Morning. We would like to thank you for joining us for Bank Rakyat Indonesia's first half 2024 earnings call. We would like to begin the meeting now. First, I would like to introduce the members of our board of directors who are joining us today. Our CEO, Pak Sunarso, our Vice CEO, Pak Catur, our CFO, Bu Vivi, our Director of Risk, Pak Agus Sudiarto, our Director of Micro, Pak Supari, our Director of Networks, Pak Andrijanto, our Director of Consumer, Ibu Handayani, Director of SME, Pak Amam Sukriyanto, Director of Corporate, Pak Agus Noorsanto, our Director of IT and Digital Banking, Pak Arga, and our Director of Human Capital, Pak Agus Winardono. I would like to mention a few points before we get started.
First, for everyone joining us on the Zoom call, I would strongly recommend that you download a copy of our presentation materials, currently available either from the Investor Relations homepage of Bank Rakyat or from the link we sent you this morning. Second, as this is a webinar format, for questions and answers, we will invite you as a speaker to the panel. When called upon, we will ask you to please unmute your phone and, then please state your name and company before asking questions during the Q&A segment. I would now like to introduce Pak Sunarso, our President Director, to begin the meeting.
Okay. Thank you, Brett. Good morning, everyone. First of all, I would say thank you for joining this session. Firstly, I would explain, share that macro situation in Indonesia. Indonesia macro situation remains stable, and outlook is attractive with our projection of 2024 GDP growth of 4.77%-5.03%, representing a modest decline from reported Q1 2024 GDP growth of 5.11%. Some near-term factor that could impact our performance include, first, the government is projecting a larger fiscal deficit at 2.7% of GDP in 2024, up from 1.65% in 2023. This would provide a buffer for economic growth in second half 2024.
Second, inflation in June 2024 declined, and volatile items, including food prices, fell to 5.96% year-on-year growth, from 10.3% in March 2024. From a historical perspective, falling food prices should have support our micro customers. The third, domestic consumption continued to weaken, reflected in lower car and motorcycle sales, among other key metrics. Additionally, the income gap between lower middle class and upper class has been widening post-pandemic, as signified by the Gini ratio increase from 0.376 in 2020 to 0.388 in December 2023. Fourth, the currency has been under pressure in Q2, and decreased by 3.2% to 16,174 rupiah per US dollar. Rupiah depreciation could lead to Bank Indonesia maintaining tight monetary policy.
Bank Indonesia's policy is likely to keep funding costs high. We continue to monitor global interest rate trend, driven by the Fed monetary policy and obstacle of for China to boost its economy despite its fiscal stimulus effort. On the domestic front, we are observing government policies that may spark a recovery in consumer purchasing power. Our first half 2024 consolidated results were impacted from the macroeconomic item mentioned and continue to feel pressure from our micro asset quality. We book in line year-on-year loan growth of 11.2%, with our consolidated loan reaching IDR 1,336.8 trillion. Our corporate portfolios grew by 29.2% year-on-year. There are a few reason for this elevated growth.
First, overall, we are seeing more opportunities in corporate lending, and especially, specifically, to date, in the first half of 2024, the largest drawdown on loan came from BULOG, the state logistics agency, increasing by IDR 11.3 trillion year-on-year, and fast-moving consumer good borrower increasing by IDR 8 trillion, and top-tier client in agribusiness sector increasing by IDR 11.1 trillion. Our micro loan decreased to 46.6% of total loan, down by nearly 150 basis point year-on-year, as we are focusing on collection and tightening risk criteria. In the current high interest rate environment, our net interest margin stand at 7.64%, which is in line with our guidance for 2024, while one time modification losses could impact second half of 2024.
We are seeing continuous improvement in our earning asset mix, and our CASA ratio increased by 151 basis points quarter-on-quarter to 63.17%, while total deposit increased by 11.6% year-on-year. Our cost-to-income ratio increased quarter-on-quarter, as we anticipated it would increase, but remain lower year-on-year, now at 41% from 41.8% in the year-ago period. Our cost of credit was 3.48% in first half 2024, and decreased to 3.13% in Q2 2024. Net cost of credit in first half 2024 was 1.93%, and gross NPL ratio was 3.05%, all improvement from Q1 2024.
Our profitability metrics were in line as our return on assets stood at 3.02%, and our return on equity was 19.22%. Leverage ratio increased to 6.3 times from 6.0 times in the same period. Finally, our net profit in first half 2024 increased by 1.1% to IDR 29.89 trillion. The key strength we note in the first half was slower micro loan growth as a result of our asset quality focus, stronger year-on-year PPOP growth, and strong capital level.
Bank-only micro loan growth slowed to a 5.7% year-on-year, compared to 10.4% in June 2023, as management is focusing on asset quality and recoveries, with net NPL downgrade improving Q to Q to IDR 9.9 trillion from twelve point four trillion rupiah, led by the micro segment. Additionally, we saw sizable increase in recoveries in the quarter. This helped to support strong PPOP growth of 11.7% year-on-year. Additionally, we believe our elevated capital position can support higher dividend payout in approve. If approve, primarily approval, we have to get approval from the FSA. Some challenges we faced were the high cost of credit and higher cost of fund.
Gross cost of credit at first half 2024 was 3.48%, supported by a decline to a 3.13% in Q2 2024. These figures remain above our full year 2024 guidance, as we front loaded provision for the micro and small business portfolios to curb the impact of potential deterioration. Furthermore, net cost of credit in Q2 2024 decreased to 1.42%. Rakyat still maintains ample NPL cover rate at 211.6%, and our loan loss reserve is 6.5%, well above the pre-COVID level of below 4.5%.
All in, only the cost of funds increased by 10 basis points to 3.53% in Q2 2024, but the outlook for rate cut and the decrease in weekly SRBI auction are signs that could alleviate some of this pressure. Turning to our guidance for the remainder of 2024, we are not making any changes at this time. We are seeing the portfolio move in line with our adjustment from Q1 2024, and we anticipate that our guidance will be met. For our loan growth, we are seeing micros slow down in line with our target, and in the second half 2024, we would note that there is a base effect on our corporate loan book, which should lower this segment growth from current level.
As we have mentioned in meeting and on call with many of you over the last quarter, we could see loan growth at the low end and our guidance in 2024. On our net interest margin, we anticipated some support to our lending yield in second half 2024 because of a few cash basis borrower that will pay in Q3 2024. We continue to monitor funding costs, which we believe can stabilize in second half 2024, but are unlikely to decrease from current level. We have seen some success in lowering our cost of time deposit by shifting to retail from institutional. We would note that there could be an impact to reported net interest margin by modification losses that could impact second half of 2024.
Our cost of credit improved in Q2 2024, but we are still cautious on our guidance for full year 2024. This could be higher than 2% if we do not meet loan growth target. Restructuring target of a Q4 2023 vintage deteriorated, deteriorated faster than historical, historical projection. Our cost-to-income ratio should be maintained at 41%-42% for 2024, in line with our guidance. So now, I would like to turn the call over to Bu Vivi and other board member, Bu Vivi as CFO, to discuss our financial in more detail. But before that, I think I apologize because I cannot join the session fully, because I have to join a high-level meeting with the minister. Thank you very much.
Thank you, Pak Sunarso. Good morning, everyone. Thank you for joining the call. So we would like to start with our balance sheet. So year-on-year, our total asset growth was 9.5%, of course, supported by the loan growth of 11.2%. And if we saw here, the loans to earning assets actually is increasing to 73% from 72% in the year-ago period. Moreover, we continue to make our balance sheet more efficient as earning asset increased to around 92.5% of total asset from 91.7% in a year-ago period. At the consolidated level, the contribution from PNM and Pegadaian still around 9.4% of our total loans and help to drive loan growth at the micro level.
As you may also aware, the bank-only micro is only growing around 5%, but in a consolidated level, together with Pegadaian and PNM, the micro segment can grow around 7%. And we, we also note that one of our subsidiary in a micro or ultra micro, in this case is PNM. The PNM loan grew, as of June, was 8%, and it is significantly lower than our expectations when we acquired PNM. And if we break it down, I think the women group lending business still continue to grow close to 12%, but the ULaM, the individual lending, declined by 26% year-on-year.
I would also want to convey a message that the macro or the external factors that currently cause the deteriorating in BRI asset quality was also impacting PNM, might also impacting PNM. Deposit growth remains strong year-on-year, rising 11.6%, and CASA increased 7.7%, leading to a strategic increase in our loan-to-deposit ratio to 86.6% from first quarter 2024. We see, we still see room to increase the LDR further in third quarter 2024, and hopefully it will help our net interest margin. If we deep dive into our loan book, in the second quarter was in line with our guidance, growing 11.2% year-on-year.
Our consumer portfolio increased 11.5% year-on-year, and like you can see here, the small segment increased by 2%, medium increased by 31.6%, and corporate portfolio growth rate in the first half was roughly around 29.2%. Most of the corporate disbursement coming from agri-related sectors, where BULOG and also big retailer, I think, contribute roughly around 30-35% of the corporate disbursement year-on-year. As Pak Sunarso stated earlier, we will slow our micro growth as we focus on collections and improving asset quality. We continue to expect micro loan growth will be driven by Kupedes, but in this case, probably we will more focus on top-up Kupedes or Kupedes that we will disburse to our healthy existing customers.
Within micro, we have implemented a number of new policies to improve collections and performance that Pak Supari will discuss later in the call, and these initiatives can impact our full year micro loan growth. Even we are seeing improvement in the net downgrade to SML or NPL, like explained by Pak Sunarso, it is still very early for us to conclude that we are able, basically, to completely resolve the problem. We maintain our intention to resolve within two years, so this year and next year. So in the medium term, our CoC will be normalized. If we are looking at our portfolio of our third party fund, our overall deposit growth was 11.6% year-on-year, and CASA decreased 2.3% year-on-year.
Our CASA ratio decreased year on year by 230 basis point to 63.2%, but still remains well above our historical level that below 60%. Our cost of CASA actually stood at 1.52%, because close to 60% of our CASA is saving account, with an average of interest expense roughly around 0.28%. And I think you also aware that in the increase in the cost of CASA is more driven by the increase in the composition of higher cost current account. Sorry, we are still cautious with the cost of fund, given that we are yet to see a rate cut.
Furthermore, the recent comments on the expansionary government spending to 2.7% fiscal deficit could help, but we are remain cautious as saving growth, especially from a micro segment, remains weak. We are working on initiatives across the business to increase CASA growth and to manage our cost of fund as a part of our aspirations to strengthen our retail banking capabilities. And if we are looking at our capital level here, the capital positions remains elevated with a total CAR of 25%. And I think we anticipate that it will be increased throughout the year. We believe we could increase our dividend payout ratio in 2024 to 85% or higher. It will be really depend on our consultations with the MSOE as well.
Over the medium term, we would like to see our total CAR decrease from the current level to close to around 20%, because the appetite for us, basically for Tier I, is roughly around 19%. And we plan to do this by, you know, finding a stronger future loan growth and continuing to return cash to our shareholders. I would like now to discuss our income statement and the items that impacting our growth. Our net interest income increased around 7% year-on-year. We would note that the interest income is benefiting for coming from the elevated loan growth, but the overall margin actually has been coming down as our NIM fell 28 basis points year-on-year.
We continue to see the funding costs, the cost of funds, outstripping earning asset yield, as our interest income increased by 15%, while the interest expense increased by 43% year-on-year. Our non-interest income increased close to 19% year-on-year, and as we continue to see strong recovery income growth and expect this level of growth could be maintained for the next few years. Our costs started to normalize, like we discussed last quarter, that the first quarter cost basically is like a seasonal. So now our costs started to normalize as we guided to investors that the OpEx usually will be roughly around 6%-8%.
If you see the cost to income ratio here, the cost to income ratio is 41%, in line with our, our, full year target of 41%-42%. This led PPOP increasing around 12% year-on-year, and this rise was primarily, primarily offset by the increase in the loan provisions costs, around 70% year-on-year, and it bring year-on-year net profit growth to 1.1%. If we are looking at our earning asset yield and margin, our consolidated NIM stood at 7.6% in the first half 2024, while the bank only was on, was 6.4%.
The NIM from PNM and Pegadaian continue to contribute roughly around 100-112 basis point to our consolidated NIM, increased 9 basis point actually from the year ago period. Our lending yield in the first half, roughly around 13.3%, represent a decrease approximately 26 basis point quarter-on-quarter. As a liability sensitive bank, we are able to manage the increase in the re- in the, in the interest expense quite well, as reflected by our reported NIM. If we are looking at the other operating income, the non-interest income continue to report strong growth, while the operating expense growth was roughly well managed. The non-interest income increased close to 20%, supported by strong recovery that up 50.5%.
Now it's around IDR 10.1 trillion, and our target was, like, twenty. Our target for 2024 is around IDR 20 trillion-IDR 24 trillion. And I think the recoveries and return on assets now account for roughly around 40% of non-interest income. A year ago, it's only like around 31%.... On the OpEx side, the cost continue to remain reasonably well controlled, with total OpEx up 8% year-on-year, to close to IDR 40 trillion. There is some seasonality to our OpEx this quarter, and we do anticipate the full growth in 2024, roughly around 6%-8% range. And we anticipate the OpEx efficiency gain will continue as we are targeting 41%-42% consolidated cost-to-income ratio. We are seeing normalizations in our OpEx, like, I mentioned earlier.
As we note that the, our costs would pick up starting in the second quarter, 2024. This led to an increase in the cost to asset of 32 basis points quarter-on-quarter to 3.21%. We guide you with OpEx to asset, usually like 3%-4%. Both consolidated and bank only are well below in terms of cost-to-income ratio compared with a year-ago period. The increase in the personnel expenses are a result of a timing issue related to bonus payment that had an impact in the second quarter numbers. And also, the first half 2024 cost-to-income ratio was impacted by one-off appreciation bonus paid in February 2023, and was not recurring in 2024. I would like now to turn the presentations over to our Director of Risk, Pak Agus Sudiarto.
Thank you, Bu Vivi. I would like now to discuss on our asset quality. The end non-performing loan ratio increased by 10 basis points to 3.05% year-on-year, as we continue to see accelerated downgrades of our COVID restructured loan book and are seeing NPLs from the 2023 micro disbursement. The increase in NPLs year-on-year was primarily across our micro and small segment, rising 72 basis points and 76 basis points, respectively, while in our corporate reported NPLs improving by 176 basis points. Special mention loans are improving, decreasing to 5.41% from 5.75% in the year ago period.
The decrease was primarily driven by higher restructuring of over IDR 11 trillion in loans during the first half 2024, while write-off increased by 30% or IDR 4.9 trillion year-on-year to IDR 21.2 trillion. The provision for loan and financing stood at IDR 86.4 trillion, representing 6.5% of total loans. From 2015 to 2019, before the pandemic, our loan loss reserve to loans never surpassed 4.4%, and we anticipate that this reserve will revert back to a level closer to our pre-pandemic ratio of loan loss reserve to loans.
Our coverage ratio is starting to move closer to normalized levels as it decreased to 211.6%, and we would expect this can continue to move lower over 2024, likely to 190% or 200% or higher, as our portfolio is much less tied to corporate lending than our peers. Loan at Risk ratio decreased to 12% from 12.7% at March 2024, as the increase in Special Mention Loan and restructured loan decreased. That said, we expect the decreasing trend in Loan at Risk to continue, but in a slower manner over the next 18 months, as we are seeing a higher rate of restructuring in the micro segment.
Our cost of credit has decreased in second quarter 2024 to 3.13% in the quarter and 3.47% in the first half 2024, in line with our guidance of an improvement in cost of credit going into second half 2024. Our net cost of credit is 1.93% year to date, but only in second quarter decreased to 1.41%. We are on pace to reach our write-off target of IDR 36 trillion-IDR 40 trillion and recoveries of IDR 22 trillion-IDR 24 trillion rupiah. Also, based on our data to date, we see the asset quality make an improvement during the second quarter this year, but it is too early to claim that there is an improvement in total in our portfolio.
That's why we do believe that the cost of credit will still remain elevated through the remainder of 2024, likely meeting our 3% guidance, unless loan growth slow further and restructuring of approximately IDR 20 trillion is not met. In the first semester of 2024, we wrote off IDR 21.2 trillion, which represented, which represent over 50% of our revised write-off target. We reported recoveries of IDR 10.1 trillion, and the last two months have averaged, have averaged over IDR 2.2 trillion per month of recoveries. At the end of the first half of 2024, total outstanding COVID-19 restructured loans decreased to 2.67% of total loans, and 1.8% of total borrowers from 4.8% and 3.2%, respectively, at December 2023.
The COVID-19 restructured portfolio totaled IDR 31.80 trillion in the first half of 2024, representing a decline of 41.6% year to date, mostly driven by improvement in micro and small segment and write-off of IDR 7.80 trillion. We anticipate that the COVID restructured loan portfolio will decrease to 20 or 22 trillion by the end of this year. Within the COVID restructured portfolio, it is composed primarily of small and micro loans that account for 59.8% of the total. At June 2024, 40.7% were current in payment, with 24.5% in special mention and 34.8% in non-performing loan. We feel the coverage of 33.4% is adequate to absorb any losses, as 28% of the loans are corporate restructuring that we do not foresee having payment issues.
I would now like to turn the presentation over to Pak Supari to discuss our micro portfolio. Please, Pak Supari.
Thank you, Pak Agus. Good morning, everyone. I would like to discuss about the contribution on PNM and Pegadaian, and detail, micro loan portfolio. The contribution of PNM and Pegadaian to consolidated micro loan increased to 20.3%. At the end, the group slowed to 8% as the women group lending business grew 11.9%. While ULaM decreased by 26.1%, women group lending is currently over 9% of PNM, total loan. Pegadaian grew 22.5%, with Pegadaian non-fund lending as the main contributor, passing 45%, while fund lending grew 18%. At year-end 2024, we expect non-fund lending could reach nearly 20% of Pegadaian loan.
Our micro loan growth in the first half of 2024 increased by only 5.7%, as we have tightened lending standards and required loan officers with a target of 5% NPL ratio to focus on collection and funding. The modest growth is driven by Kupedes increasing 60.1% year-on-year, as we transition back to our core commercial and more profitable micro loan. Our subsidized portfolio, known as KUR, increased by 1.3% year-on-year. We are seeing the number of Kupedes borrowers remain flat quarter-on-quarter, with a 26% graduation rate from KUR to Kupedes. We expect to meet the KUR disbursement target of IDR 150 trillion for micro and super micro KUR, while continuing to see non-subsidized micro loans increase to 65% or higher of micro loans.
I would like to share granularly on our Kupedes 2023 disbursement, and the breakdown of this loan across vintage and performance bucket. In 2023, we disbursed IDR 201 trillion in Kupedes loan, and currently IDR 116 trillion remain on our balance sheet at first half 2024. The disbursement was broken down by 53% from Kupedes top-up loan or refinancing, 30% from KUR graduate to Kupedes, and 60% new borrower. Within this, we saw weaker asset quality than 2022 vintage across all segments, and particularly in the new borrower segment, where 6.01% are in NPL. The bottom table shows the current NPL, SML, restructured, and write-off of the 2023 and 2024 disbursement. We would note that the data will continue...
We would note that data will continue to improve in the fourth quarter as the vintage ages, and the nearest comparable data we can provide is at 3 months on book for the entire portfolio that is provided at the bottom of the IDR 160 trillion remaining from 2023 disbursement. There are currently 11.3% in SML, 3.58% in NPL, and 0.87% has been written off. We would note that this portfolio is not fully seasoned, as we tend to see more clarity of performance and don't see deterioration closer to 8-12 months post disbursement. So we remain cautious on fourth quarter 2023 disbursements that have only been on book for 6-8 months.
In addition, we are actively restructuring loans via tenure extension that, as of the first half of 2024, we have restructured IDR 5.8 trillion of Kupedes disbursed in 2023, and we could potentially restructure IDR 15 trillion-IDR 20 trillion by year-end. We see opportunity of restructuring that we did, and we would note higher success in post-COVID restructuring. Internally, we believe that the restructuring is more sophisticated than those completed during the pandemic, as completed deeper analysis of the borrower and expect better performance. I would now like to turn the presentation back to Pak Brett to organize the question and answer segment. Thank you.
Thank you, Pak Supari. We would like to now move to the Q&A segment. At this time, please raise your hand if you would like to ask a question. When called upon, please unmute your microphone, and please state your name and company before asking questions. Please raise your hands now. We'll aggregate the questions. We do have a few questions from the Zoom that we will address first. I think the first question we have here is from Gaurav at JPMorgan. The first question is: on slide 29, on details around Kupedes disbursements, why is downgrade to SML three months on book higher at 1.5% for 4Q 2023? Do you expect NPL SML to increase eventually for the second and third quarter vintages?
There's a second question from Gaurav as well: Is the decline in quarter-over-quarter NIM due to higher corporate loan growth, or are there other drivers as well for the decline? Bu Vivi, do you want to take the first question?
Yeah. Okay, for... Hi, Gaurav. Thank you for the questions. For slide 29, if we are talking about the disbursement for every fourth quarter, every year, at least since 2021, where basically this is the first time we try to monitor our vintage. The vintage for the loan dispersed in the fourth quarter usually is, you know, is the worst every year. And if we are looking... So this is like a trend, basically, every year, the fourth quarter disbursement, usually the asset quality is the lowest among the quarters within a year. And I think the fourth quarter 2023 also facing similar experience.
However, if we want to deep dive on this number, if we see the fourth quarter 2023 actually have a better vintage compared to fourth quarter 2021 disbursement at 1.78%. However, they are still have, I mean, the fourth quarter 2021 is still the best vintage so far. So the fourth quarter 2023 actually is better than the fourth quarter 2022, but not as good as fourth quarter 2021. And for your next questions is the decline in net interest margin quarter-on-quarter. First, the main reason, of course, is about the increase in the cost of fund, because our cost of fund margin release now around 3.6% for bank only.
And, please note that in the first quarter 2024, we have one-off event coming from the corporate client that impacts our interest income as well. And I think the other reasons for this one, actually, for micro, for example, the micro yield itself actually is increasing. So this is mainly because of the cost of fund, and the second one is the one-off in the first quarter coming from our corporate client.
Thank you, Bu Vivi. Now, we will move to the next question. We'll take one from the attendees on the who've raised their hands. The first person from Ferry Wong. Ferry, could you unmute your microphone?
Yes. Hi. Thanks, Brett. Thanks, management of BRI. Yeah, can you hear me?
Yeah. Yes, we can hear you, Ferry.
Yeah. Okay. Yes. Okay. Yeah, I have three questions. The first one, could you please explain the non-loan provision expense in the second quarter of 2024? A nd the second one, with regards to the KUR, yeah, for example, if the government actually will allocate more KUR, going into 2025, are you going to accelerate your KUR growth going into 2025? And the third one, any guidance on the credit costs in 2025? Because Pak Sunarso mentioned that there could be a possibility that the credit cost could exceed the 3% level in 2024 if loans growth is not being achieved. So what about 2025, outlook for credit costs? Wouldn't be... Well, basically, I think, I wanted to see whether you wanted to increase your credit cost, i.e., to 3.5% in 2024, then you start clean in 2025. So that's all. Thanks.
Thank you, Ferry. Bu Vivi, do you want to take the first part and then go from there?
Okay. So, thank you, Ferry. So I will answer your first two questions, and I think the last question, Pak Agus Sudiarto will help me. For the non-loan provision expense, basically, we have reversal. It is coming from our corporate clients. The reversal is around IDR 2.6 trillion, and usually, this is the provisions that we provide for non-cash loan, like Guarantee Bank and Trade Finance. I think this first half, we reverse the non-loan provisions. For example, the WIKA. WIKA loan basically sit, most of their loan in Rakyat, sit in non-cash. So when the scheme changed into a cash loan, so WIKA loan then changed into a cash loan, we reverse the provision in non-cash loan and add it back to the cash loan provisions.
For KUR, 2025, I think, at the current moment, for us, it is still very early to discuss the 2025 budget plan. And I think, we still on the process of negotiations with the KUR committee, including with the transitions government. And, this process usually will be finalized in fourth quarter 2024. But so far, you know, in a very high level discussion, actually, we do not have any intentions to increase the absorption of KUR, but that will really depend on the discussion later on in 2024. Agus?
Thank you, Bu Vivi. And thank you, Ferry, for your question for number three, for the guidance of the credit of, cost of credit. As mentioned by Pak Sunarso earlier, I think we are still confident on achieving cost of credit on the guidance 3%, but we still see there is a possibility to higher than our guidance because there are some condition. First is the loan growth target. As you understand, initially, we have a target 10%-12% in the loan growth, but it is not meet the target, so the denominator impact will impact also in the our cost of credit. Secondly, of course, in our activities in restructuring.
Starting the first May, we implemented our team task force to aggressively restructure our loans, especially in the performing and special mention loan, to hold them and to see the opportunity, the debtor, to help the debtor to fulfill the obligation. So if two main reason, loan growth and secondly, the restructuring activities meet, we are still believe that the guidance for the cost of credit will achieve. But if not, so maybe there is a higher cost of credit during this year. This Bu Vivi.
Thank you for answering the questions. The next question will be from Jayden. Jayden, please, unmute your phone.
Okay. Thank you, BRI team. Appreciate the opportunity. Couple more questions on slide 29, obviously quite topical. Just want to clarify, which of the buckets is the most concerning? Is it the KUR graduates, or is it the new borrowers? Do you know what proportion of them are you sort of watchful on? Because you mentioned that it's the July, August period that we should be seeing some of the seasoning come through. My second question is just on the broader restructuring target for micro. Can I confirm if the IDR 15-20 trillion for this year is actually higher than what we were saying earlier? And then following on from that, we never used to restructure micro customers. We'd always just downgrade and write them off, apart from the pandemic in 2015, if I recall correctly.
Has something changed? Is this gonna be a permanent thing, or is this sort of a, a one-off adjustment as well? Those are my questions, and thank you very much.
Thank you, Jayden. Maybe I can start with some of it, and then Vivi and Agus Sudiarto can add to that. First, I think on your question, looking at slide 29, on the seasonality. If you look at the numbers from the fourth quarter of 2022 and fourth quarter of 2021, we also do see usually a higher amount of three months on book that are deteriorating or weaker performance from the fourth quarter numbers historically. So there is a little bit of seasonality to that. And I think when, you know, we look at those numbers, we're cautious on those fourth quarter, but it is also in line with seasonality, what we've seen in the past.
If we look at, you know, all these numbers here, where we're most concerned about, if you can see the new borrowers is definitely the number that has had some of the bigger problems on the last of the 2023 vintages. And you've seen what we've been... Originations for this year have been a lower number of new borrowers as well. The best performing that we see is coming from those that are Kupedes top-up customers or refinancing customers. Those have been performing much better, and that is the largest portion of the borrowers that we're seeing here. We've seen KUR graduates of about 26% in the quarter moving from KUR to Kupedes. We're trying to be very cautious on this. If we want to...
You know, also looking at, on the micro borrowers restructuring, we never did this before in the past, but we have done it during the pandemic, and we will, you know, do it a little bit now. Mainly, the restructuring that we're doing, though, is tenor extension. Everything that we've done year to date has been tenor extension, and we have, you know, no plans as of now to change that. This would mainly be, current and, SML Category One loans that we'd be restructuring for the most part.
Yeah. Just to add from Brett's explanation, Jayden. So for restructured loan in micro, I think we learned a lot from the COVID-19 pandemic, where basically we still have, we still see that our micro customers, actually, they still have a willingness to pay. So, if we are talking about the restructuring in the micro segment going forward, I think we still put limitations. So, for example, for KUR, they will only able to be restructured two times, and Kupedes is three times. The reason for this is because we do not want to put burden, you know, going forward. So we give them an opportunity by restructure them, but with a limit of frequency, we can restructure them. And the other questions, actually, is the IDR 15 trillion-IDR 20 trillion. Am I correct?
Yes, the IDR 15 trillion-IDR 20 trillion for the micro loan that will be restructured in 2024, is that higher than earlier? Well, at this moment, to be honest, a lot of moving parts coming from our part, Jaden. So this IDR 15 trillion-IDR 20 trillion, I will say, yes, it is higher than the previous one. And whether this number, you know, will be kind of fixed, let's see. Up to now, our estimation is IDR 15 trillion-IDR 20 trillion micro loan will be restructured. And probably we can give you a better color in the third quarter or fourth quarter, because the mechanism of the restructure loan is like Brett mentioned, it's just extensions of time period, and usually it's like six months and above.
For the loan debt being restructured six months, probably they will mature in the fourth quarter, so then we can see probably a better color of this loan.
Thank you, Bu Vivi. There's a question from Zoom from Serena Lesmina. Can I confirm the statement that COVID restructured loans will drop to IDR 20 trillion-IDR 22 trillion by year-end? Was the intention to clean up COVID restructured loans this year? Yeah, so the expectation is it will get down to about IDR 20 trillion-IDR 22 trillion by the end of the year. The reason it will still stay at around that level is we do have close to IDR 10 trillion in corporate restructured loans, and that number will fall a little bit slower than the rest of the portfolio.
We would anticipate that the remaining portfolio would probably be resolved by the middle to end of 2025, but that should lead to limited write-offs in the 2025 period coming from that portfolio compared to what we've seen so far this year from that book. We'll take another question from the call. Harsh Modi. Harsh, if you can unmute your line.
Yeah, thanks for allowing me to ask the question. On the provisions as we restructure, do you expect... will you take provisions on restructured loans, and how much will be the provisions on these? Or would you wait for the actual performance of these restructured loans in the course of 2024, 2025, and progressively will take provisions? Basically, what I'm trying to understand is the 300 basis points, the credit cost guidance, is that a hard target? Or, if you think about the two possibilities of having 300 this year and potentially... likely, 225-300 next year, versus doing a bit of a kitchen sinking this year, closer to 350, so that 2025 onwards, it is higher, with higher confidence, we can say credit costs normalize.
So just thinking through the timing of provisions here and how much confidence do we have in dimensioning the entire problem, both from balance sheet and P&L point of view? Thank you.
You want me?
Yeah. Thanks, Harsh. Maybe I'll just take part of your second question first, and then Bu Vivi can answer the add to that, and also answer the first half. I think any problems that we can identify in micro we would like to resolve them this year. If that implies that we can, you know, we don't see opportunities to restructure to that IDR 20 trillion or more that would lead to potentially the credit costs being higher this year. If the loan growth, you know, continues to slow down, when you look at the loan growth, I think keep in mind, as I believe Pak Sunarso mentioned, that we had 13.5% corporate loan growth in the third quarter of 2023.
When we look at the corporate loan growth year-over-year in 2024, that number probably slows down. So the loan growth number overall probably comes in the third quarter. If we look at what we're seeing as of now, maybe closer to the 10% level instead of, you know, over 11% where we stand currently. That would also have a small impact on our cost of credit numbers. But we will continue to review all of the micro loans that we see where we cannot restructure, and those loans we would consider looking at, you know, potentially having an impact on the cost of credit being above the 3% target. But I think as you saw in the quarter, for quarter two, the cost of credit did come down.
For the quarter number, it was about three point a little bit over 3.1%. And, you know, we'll monitor that throughout the third quarter. I think, you know, we did mention that even with the seasonality in the fourth quarter, 2023, and historical fourth quarter numbers on the vintages, that you know, we'll monitor that to see how that performs throughout, particularly the third quarter of this year. Bu Vivi, is there-
Yeah.
Do you want to add?
Okay. Thanks, Britt. So for the provision, Harsh, actually, the provision still follow the initial bucket when they, they, they start to be restructured. So, in a mass, I mean, in a segment like micro, so the calculations of the ECL, the provisions, basically, it's a, like a collective impairment, so the provisions still follow their initial bucket. However, the management still have an opportunity to add through the management overlay mechanism. So, for example, like what we start to do now, actually, is we are looking carefully on the loan that being restructured in micro segment, especially the loan debt going forward, it's not now, I mean, the, the restructured loan that already being restored twice, for example. So we can add more provisions through the management overlay mechanism.
Maybe I want to just add this explain from Bu Vivi to Harsh. During the pandemic, even though the OJK implemented the relaxation also in the calculating the provision, we in BRI still calculate in accordance with the PSAK 71, the IFRS 9. So even though there's a relaxation, we implemented the strict regulation on calculating the provision. So same situation will be implemented under the restructured loan, the micro, in the current situation. Thank you.
Thank you for the question, Harsh. We're, you know, running short of time here, so any of the additional questions that we have from the Zoom, we will email and email your responses. I want to thank our board of directors and our SVPs for joining this this call, and also, all of the analysts and investors who joined as well. Please feel free to reach out to us with any additional questions that you have. Apologies if we could not get to any more questions in the time limit. Thank you very much. Have a nice day.