Good morning everyone, and welcome to BNI's third quarter of 2026 earnings call. My name is Sigit from BNI's investor relations, and I will be your host today. Thank you for your attendance. First, I would like to introduce our Board of Directors who are here with us. First, we have Bapak Putrama Wahju Setyawan, President Director. Ibu Alexandra Askandar, Deputy President Director. Bapak Hussein Paolo Kartadjoemena, Finance and Strategy Director. Bapak David Pirzada, Risk Management Director. We also have other members of BNI's Board of Directors and senior management as well. Today's presentation will highlight our earnings resilience supported by our record high PPOP, our strategic business expansion, and continued improvements in underwriting. We want to discuss our strengthening CASA franchise and solid capital position, which support our ability to navigate the ongoing market volatility.
We will begin the call with a presentation from our BOD, and then we are going to have a Q&A session. Please feel free to submit your questions in the Q&A box on your Zoom apps. Without further ado, it is my pleasure to invite our President Director, Bapak Putrama Wahju Setyawan, to begin the presentation. Bapak Putrama, the floor is yours.
Thank you, Sigit. Good morning, everyone. Thank you for joining us today. I want to start with our overall performance for the first nine of 2026. We know the environment is very dynamic and challenging for all banks, but I am grateful to share that we have delivered a record high core profit. Our PPOP reached IDR 27.5 trillion. This is a record high for us, growing 11.6% year-on-year, and our net profit also grew 6.6% to IDR 16.1 trillion. How did we do this? We grew our business strongly. Our loans grew 22.2%, and our CASA grew 19.6%. Yes, our NIM was under pressure, down by 30 basis points, but this is an industry-wide issue. We are not alone. The industry also dropped by 30 basis points because we grew our volume strongly, our total profit still increased.
At the same time, we are keeping the bank safe. Our asset quality is getting better. Our loan at risk, or LAR, improved significantly from 10.4% to 7.8%. We also keep a strong reserve buffer at 3.8%, which is higher than the industry average. So we grow fast, but we remain prudent. Now let me talk about our loan growth. Our market share increased to 10.6% in August. We added about IDR 180 trillion new loans year-on-year, and the main driver is our core business, the large corporate and middle corporate, or what we often call the enterprise segment. This segment grew very strong. We also participate in the government program, the Agrinas Loan. I know many investors were concerned about this last quarter. You worried about the risk and whether the government would pay. I want to give you an update.
We always make sure the risk is well managed and properly structured. I am happy to share that in September, we already received the first repayment, so the program is running well and the risk is handled. I want to emphasize that we are not just chasing growth. We are growing with discipline. As you can see on the right side, our risk management is working very well. Our NPL formation went down in almost all segments. Bank wide, it dropped from 2.0% to 1.3%, with the most significant improvements seen in enterprise and commercial segment. We do see a little pressure in the consumer segment, but the team is watching this very closely. Overall, our new loans are much healthier than before. Before I pass to the CFO, I want to talk about our funding. For our bank, funding is the most important thing. It is our foundation.
We strongly believe that we cannot grow our lending in sustainable way if we do not have strong and stable funding. We put a lot of focus on this, and I am happy to share that our strategy is working. Our low-cost funding strategy, growing much faster than the market. Our current account grew 25.9%, while the industry only grew around 9.8%. Our saving grew well. Because of this, our CASA market share is improving. How do we do this? We focus on traditional banking and digitalization. Our business platform, BNI Direct, is used by more and more corporate clients. For retail, our app, wondr, now has 16.6 million users, a very big jump of 58%. This also helps us to get more payroll accounts. In short, because we have strong funding growth, we have the power to keep growing our loans safely and sustainable in the future.
Now I pass the time to Pak Paolo, our CFO. [Foreign language], Pak Paolo.
Thank you, Pak Putrama. Let me start on page seven with our NIM dynamics. Usually when we see NIM compression across the banking sector, it is driven by rising funding costs. However, our experience this year has been slightly different. If you look at the top right chart, our year-to-date cost of fund remain very stable at 2.8%. The 30 basis point of NIM compression from 3.8% to 3.5% was primarily driven by a 33 basis point decline in our loan yield. We see this as a reflection of the strength of our funding franchise. Even though we grew our deposits by over 20% and gained market share, we managed to keep our funding costs flat. We were able to grow our balance sheet meaningfully without having to overpay for deposits. That said, we are not just relying on our funding advantage. We are actively managing the asset side.
If you look at the bottom left chart, you can see the quarterly trajectory of our loan yield. After bottoming out at 6.9% in the first half of the year, we successfully repriced our assets in the third quarter, bringing the yield back up to 7.1%. We are executing this repricing very carefully. We want to protect our spreads, but we also want to avoid triggering client attrition. We believe the Q3 recovery is a good indication that our balanced approach is working. Given the global volatility we are seeing, having a strong balance sheet is absolutely critical. We are entering this period of uncertainty from a position of strength. Our liquidity is deep, with a loan-to-deposit ratio of 87.9%, and an LCR of 143%. On the capital side, our total CAR stands at 19.2%.
This is nearly 5% above the regulatory minimum, providing us with over IDR 40 trillion in excess capital. If we look at asset quality, our metrics compare very favorably against the broader industry. Our NPL ratio is maintained at 1.9%, which is better than the industry average of 2.1%. More importantly, our NPL coverage ratio stands at 193%, significantly higher than the industry's average of 166%. Ultimately, these superior buffers, both in capital and provisioning, give us the safety and the flexibility to keep supporting our clients. Now on page nine, let me share our updated guidance. We are revising our loan growth guidance upward to the 10%-13% range. This upward revision reflects a divergence between the broader domestic economy and the specific segments that we serve. Why are we able to grow faster in the market?
It comes down to our balance sheet capacity and our strategic positioning. While many players in the market are currently facing liquidity and capital constraints, which naturally limits their lending capacity, BNI's strong balance sheet allows us to step in and capture high-quality opportunities. With our 19.2% CAR and 87.9% LDR, we have the funding and the capital to support our clients. Furthermore, our growth is less reliant on domestic consumption cycles. Our expansion is anchored in specific growth areas. We are seeing robust demand from the natural resources sector, which is supported by global demand. We are also actively supporting government strategic programs like the Agrinas loan, where we have ensured the risk is well managed and have already received the first repayment. I also want to reaffirm the rest of our guidance.
We are maintaining our NIM guidance at 3.3%-3.5%, and our credit cost guidance remains at 1%-1.2%. We believe these levels reflect a prudent balance between profitability and risk management. While we maintain cautious on the macro outlook, we are highly confident in our specific growth trajectory and our ability to execute. Turning to page 17 of our financial results, I want to highlight the balance in our growth strategy. We delivered a 22.2% increase in loans, which is aligned with the 19.6% growth in CASA. Because our loan growth was well-aligned with our funding capacity, our net interest income increased by 13.6%. This drove our PPOP to a record high of IDR 27.5 trillion, growing 11.6% year-on-year. However, consistent with our commitment to long-term integrity, we did not let this strong top-line performance lead to complacency.
We chose to increase our provisioning charges by 18.6% to ensure our buffers remain robust. As a result, our net profit grew by a solid 6.6% to IDR 16.1 trillion. We believe this represents high-quality, sustainable earnings built on a foundation of prudent risk management and disciplined funding. Looking at page 21, our 22.2% consolidated loan growth was driven primarily by our wholesale segment, with balanced contributions from large corporate and middle corporate. I also want to highlight a very important detail about our loan composition. There is a general market perception that when the domestic economy moderates, corporate CapEx or investment loans will slow down, and companies will only draw on working capital loans because they are short on cash. However, our data tells a different story. Our loan growth is equally split between working capital and investment loans. Both grew by around 25% year-on-year.
This tells us two things. Firstly, our clients are not just surviving, they are still expanding their capacity. Secondly, this ties back to our earlier point, because our growth is anchored in resilient sectors like natural resources and strategic infrastructure, we are seeing genuine investment demand driven by global markets, not just distressed borrowing. Finally, I want to draw your attention to the yield table on the right. In the third quarter, our blended loan yield recovered to 7.1% from 6.9% in the previous quarter. This confirms that our cautious asset repricing strategy is yielding tangible results without causing significant client attrition. Finally, on page 24, let me address our funding dynamics directly because I know the rising cost of funds in the third quarter is a key focus for many of you.
You can see in the bottom left of our chart that our Q3 cost of fund ticked up. I want to be very transparent about the reasons why. In June, there was unexpected announcement regarding the withdrawal of government SAL funds from state-owned banks. The immediate market reaction was intense deposit competition as banks built liquidity buffers at all costs. We participated in that competition as well to protect our franchise, and that is reflected in the Q3 numbers. However, the situation has since evolved in a more constructive direction. The government has now provided a clear stage timeline for SAL withdrawal. In BNI's case, our SAL-related term deposits once reached IDR 95 trillion before coming down to IDR 75 trillion in September, and will decline further to around IDR 55 trillion by November. This clarity actually is very helpful.
It allows us to prepare our liquidity in stages rather than reacting to a sudden shock. The broader message is this. Liquidity in the system is available, but if you need to secure it in massive size, you have to pay up for it. We expect the cost of fund to remain elevated through the first quarter of next year, but we do not anticipate a significant further worsening from our current levels. We also received additional support just last week. Bank Indonesia maintained the benchmark rate at 5.75% and announced a reduction in the reserve requirement ratio. Both measures are constructive for bank liquidity and funding stability going forward. More importantly, our structural foundation of our funding remains intact. Our CASA grew 19.6% to IDR 733 trillion, with current accounts up 25.9%.
This was not achieved by simply paying higher rates, but more driven by deepening our transaction banking relationships. 93% of our wholesale current account balance comes from users of BNI Direct, and wondr continues to drive retail deposits. Because of this low-cost sticky deposit base continues to grow, we have the foundation to manage through this period of elevated funding costs and to grow our loan book in a sustainable way. I will now hand it over to Pak David, our Risk Management Director, to walk you through our asset quality in detail.
Thank you, Pak Paolo. Good morning, everyone. Let me begin on page 29 by giving you a clear picture of our asset quality. At the bank-wide level, I am pleased to report that our portfolio has strengthened over the past year. If you look at the top left, our special mention loans improved from 3.6% to 2.7%. More importantly, our LAR dropped from 10.4% down to 7.8%, and our gross NPL remains stable at 1.9%. I also want to highlight the bottom right chart on our recovery efforts. As we write off legacy loans, our recovery rate remains very healthy. In fact, our recovery-to-write-off ratio improved to 66.1%, which shows that even when we write off loans, we are recovering a significant portion of the value. While our corporate, enterprise, and commercial segments all show strong improvements, we are seeing some pressure in the consumer segment.
This is primarily driven by macro factors affecting household purchasing power. We are monitoring this closely and have tightened our underwriting criteria for consumer products. However, because consumer loans are a relatively small part of our total portfolio, it does not change our overall positive trajectory. I want to show you why our asset quality is improving and why we are confident that this is structural, not just cyclical. If you look at the chart on the left, 56% of our NPL formation in nine months of 2026 came from loans that were originated before 2022. Similarly, 55% of our write-offs came from this older vintage. These are legacy issues from the pandemic era, and we are successfully clearing them out. The more important metric for the future is our NPL formation rate.
As you saw in our management highlight earlier, our Bank Wide NPL formation dropped significantly from 2% to 1.3% year-on-year. What is driving this? Our new underwriting standards are working. If you look at the corporate and enterprise segments, NPL formation dropped sharply to 0.2% and 0.8% respectively. I also must note that in the consumer segment, NPL formation ticked up slightly to 2.7% due to household purchasing power pressure. We are managing this tightly. Because the rest of our book is performing so well, the total NPL formation in nine months of 2026 was only IDR 8.1 trillion, which is a massive 34.6% decline year-on-year. Write-off also dropped by 47.4%. The story here is that the drag from our legacy portfolio is shrinking, and our new book is performing very well.
I want to emphasize our provisioning philosophy and why our reserves are so resilient. Despite the fact that our asset quality is improving and NPL formation is falling, we did not release our reserve to artificially boost short-term earnings. Instead, we continued to build them. As you can see on the top left, even after deducting our write-off, we actively added another IDR 6.8 trillion to our loan provisions in the first nine months of the year. Because of this proactive build-up, our loan loss reserve now stands at 3.8%, which is higher than the industry average of roughly 3.49%. I want to address the NPL coverage ratio on the bottom left, which decreased from 206% in December to 193% in September. I want to be very clear that this is not because we reduced our reserve.
The drop is simply because our write-off volume significantly reduced this year by 47.4%, which is driven by strong recoveries and better legacy asset resolution. Because we are writing off fewer loans, our absolute NPL base is not being artificially shrunk as much as it was in previous periods. More importantly, if you look at the broader risk picture, our LAR coverage actually improved from 46.9% at the end of last year to 48.3% in September. This tells you that our buffer for the entire at-risk portfolio is stronger than ever. I also want to draw your attention to the bottom right table, which show how we allocate this reserve. Our stage 3 coverage is very strong at 57.1%, and our coverage for NPL is even higher at 63.5%. Given the current global uncertainties, we believe this conservative approach is absolutely necessary.
Our total credit cost for nine months of 2026 remains stable and within guidance at 1%. By maintaining this strong buffer, we are fully prepared to absorb any unexpected shocks and protect the bank's long-term earnings stability. With that, I will hand it back to the team for the Q&A session. Thank you.