Good morning. We would like to thank you for joining us for Bank Rakyat Indonesia's nine months 2024 earnings call. We'd 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. Director of Risk, Pak Agus Sudiarto. Director of Micro, Pak Supari. Our Director of Networks, Pak Andrijanto. Director of Consumer, Ibu Handayani. Director of SME, Pak Amam Sukriyanto. Director of Corporate, Pak Agus Noorsanto. Director of Compliance, Pak Solichin . 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 encourage you to download a copy of our presentation materials currently available either from the investor relations homepage of Bank Rakyat Indonesia or from the link we sent this early morning. Second, as this is a webinar format for Q&A, we will invite you as a speaker to the panel. When called upon, we will ask you to please unmute your microphone and then please state your name and company before asking your question during the Q&A segment. And then I would now like to introduce Pak Sunarso, our CEO to begin the meeting.
Thank you, Siaga. Good morning everyone. Thank you for joining this meeting. First of all, I would say I would share about the macro situation of Indonesian economy. Indonesia's macro situation remains stable and the outlook is attractive with our projection of 2024 GDP growth of 4.9%-5.1% representing a modest improvement from reported Q2 2024 GDP growth of 5.05%. Some near term factors that could impact our performance include first, the government is projecting a largest fiscal deficit at 2.7% of GDP in 2024, up from 1.65% in 2023. This would provide a buffer for economic growth through the rest of the year. Second, inflation at September 2024 declined as we have seen five consecutive months of deflation. Most notably, volatile items including food price fell to 1.43% year on year growth. Remember, this is down from 10.3% in March 2024.
As we noted in the first quarter, we felt this figure could decline faster than originally anticipated as we have seen the government's action firsthand on rice import. From a historical perspective, falling food prices should have supported our micro customers. Third, domestic consumption remained weak as we continue to see households shifting to lower price alternative and the above mentioned deflation. However, retail sales figures are slightly elevated due to low base effect in 2023. Overall the business activity index improved in 2024 versus 2023 but has seen a downtrend the last two quarters. Fourth, the currency has been stable trading between 15,000-16,000.
Given the global volatility due to the Fed sizable 50 basis point cut and then followed by China unprecedented stimulus, we do anticipate there will be room for rupiah depreciation under the incoming administration policies which must be monitored but in the near term rate cut could be in lockstep or ahead of Fed action helping to improve funding costs. As we are liability sensitive, this should have improved our profitability. Let's move on to discuss our key performance highlight. Our pre-provision operating profit continues to grow by 15.9% Q on Q and now stand at IDR 87.5 trillion as our non-interest income has picked up to support revenue growth while our net interest margin remained quite strong at 7.8% in the quarter. As we are entering a falling rate environment, we believe our liability sensitive balance sheet can benefit.
Return on assets and return on equity remain strong, as our return on assets is at 3.2%, the same level from Q3 2023, and our return on equity is higher by 20 basis points from Q3 2023 level. Most of this is due to our ability to optimize our balance sheet from a historically conservative asset mix, as we have increased our loan to deposit ratio, loan to earning asset, and earning asset to total asset. Our capital adequacy ratio continues to remain quite elevated, implying that our 19.2% return on equity would be much higher if our capital level were at industry averages for the top 10 banks in Indonesia. Our lending yield has remained elevated despite the size of our loan and the elevated NPLs, and our subsidiaries have continued to grow and our mix has improved.
The strong ability to generate recoveries on write-off loans has led to a continued decline in the net cost of credit, which fell by 49 basis points to 0.93% in Q3 2024. There was a step increase of 300 basis points Q on Q in subsidiaries' gross cost of credit at 5.66% as PNM, Permodalan Nasional Madani, front-loaded provisions. As asset quality remains weak, other key metrics appear in line to meet our 2024 guidance. We booked loan growth of 8.2% with our consolidated loans reaching IDR 1,353.4 trillion. Our corporate portfolio growth slowed to 16.9% year on year as we guided toward on our Q2 2024 call. The corporate slowdown along with bank-only micro growth slowing to 3.3% were the biggest drivers in loan growth declining.
We anticipate Q4 2024 loan growth to increase as a result of the base effect from corporate falling of 5% in Q4 2023. Our micro loan decreased to 46.4% of total loans down by nearly 80 basis points year on year as we are focusing on collection and the impact of tighter scoring standard. Our net interest margin stand at 7.7% which is in line with our guidance for 2024. Recent rate cuts should start to impact cost of fund toward the end of Q4 2024 helping to further support our net interest margin. We are seeing continued improvement in our earning asset mix and our CASA ratio increase by 100 basis points quarter on quarter to 64.2% while total deposit increased by 5.6% year on year driven by CASA deposit rising 6.5%. Our cost to income ratio decreased quarter on quarter to 42.4% from 44.7% and 9 months 2024.
Cost-to-income ratio stands at 41.3%, which is at the midpoint of our 41%-42% guidance. Our cost of credit was 3.39% at 9 months 2024 and stood at 3.2% in Q3 2024. Net cost of credit in 9 months 2024 was much lower at 1.6% and the gross NPL ratio improved to 2.9% as asset quality continues to improve. Finally, our net profit in nine months 2024 increased by 2% to IDR 45.1 trillion. The key strengths we noted in the quarter were our net asset quality improvement, strong PPOP growth rising 10% year on year helping to support solid return on equity at 19.2% were slower micro loan growth as a result of our asset quality focus.
Strong year-on-year PPOP growth and strong capital level. Net downgrades to NPL improved Q on Q to IDR 9.2 trillion from IDR 9.9 trillion as micro net downgrade improved. Recovery income continues to trend higher as average monthly recoveries increased to IDR 2.6 trillion from IDR 1.9 trillion in Q2 2024. This helped to support PPOP expansion Q on Q of 15.9% driven by non-interest income rising 26.6% Q on Q and positive operating leverage as revenue growth rate was more than 2x cost growth. Additionally, we believe our elevated capital position can support higher dividend payout if approved. Some challenges we faced were the high cost of credit and elevated cost of funds. Gross cost of credit in 9 months 2024 improved to 3.39% supported by a decline to 3.2% in Q3 2024.
This remains above our full year 2024 guidance as we front-loaded provisions for the micro and small business portfolios to curb the impact of potential deterioration. Furthermore, net cost of credit in Q3 2024 decreased to 0.93% as we saw sizable recoveries. BRI is still maintaining ample NPL coverage at 215.4% and our loan loss reserve is 6.2% well above the pre-COVID level of below 4.5%. Our bank-only cost of funds were flat Q on Q in Q3 2024 but the recent rate cut combined with the outlook for more expansionary monetary policy and the decrease in weekly SRBI auctions are signs that cost of funds could improve. Turning to our guidance for the remainder of 2024, we are not making any changes in it 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 micro slowdown in line with our target and in Q4 2024. We would note that there is a base effect on our corporate loan book which should increase this segment growth in the fourth quarter. 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 of our guidance in 2024 on our net interest margin. We anticipate that we will remain within our target of 7.6%-8%. Funding costs appear to be stabilizing and starting to decrease in September and October. We have seen some success in lowering our cost of time deposit by shifting to retail from institutional.
Our cost of credit continue to improve but we are still cautious on our guidance for full year 2024. This could be higher than 3% if we do not meet loan growth target, restructuring target or if Q4 2023 vintages deteriorated faster than historical projection, limited modification losses and the macro outlook. Our cost to income ratio should be maintained at 41%-43.2% for 2024 in line with our guidance. I would now like to turn the call over to Bu Vivi, our CFO, to discuss our financials in more detail. Bu Vivi, please.
Thank you, Pak Sunarso. Good morning everyone. I will start with the balance sheet. First, year on year, our total asset growth was 5.9% supported by loan growth 8.2% and if you can see in this slide, the loans to earning assets increased to 74% from 73% in the year ago period. Moreover, we continue to make our balance sheet more efficient and productive as earning asset increased to 93.3% of the total asset from 91% in the year ago period. At the consolidated level, the contributions of PNM and also Pegadaian stood at 9.7% of total loans and helped to drive the loan growth especially at the micro level. Our loan loss reserve decreased by 3.8% year on year.
As you know, we built the reserve during the pandemic and now are using it to offset some of the COVID restructuring portfolio and also the micro related write offs, especially the micro that we dispersed in 2022 as the loan provisions remains an elevated 6.2% of the total loan compared to around 4.5% pre pandemic level. Deposit growth slowed down year on year to 5.6% and CASA increased to 6.5% leading to a strategic increase in our loan to deposit ratio to 89.2% Q on Q. We anticipate this loan to deposit ratio will likely not move much higher from these current levels. I would note that we are modestly increasing our leverage.
Our leverage rose to 6x from 5.9 x in a year-ago period and we anticipate that over the next 12 months we can continue to increase our leverage and hopefully increase our payout ratio to 85% or higher, but we will remain relatively conservative in capital management as well for the portfolio mix. In asset side, our loan book at the third quarter 2024 fell below our guidance growing by 8.2%. We would note that we have continuously guided investors to a slowdown in the third quarter loan growth before a likely pick up in the fourth quarter 2024, a result of the impact of the base effect from 2023. Corporate loan movement. I would like to provide more detail on the growth in two important segments in this quarter. The first one is the corporate portfolio growth rate in September 2024 slow to 16.9% year on year.
There are a few reasons for this slowdown and we anticipate it will improve in the fourth quarter 2024 slightly. First, there is a base effect impact in September 2023 increased by 13.5% quarter on quarter before decreasing by 5% in the fourth quarter 2023. Therefore, we do anticipate that full year 2024 corporate loan growth likely to be above 20% year on year and it will support consolidated loan growth of around 10% or slightly below that. As we can see corporate loan growth increased by 1.2% Q on Q. It is basically slowing down from over 2% quarterly growth rate in the first half 2024 in the quarter. The largest drawdowns on loans coming from Pertamina and Bulog and the second segment that I would like to discuss is about the micro segment.
The micro segment is starting to settle at 6.4% consolidated with bank only at just below 4%, but as mentioned earlier, we slow our micro growth because we are focused on collection and improve asset quality. As you can see, we can quantify the recoveries increase by an average 36.8% per month in the third quarter 2024 versus, you know, the first quarter 2024. The micro restructured loan also increased by 53% to an average IDR 2.3 trillion per month in the third quarter 2024 vs only IDR 1.5 trillion in the first quarter. The results are due to the new policies we implement to improve collection and asset performance that Pak Supari will discuss later in the call. Our consumer portfolio slowing down to 10% year on year as mortgage growth has decreased to 12.5% year on year and payroll lending growth around 9.1% year on year.
Small portfolio only increased by 1.1% year on year and medium portfolio increased by 24.6% year on year. Next we would like to discuss about our deposit. Our overall deposit grew year on year slow to 5.6% year on year as deposit decreased Q on Q by 2% because we allow higher cost time deposit and also wholesale current accounts allowing us to maintain our cost of funds. On the other hand, CASA increased 6.5% year on year as our CASA ratio improved by 53 basis points to 64.2% and continue to maintain well above historical level. On Q on Q basis, we are seeing that the CASA ratio increased by 100 basis points and our LDR climbed to over 89%.
All are part of our 2024 strategy to maintain margin as micro loan growth slowed down due to the asset quality issues while current account increased year on year by 11.1% especially in retail current account. We believe more importantly that the year on year increase in our savings around 3.6% is a positive indicator that we could be seeing improvement in the consumer and micro customer strength. Our cost of CASA still around 1.5% because 60% of our CASA is savings account with the average interest rate of 0.29%. We are more positive on the outlook for the COF given the result l ike Pak Sunarso also mentioned earlier on the BI rate cut and also the SRBI. For next, I would like to talk about the capital management.
Our capital positions remain elevated, the total CAR is 26.8% and we believe we could increase our dividend payout ratio in 2024 to 85% or more. Next is about the P & L. I would like to discuss about the P & L here. Our net interest income increased by 4.5% year on year. We would note that the interest income is benefiting from repricing in our SME and corporate segment and also some corporate borrowers that are on cash accrual basis and made payments in September and this supported Q on Q NIM expansions around 39 basis points to 7.83% and raising the nine month NIM to 7.7% still in line with our guidance 7.6%-8% net interest margin.
Our non-interest income rose 29.8% year on year as we continue to see strong recovery in transaction group to achieve our target around IDR 22 trillion-IDR 24 trillion by the end of this year. Our cost remains a little elevated, like we always communicate, usually in the third quarter and fourth quarter. You might expect increase in the operating expenses.
Our costs increased 11.1% year on year, but most of this driven by other OpEx. Basically, in this other OpEx is due to the amortization expenses of the Kupedes insurance premiums and also the implementations of the last module on SAP, the income expense module to SAP, so we want to settle some of inter office account this year. We continue to maintain our cost to income ratio 41.3%, which is in line with our guidance 41%-42% consolidated guidance, with bank only cost to income ratio 37.7%. Our cost to asset roughly still around 4.2%, up 19 basis point Q on Q, because in the first half as we are seeing asset growth slowing down being impacted by one by someone of mention in our other OpEx. This led to PPOP increasing 10.2% year on year.
However, this rise was primarily offset by the increase in loan provision expense 54% year on year, bringing the year on year net profit growing to run around 2%. Now I would like to turn the presentation to Pak Agus Sudiarto to start the discussions on the asset quality.
Thank you, Ibu Vivi. Good morning to you all. Now I would like to continue the discussion by explaining our asset quality. The NPL ratio decreased by 17 basis points to 2.9% year on year as we continue to see improvement in corporate asset quality and as NPLs in this segment decreased by 214 basis points to 2.52%. Moreover, we continue to resolve the COVID restructured loan portfolio where NPLs fell by 19% year on year to IDR 9.3 trillion from accelerated downgrades of our COVID restructured loan book. We still see the NPLs rising in micro a little bit in small and our subsidiaries on a year on year basis which we anticipate will remain elevated in micro and ultra micro subsidiaries but likely to see a decline in small going into 2025. Special mention loans are improving decreasing to 5.56% from 5.74% in the year ago period.
The decrease was primarily driven by higher restructuring of over IDR 18 trillion in loans in nine months 2024, while write off increased by 33% of IDR 8.3 trillion year on year to IDR 33.5 trillion. Provision for loans and financing stood at IDR 84.5 trillion, representing 6.2% of total loans from 2015 to 2019. Before the pandemic, our loan loss reserve to loan never surfaced 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, while in coverage ratio remain elevated at 215.4%, and we would expect this can move lower going into 2025, likely to 200%, as our portfolio is much less tight to corporate lending than our peers. Loan at risk ratio decreased to 11.7% from 12% quarter on quarter as NPL and restructured loans 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. Cost of credit stood at 3.23% in 3Q24 and decreased to 3.39% in the first nine months from 3.47% at June in line with our guidance of improvement in cost of credit in second half 2024. Our net cost of credit is 1.59% year to date but in the third quarter decreased to 0.93% as a result of strong recoveries. We are on pace to reach our write-off target to IDR 36 trillion-IDR 40 trillion and recoveries of IDR 22 trillion-IDR 24 trillion.
Based on our data, we do not see asset quality deteriorating further, but we do believe that cost of credit will remain elevated through the remainder of 2024, likely meeting our 30% guidance unless loan growth slows. Further restructuring of approximately IDR 20 trillion is not met. Our modification loss target does not come through and any macroeconomic adjustment. In the first nine months of 2024 we wrote off IDR 33.5 trillion which represent over 83% of our write off target. We reported recoveries of IDR 17.1 trillion and the last quarter have averaged over IDR 2.6 trillion per month up 35% from IDR 1.9 trillion during the second quarter 2024. At the end of the first nine months of 2024, total outstanding COVID restructuring restructured loan decreased to 2.1% of total loans and 1.3% of total borrower from 4.8% and 3.2% respectively at December 2023.
The COVID-19 restructured portfolio totaled IDR 25.9 trillion in the first nine months of 2024, representing a decline of 52.5% year to date, mostly driven by improvement in the micro and small segments and write-off of IDR 9.6 trillion. We anticipate that the COVID-19 restructured loan portfolio will decrease to IDR 20 trillion-IDR 22 trillion by end of this year. Within the COVID-19 restructured portfolio it is composed primarily of small and micro loans that account for 54.8% of the total at September 2024: 39.3% with current repayment, 24.88% in special mention, and 35.9% in NPL. We feel that coverage of 24.1% is more than adequate to absorb any losses as 33% of the loans are corporate restructuring that we do not foresee having payment issues. Now I would like to turn this presentation to Pak Supari to discuss our micro portfolio.
Thank you, Pak Agus, and good morning everyone. The contribution of PNM and Pegadaian to consolidated micro loan increased to 20.9% while at PNM the growth slowed to 7.9% as the women group lending business grew 10.7% while ULaMM decreased by 23.1%. Women group lending in currently over 90% of PNM total loans. Pegadaian grew 26.5% with Pegadaian pawn lending as the main contributor rising 27.0% while non-pawn lending grew 22.4% at year-end 2024. We expect non-pawn lending will reach around 16% of Pegadaian loan. Our micro loan growth in the first nine months of 2024 increased by only 3.3% year-on-year as we have tightened lending standards, increased KPIs related to asset quality, and required loan officers with high NPL ratios to focus on collection and funding.
We currently maintain over 1,100 business support assistants for collection and this will increase to nearly 2,000 by the end of 2024. Our initiative to enhance loan officer competency is also advancing with regional training centers. Having trained over 11,600 officers to date, KUR is driving year on year growth up 8.5% as we aim to disburse most of the allocation by the end of October. However it's possible that we could increase our KUR allocation through the end of the year. That should drive more KUR growth and slower Kupedes growth.
We are seeing the number of Kupedes borrowers slightly decreased quarter on quarter with 20% graduation rate from KUR to Kupedes down from over 30% in 2023. Through mid October we have nearly fulfilled the KUR disbursement target on IDR 150 trillion for micro and super micro loans on the IDR 96.8 trillion remaining from 2023 disbursement there are currently 13.95% in. I repeat about my explanation. I would like to share an update our 2023 Kupedes disbursement and the breakdown of this loan across vintage and performance bucket. In 2023 we disbursed IDR 201 trillion in Kupedes loans and currently IDR 96.8 trillion remain on our balance sheet in September 2024.
Across the vintage the weakest performance is seen in the new borrower which maintains an NPL ratio of over 8% at September 2024 and has written off over 2% of the 2023 disbursement. In 2024, n ew borrower account for only 12% of disbursement drawn from 17% in 2023. The bottom table show the current NPL SML restructure rate and write off of the 2023-2024 disbursement. We would note that the data will continue to evolve as the vintage ages and we provide comparable data at six months on book to show the performance of 2023 through the first quarter of 2024. Of the IDR 96.8 trillion remaining from 2023 disbursement there are currently 13.95% in SML, 5.4% in NPL and 2.4% 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 get closer to age 12 months post disbursement. So we remain cautious on the fourth quarter of 2023 disbursements that have only been on book for nine to 11 months. In addition, we are actively restructuring loans via tenor extension that as of September 2024 we have restructured IDR 8.1 trillion of Kupedes in 2023 and we could potentially restructure over IDR 20 trillion in total micro loans by year-end. Internally we believe that the restructuring is sophisticated that those completed during the pandemic is as we completed deeper analysis of the borrower and expect better performance. I would now like to turn the presentation back to Pak Siaga to organize Q&A. 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, and I would like to remind that when called upon, please unmute your microphone and please state your name and company before asking your question. Please raise your hands now, and we will aggregate the questions. But for the first response, we would like to address the question from the Q&A box in the webinar. It's from Harsh Modi that the first question is regarding the LDR whether it's already bottom out considering the situation, and the second is the source of the increase in subsidiaries cost of credit. Please, Bu Vivi, please to address the question. Thank you.
Thank you, Siaga, thank you, Harsh, for the questions. The first one is about the cost of fund. I think we are in a better position if we compare with our peers knowing that our loan growth basically will be slightly below our guidance, slightly below 10%. And also we have a good environment about the SRBI and also BI cutting interest rate. So if you ask me, has the COF bottomed from now? I would say yes because you know the cost of fund consists of two things, the cost of deposit and cost of non deposit. If I look at the marginal cost of deposit, meaning monthly cost of deposit in BRI, in Rakyat, it is continued to decrease. For example, in June the marginal cost of fund is 3.69%, in August is 3.61%, and in September is 3.52%. So it's continued to decline.
So I would say that the cost of funds probably will continue the trajectory to decrease by the end of December 2024. The second question is subsidiary credit cost for subsidiary credit costs. We saw a significant or a spike in the provisions especially in PNM. In PNM in the third quarter, especially August and September, PNM booked provisions around IDR 1.3 trillion or improve or increase 98% Q on Q. And this is due to their plan to clean up the group lending scheme or we knew it as Mekaar because they already provisions for the individual lending and now they start to clean up the group lending especially the borrowers that already being, you know, restructured many, many times in Mekaar because of COVID-19 and based on our calculations this will bring PNM overall CoC around 7% by the end of this year.
It is already included within our calculations of CoC group. So the CoC group we don't change the guidance because there are several reasons for this one. So, we are still believing that the cost of funds probably the cost of credit roughly around 3% or slightly above 3% because of the first one with several assumptions. The first one, the write-off assumptions should be IDR 40 trillion or below.
The second one, the downgrade to NPL we are expecting the downgrade in the fourth quarter should be roughly around IDR 9 trillion. And if you see the numbers here, the downgrade quarterly basis is continue to decline from IDR 9.9 trillion in the second quarter. Third quarter is IDR 9.2 trillion. And in the fourth quarter we are expecting the downgrade to NPL is only around IDR 9 trillion. And that's, s o that's the first assumption is the write-off.
The second one is the downgrade. The third one is the loan growth. We might slightly miss the loan growth slightly below 10% but that will be compensated with the potential modification loss. So we will have a modification loss in the fourth quarter roughly around IDR 1.2 trillion-IDR 1.5 trillion. The modification loss basically will decrease the interest income but will reverse the provisions. And I think the last assumptions, you know, it's about the fail rate of the restructuring loan. Especially in Kupedes 2023 we are expecting the fail rate like around 30%-35%. So if all of these factors continue to be on track, we are still believe that roughly around 3% CoC BRI group still a very comfortable level for Rakyat to achieve.
Thank you, Bu Vivi. And for the next questions I would like to ask Selvie Jusman to please unmute yourself and please speak to the microphone. Thank you.
Hi, thanks Siaga. Thanks to the management for giving me the time and the presentation. So I'll have like two questions and I think they are sort of related on the credit quality, I guess, in terms of like the Kupedes vintage. It has been showing improvement. And if I were to look at the outstanding loans from the vintage 2023, it's only left about like 20% of the book or so. So with things on the Kupedes side is actually better than expected. Do you think like actually 2025 credit costs could be lower than the previous guidance of roughly about the same level as this year? That's my first question.
On the second question also, I think, sorry, going back to the Kupedes side, and I think given that this year we are not growing as much for Kupedes, what do you think needs to change? If, let's say, credit quality has improved, what do you need to see for you to start growing in this segment? And of course I think on the macro it seems like it has gotten better. Like in the opening statement when you look at the savings account balance and so. So what do you need to see before you are more confident about growing b ack in the Kupedes segment? M y second question on the, if you were to look at the special mention loan ratio, there is some increase in the retail as well as in the, I think, medium segment.
I think the increase in the medium on the ratio basis was a lot higher on the Q on Q basis. Is there a reason for that? Thank you.
Thank you, Selvie, and I would like to please Pak Sunarso CEO to manage the question.
Okay, thank you Selvie for your questions. I would respond about your question in increasing in small special mention loan in medium segment because there are five customers, two in our regional office in Jakarta and three in our regional office in Surabaya. It's just an administrative mistake in our operations. Actually all the customers still in the collectability 1, but in the process of the end of this month it will downgrade it to collectability 2. So this month all special mention of five customers will be back to the collectability 1. Ibu Vivi will respond your another questions.
Okay, thank you Selvie for your questions. Your first question is about the guidance for 2025 CoC, whether it could be lower than previous guidance. Actually we haven't finalized the guidance for 2025 but if we consistently seeing the vintage for Kupedes until you know December 2024 and for the Kupedes 2023 and then also the fail rate of Kupedes 2023 that being restructured in 2024 continue to be like roughly around 30%-35%. Yes, we have an opportunity basically to have lower CoC in 2025. What is your next question, Selvie?
It's the.
What should we monitor before we decide to grow Kupedes? The first one is of course the health of the asset quality. The second one, I think it's more important, is the success of our program to improve the capability building of our mantri or micro loan officers, our BRI unit branch manager. So that is basically the two. The two important point whether the. The third is basically about a technical. It's about the scoring and underwriting model but it will be reflected from the asset quality vintages.
Thank you. For the next question, it comes from Ferry Wijaya. Please unmute yourself and ask the question.
Yeah. Hi, thanks. Ferry Wong from Citi . I think I would like to ask the same questions on the credit costs because you are still maintaining the 3% credit cost and in terms of the outlook for fourth quarter of 2024. So if you are maintaining your 3% credit cost, that means that you need to reduce your credit cost to around 1.8% in the fourth quarter. I would like to ask. You already answered that you still do not have the guidance for 2025. Can you provide a bit more color? My second question is on the PNM, your credit costs at the third quarter actually reaching around the 10.6% credit costs for PNM. Overall nine months is about 7.6%. And then, Bu Vivi mentions about. Sorry, Pak Supari mentions about 7% guidance for full year 2024.
So that means that most likely that your credit costs for PNM will come down to around this 7.8% in the fourth quarter of 2024. So what's the outlook for 2025? Are you still confident that the credit cost will remain at around i.e. like 7% or could be lower than 5%. Thank you, Pak.
Okay, so thank you, Ferry. Yes, I know like, you know, most of you concerned with the guidance of 3% because, like, Pak Ferry mentions in the fourth quarter we need to book like roughly around 1.9% quarterly CoC. So there are several events, Pak Ferry. The modification loss basically that will impact it down 10 until 15 basis points. The modification loss coming from the corporate segment and the downgrade itself in NPL. If we can maintain IDR 9 trillion that will also helping decreasing our provisions as well probably around 10 basis points or more. And I think most of you also aware that once a year basically Rakyat will take a look at the macroeconomic assumptions that building into our model to calculate the provisions and that is basically usually happen around November or December.
If we, we are quite optimistic with the macroeconomic assumptions that we are going to be implemented in our modeling that will also support basically the provisions. Meaning we expect to have like some reversals of the provisions as well. So that's basically most of the impacting points for the provisions in the fourth quarter. For PNM, I think based on our latest discussions with them, there, the third quarter provision will be the highest on a quarterly basis. Fourth quarter provisions will be lower than third quarter. So that's why by the end of this year their credit cost is roughly around 7% and in 2025 in our calculation should be lower than 7%.
Thank you, Bu Vivi and Pak Agus Sudiarto. And please, anyone, if you like to ask question, please raise your hand first and then we'll ask you to unmute the questions. Thank you. Please. I think we have no more questions for this meeting. If you have any additional question that we have from the Zoom, we will email you the responses. And lastly, I would like to thank our Board of Directors and SVPs for joining this call and all analysts and investors who join as well. Please feel free to reach out to us for any additional question that you have. Apologies that we could not get to any more question. Thank you. Have a nice day. Thank you.