaction numbers. This led to the growth of transaction value that reached 14.2% year-on-year. The spike in the number of transactions is due to the increasing contributions of our digital clients, namely fintech and e-commerce. More importantly, the room for growth is still ample, as the penetration rate of our clients is 21.5%. Ultimately, the question is, what is the impact to us?
Are the results in line with the efforts to boost transaction from customers? In this slide, we show that other than fee income, better customer experience in doing transactions ultimately brings sticky CASA, which enables us to maintain or even expand our margin. Nowadays, 55.6% of our saving balance comes from regular mobile apps users. This percentage is much improved as compared to only 44.6% a year ago. For current account, 89% of it comes from cash management users. This current account stay with us because of the convenience to do transactions and not sensitive to the interest rate we are offering. As a result, our year to date cost of fund for current account is only 1.27% until December 2021 as compared to 1.9% a year ago.
Overall, this should help our bank to maintain leadership in low cost funding to support the long-term strategy that our CEO already explained, which is shifting asset mix to lower risk customers to generate superior fee income and credit cost in order to deliver sustainable best-in-class ROE. This is the end of our full year 2021 result presentations. The next moderator will coordinate for the Q&A sessions. Thank you.
Thank you, Bapak dan Ibu for the insightful presentations. Ladies and gentlemen, we are now entering the Q&A session. If you have any questions, please send it to our email ir@bni.co.id, or you can send your question with Bahasa Indonesia or English in the Q&A section on your Zoom apps. You can use the interpreter button if the answer is delivered in Bahasa Indonesia. The first question that we have received is probably the trending topic in the market recently, and I suppose it will be best if Pak Royke could give us the insightful explanation for this. The question is from Angus Mackintosh from Smartkarma and Baruna Arka Setyo from Bahana Sekuritas. The question is, what's the latest update on BBNI inorganic growth related to digital banks? Please, Pak Royke. Thank you.
Thank you. The latest update that we had just published the announcement, the acquisition plan last week. We acquire a majority share of Bank Mayora. The transaction value will be IDR 3.5 trillion, equivalent to 2x PBV multiple. The acquisition plan will need shareholder approval, the upcoming AGM and OJK approval. Any other subsequent transaction related to change shareholder composition will be covered in a separate announcement. I think this is the latest update.
We still [Non-English content] with tech partner. [Non-English content], but there is one that is most serious, maybe you can guess, and this is indeed the key later in this digital business. Because no matter what, we will focus on SME. Focusing on SME, later, the transactions will be large, many, and the risk is also quite high, so we see that we must have good technology so that we can mitigate risk well and have low operating costs.
This is the most important thing so that we can enter the SME market more aggressively. Because if you look at BNI, we are indeed aggressive in SME, especially in government programs like KUR. But in traditional SME, this is where our portfolio is relatively not too large and we see an opportunity to develop. We have a value chain from corporate client, the Tier 1 corporate client, we also have an opportunity to develop, and we see e-commerce business is also quite interesting for us to tap from there. That's the latest development.
Thank you for the clear answer, Pak Royke. The next question is still regarding the digital bank, Pak. The question is still from Angus and also from Baruna. What is BNI's view of the digital banking environment, and do you see that the new banks taking shares from the existing mainstream banks? If so, in which areas do you see the most impact? Please, Pak Royke.
[Non-English content]
Thank you, Pak. If I may, I think maybe let's just see on the Indonesian customer behavior. I think here Indonesia, mostly the people will have more than one relationship with one bank. So if we can divide it into two, the first bank they bank with is the bank that they trust. They put the portfolio and doing transaction with that bank because they trust the bank. The second relationship they have is that banks that are based on the benefit they are having. So people put the money transacting with that bank because the benefit that they are having, and they put their money as on needed basis. Because of the benefit, high interest rate or any discounts that the bank is giving. Even it's not just banks, but also for e-wallets. This is the behavior of the consumer. So two types of behavior.
When we see of the Indonesian banking landscape itself, as you know, Indonesia has more than 100 banks. With the new digital banks coming in, it will be more banks to come in into the banking landscapes. When we are talking about the digital bank itself, it is not just new. The digital bank already been in the country for a few years already, and we don't see actually a significant increase of the market share of them. If we goes back seeing about what happened in one to two decades Indonesia, the top four banks gaining market share consistently growing higher and higher in the market share. Then we see that with many banks that already been in Indonesia, this top four banks still growing their market share.
When we check on our own data in BNI itself, we see that just like what we show you just now, the growth of transactions, the growth of users on our digital channels is already been growing tremendously. We see that the traction of disruption of digital bank itself, it doesn't really disrupt the banking relationship with traditional banks like us that is doing also digital transformation and giving digital proposition for our customers. We see that with all this new player coming in, it give us a good flavor of competitions in the market. But knowing with all the development that we are doing, the transformations that we done, and we also see the result on the data that also we show to you just now. We are very confident on seeing the competition in the futures with all the new fintech, new digital banks coming in.
I think maybe that is our view. Thank you.
Thank you, Pak Royke and Pak Y.B. for the clear answer. Ladies and gentlemen, I remind you once again that you can click the interpreter button and choose English if the answer from our management is delivered in Bahasa Indonesia. The next question is from Sarina Lesmina from CLSA, still regarding the digital bank. The question is, on digital bank joint venture, will the joint venture require to do asset cleanup of the legacy loan in Bank Mayora? Pak David, would you like to take this one, Pak? Thank you.
Thank you, Sarina, for the question. On this asset cleanup, on the issue on the asset cleanup in the Bank Mayora, we actually did the due diligence and quite comprehensive and deep due diligence which covered a majority of the loan book. We have also been assisted by one of the big four accounting firms when doing the due diligence. Based on this due diligence result, the potential NPL under our conservative scenario is much well below 5%. Most importantly, there is no requirement to book any material additional provisioning to the book as the provision coverage is considered sufficient. Hence, the acquisition will not have any adverse impact to our overall asset quality. Thank you.
Thank you, Pak David. The next question is regarding the rights issue. The question came from Jayden Vantarakis from Macquarie. The question is: what is the latest with the rights issues plan in terms of size and timing? Does the state budget have room for an equity injection for BNI, or are there other priorities for the government? Ibu Novi, would you like to cover this question, Ibu? Thank you.
Thank you, moderator. We expect the government will allocate around IDR 3.5 trillion capital to participate if we do a right issue. We expect our amount of right issue is around IDR 8 trillion up to IDR 11 trillion on the size, including government portion.
The timing should be in second half of this year. Maybe I will explain more detail about this right issue. Our right issue plan is, right now our balance sheet is strong. Strong structure balance sheet. We are doing prudent growth, our business with focus on sustainability performance. We are not seeing any near-term risk of having inadequate capital, as our profitability should be improved over the next few year. We just successfully issued AT1 capital last year. However, we should also note that as an SOE, we might have limited flexibility in terms of capital raising. We need majority shareholder support and commitment. This time around, we are grateful that government is very supportive with our capital raise plan. We should take advantage of this rare opportunity, having a slightly bigger capital is beneficial for us in several ways.
It allow us to do flexibility in our business plan. One of them, which you might already hear, is related to digital bank development. If the business plan of the digital bank works, and the bank grow, in the future, we may need more capital injection to prepare. We want to anticipate the risk that emerging market is usually at risk of U.S. taper tantrum, and it might also impact its credit rating. We estimate that the impact of Indonesia will be more moderate that we had in the past. We need to prepare the worst case. For example, if the sovereign rating get downgraded as the result of macro volatility, it may result in significant increase in the risk weighting of our exposure to government and may affect our credit rating.
We want to ensure that there is no intention to use capital raising to provide for pre-COVID loan book. We have been doing multiple exercise to get the best understanding of our asset quality, including by conducting survey to up to 19% of our borrowers. So far, the evidence we have are pointing to one direction, which is better asset quality outlook in the absence of massive external risk, such as prolonged pandemic. Maybe that's it. Moderator, thank you.
Thank you, Ibu Novita Widya Anggraini, for the comprehensive answer. The next question is probably one of the highlights in the market also. The question came from Aryana Paramita from Sinarmas Sekuritas. How will BBNI utilize the possibility of Bank Indonesia rate hike to boost loan growth? Pak Silvano, would you please answer this one, Pak? Thank you.
Okay. Thank you. We think BI rate hike is usually followed by lending rate adjustment. The magnitude of lending rate adjustment could vary from just enough to cover the increase in funding costs, or if the market backdrop is very strong, rate hike could translate into higher NIM, which is, of course, the best case scenario. We do not want rate hike to hurt our clients' capacity to repay their obligations, because we're looking to optimize our customers' lifetime value, not only short-term profit opportunity. Any lending rate adjustment will be done on a selective basis. Another way to mitigate rate hike impact to our margin is by having higher CASA from our clients' transactions in BNI. The increase in lending rate might be imposed mainly for those clients who do not transact with BNI sufficiently.
Our cost of fund, as you know, right now is very competitive among Indonesian banks. We could use this cost of fund advantage to gain lending market share in the industry during rate hike cycle, as most banks in Indonesia might not have as much flexibility as we do in terms of not only the level of funding costs, but also in terms of room for expansion or improvement. I just want to reiterate again what I've mentioned at the beginning of the presentation that in corporate banking segment, we have increased our CASA to loan ratio from 52% - 67% in the past 12 months. This is one of the examples of the progress that we've been making in terms of building a stronger CASA franchise.
In our five-year corporate plan, if I may reiterate our CEO explanation earlier, we aim to have best in class ROE on a sustainable basis. We do not want to see profit volatility from time to time as we have observed in the past. To achieve this, we have to gradually build a good low-risk customer base. This is very important. A good low-risk customer base that have resilient business model and proven to survive various economic turbulence in the past, as well as very good reputation and character, which is probably equally, if not more important. We are fully aware that by doing this strategy, our margin might not look the best among peers, but it will be compensated by lower credit costs as well as room to boost fee income prospects. Thank you.
Thank you, Pak Silvano. Still from Aryana, the next question is about Xpora, and we believe Pak Muhammad Iqbal can give us some color for this question. Pak Muhammad Iqbal, would you please explain to us the latest update on Xpora? Thank you, Pak.
Okay. Thank you, Aryana. As previously explained by Pak Silvano during his presentation, Xpora has been one of our future engine growth in advancing SMEs. Six months after the launch, BNI Xpora has promoted almost 600 SMEs to go global, and we have channeled for about IDR 2.4 trillion of loan to them. Apart from lending, we also develop SMEs capacity through trade expo and training, supported by several agencies, entrepreneurial association, and e-commerce. As an update, BNI Xpora just started a collaboration with Shopee, one of the leading global e-commerce players, to facilitate our SMEs to tap into export market, especially ASEAN and Taiwan. In addition to that, with the support of our overseas branches and the Indonesian embassy networks, we continue to accomplish a number of business matching to connect our customers with the global buyers.
So far, we have succeeded in connecting our SMEs with buyers from South Korea, U.K., Philippines, Malaysia, Hong Kong, Japan, and Singapore. Thank you.
Thank you, Pak Muhammad Iqbal, for the clear answer. The next question came from Thalia Riyadi from PT Indo Premier Investment Management. Any forecast rate for NPL rate this year? Pak David, would you please cover this question, Pak? Thank you.
Thank you, Thalia, for the question. For the NPL overall loan at risk, right now we feel much more comfortable with the asset quality situation, and we believe that the worst has been behind us. As of December 2021, the asset quality, as we mentioned before, continued to be resilient and improve. Loan at risk has declined quite significantly from 28% - 23.3% of the total portfolio, which is 5.4% lower year-on-year, and improvement is also across all components. NPL improved by 60 basis points year-on-year to 3.7%. For 2022, we think that NPL should improve close to 3% or below, which is supported by broad economic recovery and stringent underwriting process. We could also mention here that 89% or 90% of our COVID restructured book is considered low risk because these borrowers already started regular installment payment.
We think that the possibility or the potential of the downgrading of these borrowers quite minimum. Additionally, around 75% of our loan at risk book is in the economic sector that has shown and indicated recovery and pick up demand. We think that 2022, our NPL and loan at risk should improve quite significantly. Thank you.
Thank you, Mr. David Pirzada. Ladies and gentlemen, the next question came from Weldon. When you say asset shift to low-risk customers, can you clarify which is the low-risk segments that you are targeting, and what is the percentage of each segment of total book that you are aiming for, how fast this will happen, and will we see strong growth of this low-risk segment this year? Can you also clarify the impact alone on 2022 net interest margin due to shift low-risk segments? Do you see that those your NIM guidance given already include the assumption of 50 basis points Bank Indonesia rate hikes? What is the sensitivity of each 25 basis point Bank Indonesia rate hike to our net interest margin? Mr. Royke Tumilaar, would you like to take this one, Pak? Thank you.
Thank you. [Non-English content] top tier. Top tier clients are what we consider low risk with large transactions and significant business potential. Compensating with top tier with relatively low interest, of course, we will get business compensation from the transaction. That is why we are also targeting our NIM fee base to be quite large from there in the wholesale segment. In retail, we certainly have payroll. This payroll business is also something interesting that we see has great potential, especially our large clients who have a large number of employees and payroll that we can get, and this is one that has relatively low risk. Also, perhaps micro-subsidized business, KUR. KUR is also a business that has relatively low risk.
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Thank you so much, Pak Royke. The next question came from Joshua Tanja from UBS. The question is, can we get more color on the very low effective tax rate in full year 2021, about 13% only, and in the fourth quarter of 2021 tax credits. Is this something that will be continued in the first quarter of 2022 and full year of 2022? Ibu Novita Widya Anggraini, would you please answer this question? Thank you.
Thank you, Joshua. I will answer it in Bahasa. [Non-English content]
Thank you, Ibu Novi. Ladies and gentlemen, as we are reaching the end of our analyst meeting today, we hope that we have delivered our financial results for 2021 to all the attendees. Any questions that have not been answered, our investor relation team will gladly accommodate the answer for you. If you need further information, please contact us at ir@bni.co.id. We would like to express our gratitude for your participation today. You may now leave the webinar room. Thank you, stay safe, and have a great day.