Good morning. We would like to thank you for joining us for Bank Rakyat Indonesia's 2024 Earnings Call. We would like to begin the meeting now. F irst, 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 Microbanking, Pak Supari, our Director of Networks, Pak Andrijanto, our Director of Consumer, Ibu Handayani, our Director of SME, Pak Amam Sukriyanto, our Director of Corporate Banking, Pak Agus Noorsanto, our Director of Compliance, Pak Solichin, 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 encourage you to download a copy of our presentation materials, currently available either from the Investor Relations homepage of Bank Rakyat or from the link that we sent you early this morning. Second, as this is in 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 state your name, and the company that you work for before asking questions during the Q&A segment. I would now like to introduce Pak Sunarso, our CEO, to begin the meeting.
Thank you, Brett. Good morning, everyone. First of all, I would share about the macroeconomic situation, and then follow the full year result and of course we will share about the guidance for this year. In recent, the macroeconomic situation remains stable, and the outlook is still attractive with our projection of 2025 GDP growth of 4.9%-5.2%, relatively in line with 2024 GDP growth of 5.03%. Our forecast for 2025 is a fiscal deficit of 2.5% of GDP in 2025, slightly larger than the 2024 deficit of 2.29%. We anticipate one additional rate cut in full year 2025, and we are forecasting moderate inflation of 2.65%-3.03%, in line with the BI's target of 1.5%-3.5%. Finally, following the surprise rate cut in January, the rupiah has remained relatively stable in the IDR 16,200-IDR 16,500 range, given the strong U.S. dollar.
Now let's discuss a few macro data points directly impacting BRI. Within GDP composition, we are seeing a shift away from household consumption and an increase in net export, reflecting not only the mineral downstreaming, but weak consumption as the middle and lower-income segment remain under pressure. The new government's policy can provide a catalyst to improve this situation, but at present, it remains a challenge. As we can see by the C-score data, the middle and lower segment purchasing power index is still below zero. M eaning the purchasing power of the middle and lower- class is still below the pre-pandemic average. Now, I would like to review 2024, as we experience a year of volatility led by asset quality deterioration, and a need to adjust our full- year 2024 target and strategy.
Initially, we identified the problem in micro asset quality derived from a spike in micro SMLs of 177 basis points year-on-year to 5.72%, primarily from the full- year 2023 portfolio, followed by higher-than-historical net downgrades to NPL in first quarter 2024, of IDR 7.3 trillion . We observed that the problem was due to several factors, but primarily due to customer offer extension in 2023, when we were over-optimistic about the macroeconomic rebound potential, and compounded by the impact of a spike in food price year-on-year. We expedited the resolution of most bad debt due to COVID-19 restructuring loan and implemented restructuring, and began to write off the 2023 cooperative disbursement. Currently, we believe we are well into the two-year resolution process that started in Q1 2024.
We responded to the micro asset quality problem by implementing strategic initiatives to fix loan underwriting, enhance loan officer capability, and adjust their KPIs that significantly slowed down micro loan growth. Despite having one of the most volatile years, we managed to maintain profitability as we grew, and team metrics such as return on asset and return on equity in 2024 were strong.
Recording in progress.
In 2025, we will launch our new corporate strategy, with a focus on the funding structure by increasing retail savings, and improving asset quality as two key profitability drivers. We will continue to focus on the micro segment. A s part of business diversification, we will also have SME and consumer as growth engines driven by medium mortgage and payroll lending.
In Q4 2024, we did not have the benefit of cash basis payment to support our revenues, as we experienced in Q3 2024, leading to Q on Q decline in PPOP of 4% and stood at IDR 29.2 trillion in Q4 2024. However, year-on-year PPOP increased by 9.6%. We would note an accounting change, that Bu Vivi will explain later in the call, that impacted the reported net interest margin and non-interest income figures. Within this presentation, all numbers in 2024 and 2023 have been adjusted to reflect the change. Our net interest margin remained quite strong at 7.8% in the quarter. W ith the recent BI rate cut and SRBI rates falling, we are hopeful for some cost of fund improvement in first quarter 2025. Profitability remained strong as our return on assets stood at 3.1% in Q4 2024.
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, while paying an interim dividend in the quarter. Our capital adequacy ratio remained quite elevated, implying that our 18.5% 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 of 13.1% remained elevated despite the shift in our loan and higher NPLs, as our subsidiaries became a larger contributor to revenues. Our strong ability to generate recoveries of write-off loans has led to 0.52% net cost of credit in Q4 2024, which fell by 41 basis points Q on Q.
There was a step decrease of 349 basis points Q on Q in subsidiaries' gross cost of credit to 2.06%, as PNM cost of credit normalized following the Q3 2024 front-loading of provision. In 2024, our loan growth slowed to 7%, as our consolidated loan reached IDR 1,355 trillion. Growth was driven by corporate and medium, which grew by 23.6% and 21.6%, respectively. We experienced lower-than-historical loan growth in our micro and small business segment, which slowed to 2.7% and - 0.7%, respectively. Our micro loan decreased to 14.63% of total loan, down by 200 basis points year-on-year as we are focusing on collection and the impact of tighter scoring standards. Our net interest margin was maintained at 7.74%, which is in line with our guidance for 2024, as we were not impacted by our largest modification loss in Q4 2024.
We feel that a recent rate cut and the declining SRBI rate are potential catalysts to support cost of fund improvement in the coming months. Moreover, our CASA ratio increased by 295 basis points year-on-year to 67.3%. Our cost-to-income ratio decreased year-on-year to 41.6% from 41.9%, as we are effectively managing our personal and G&A expenses. Our cost of credit was 3.23% in 2024 and modest 2.76% in Q4 2024, while our net cost of credit in 2024 was much lower at 1.32% and only 0.54% in Q4 2024. Furthermore, the gross NPL ratio improved 17 basis points year-on-year to 2.78%. Finally, our net profit in full year 2024 increased by 0.4% to IDR 16.7 trillion. Turning to our guidance, I want to review our 2024 guidance and provide 2025 guidance. For 2024, it was a mixed result.
We achieved our guidance for net interest margin, non-performing loan, and cost-to-income ratio, and mixed for loan growth and cost of credit. Starting with our loan growth, we saw a continued slowdown in second half 2024, particularly from micro and small, leading us to come in below guidance at 7%. For 2025, we anticipate loan growth will reach 7%-9%, supported by consumer and corporate lending. For net interest margin, we were in the midpoint of our guidance despite seeing a surprise rate hike in 2024 and high SRBI issuance. We were boosted slightly by the delay in modification loss that is likely to impact full- year 2025 net interest margin. Our 2025 guidance is for 7.3%-7.7% net interest margin, as we are anticipating one or two rate cuts, supporting our liability-sensitive balance sheet.
Our cost of credit of 3.23% was above our guidance of 3%, but it has improved throughout the years. The biggest driver of cost of credit being above our guidance was the slower loan growth, higher provision at our subsidiaries, and the delay in modification loss on a larger corporate that we expect will occur in 2025. We are targeting a cost of credit of 3%-3.2% for 2025, as we continue to clean up the asset quality issues in micro. This is in line with our commentary to investors since April 2024.
For our NPL ratio, we met the guidance, as we saw some year-end 2024 improvement as write-off surpasses our target. We anticipate for the 2025, we can maintain NPLs below 3% as well, but we could see a shift in the composition with a little higher amount from micro and lower. Cost-to-income ratio was in line with guidance in 2024 at 41.59%. For full year 2025, we believe it will increase to 41%-43%, as we continue to invest in our workforce and digitalization. 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. I would like now to discuss about our balance sheet and PNL, s o year-on-year, our total asset growth was 1.4%, supported by loan growth 7%, and loan-to-earning asset actually continued to improve from 71% in 2023 and now is like 74%. Moreover, we continue to make our balance sheet more efficient as earning asset increased 92.4% of total asset. If you remember, 2023 is roughly around 90%.
At a consolidated level, the contributions from PNM and Pegadaian are roughly around 10% of our total loan, and helped to drive the loan growth and the micro level. Deposit growth strategically slowed down year-on-year to 0.5%, and CASA increased 5.1%, leading to a strategic increase in our loan-to-deposit ratio to 88.9% year-on-year. We anticipate our loan-to-deposit ratio in 2025, could move slightly higher from this current level. I would note that we experienced no changes in our leverage, 6.2 x as we declared a larger interim dividend that should drive the leverage to increase, but I think weak asset growth, as we reposition the asset base more than offset this. We anticipate that over the next 12 months, we can continue to increase our leverage, and hopefully, we can increase our payout ratio to 85% or higher, but we will remain relatively conservative in capital management.
Talking about our loan book portfolio here, our loan book fell below our guidance, 7%, s o several things. The first one is our corporate portfolio's growth rate picked up in the fourth quarter of 2024, as we expected actually, because strategically, at least within two years, we might expect that the corporate segment might grow a bit higher. T he corporate segment grew 23.6% year-on-year, and primarily driven by base effect on last quarter base effect. B ut if we talk about the fourth quarter 2024 itself, corporate loan declined by 1.37%. In 2024, actually we lent out to corporate clients in agribusiness, FMCG, and mining, as we saw opportunity in these sectors. Our intentions, I think micro growth actually is slowing down, as consolidated growth in a year stood at 2.6% and bank-only growth actually is - 1.1%.
T his is also along with the elevated in write-off in 2024. We anticipate in 2025 that we can see improvement in micro loan growth, as we start to grow Kupedes very carefully. All new underwriting methodology that we implement in 2024 will be still applied in 2025. We also saw slow growth in small business, which contracted nearly 1% year-on-year, as we have implemented more stringent lending criteria. We did write-off in SME roughly around IDR 6 trillion, to clean up COVID-19 portfolio. We anticipate growth in this segment will improve in 2025, as our loan officers become more familiar and adaptive with the new underwriting methodology, as well as the readiness in the infrastructure of SME segment. Our consumer portfolio grows slow to 10% year-on-year as mortgage growth decreases, and payroll lending growth is around 9.1% year-on-year.
In 2025, we expect to grow consumer business in a mid-double digit, by boosting mortgage growth through leveraging strategic partnership with top-tier developers, and reinforcing our role in the upcoming government programs. As you can see here, there has been a strategic shift in our portfolio mix toward wholesale banking. Around 70% of our wholesale clients now are private companies, compared with probably like several years ago, i t was dominated by SOE. Our approach on disbursing wholesale loans has been changing to customer profitability accounting, and a better account planning. We have been doing a lot of syndications with other big banks, focused on short-term and big value chain clients. N ow we are moving into the deposit compositions.
Our overall deposit growth year-on-year slowed to 0.5% year-on-year, as deposits were flat Q on Q, as we allow higher cost time deposit to roll off the books and primarily replaced by CASA in the fourth quarter last year. CASA increased 3% year-on-year. CASA ratio improved to 67.3%, and I think it's continued to be maintained well above historical levels despite the rising rate environment. On Q on Q basis, we are seeing CASA ratio increase by 310 basis points and LDR 88.9%. While current account increased year-on-year by 8.2%, we believe more importantly, the year-on-year increase in savings of 3.1% is a positive indicator that we could be seeing improvement in the consumer and micro customer strength. We would like to highlight our current account, especially in retail segment, that's consistently growing double digit.
This is due to the introductions of QLola Lite to our SME clients, so that these additional services give them additional value to use our current account. We will continue to implement this as a part of strengthening our retail banking capabilities. I think the cost of CASA continues to rise due to higher cost current account growth in wholesale. We do hope that going forward, the BI rate cut probably will give more opportunity in 2025, along with a decrease in SRBI. However, if you see, our NIM guidance actually does take into account the high LDR at our peers and their guidance that was presented over the previous week. At least we will see the liquidity conditions in the first half, at least first quarter will still remain very, very tight. Our capital positions remain elevated with total CAR of 26.6%.
This is because of impact from Basel III implementations of market risk weighting adjustment. Over the medium term, we would like to see our total CAR decrease from the current levels to closer to 19%-20% through stronger future loan growth, and we continue to return cash to our shareholders. Now, I would like to discuss now our income statement and key items that impact our profitability. Our net interest income increased by 3.4% year-on-year. In the fourth quarter 2024, we would note that the interest income did not benefit from corporate borrowers that are on cash accrual basis like we saw last quarter. That is a factor in the lower Q on Q interest income. Not to mention about additional adjustment of the modification loss from WIKA and Waskita, both around IDR 560 billion and also bulk repayment.
I think this impacted our Q on Q lending yield as well. The net interest margin decreased, although the consolidated full- year NIM stood at 7.74%, in line with our full- year's guidance of 7.6%-8%. On year-on-year basis, our NIM has decreased by 41 basis points, due to the increase in the cost of fund. W ith Indonesia entering an expansionary policy cycle, we are hopeful that the COF could stabilize in 2025 and beyond. I think Pak Sunarso mentioned earlier that we have like a slightly different accounting method in the fourth quarter. Actually, we reallocate the supply chain financing or SEF revenue moved into interest income, roughly around IDR 2.4 trillion. P reviously, this item was booked under fee income, but to be aligned with the industry best practices, we reallocate supply chain financing into net interest income.
Okay, so our non-interest income rose 24.8% year-on-year, as we continue to see strong recovery growth actually and expect this level of elevated recoveries could be maintained into 2025, but likely does not grow as aggressive as recoveries could be driven by higher rate of Kupedes write-off in 2025. I n 2025, I think the recovery in a bank-only level are roughly around IDR 24.2 trillion. In 2025, we also expected higher than IDR 20 trillion recovery for this year. Our operating expenses remain in line with our target, increased by 8.2% year-on-year as our core components like personnel expense and G&A rose by 3.5% and 4.1% respectively. On Q on Q basis, you might see the personnel decline 36.2%. T his is due to the adjustment of average effective tariff on income tax to our employees.
If you remember, every beginning of years, we calculate the average effective tariff using the highest in the tax bracket. A long the year, we adjusted with the fact or the real number, s o actually the rate is declining. A lso, the second items that is also impacting the personnel decline is the employee leave allowance. I f you remember last quarter, there was an increase in employee leave allowance, that in the fourth quarter not happens again. Our cost- to- income ratio is 41.6%, which is in line with our guidance, 41%-42% consolidated guidance. This led to PPOP increasing 9.6% year-on-year. However, this increase was primarily offset by the increase in loan provision expenses year-on-year, so leading to flat earnings around IDR 60.64 trillion. Okay, so this is basically about our earning asset yield and margin.
I previously mentioned that there is a reclassification on supply chain financing. A lso, please keep in mind that in the third quarter 2024, was impacted by the cash payment from some of our large corporate. NIM at our PNM and Pegadaian contribute 116 basis points to this consolidated NIM, up 7 basis points from 109 basis points in a year ago period. With portfolio mix, it's shifting more and more into wholesale segment, our consolidated lending yield in full year 2024 stood at 13.2%. I think in the fourth quarter 2024, lending yield slightly declining to 12.5%, because of the cash accrual- like I mentioned previously. Our marginal cost of fund were flat Q on Q, 3.48%, as we did see less pressure on funding costs in the last quarter.
In the last quarter, we saw our cost of deposit in rupiah terms increase 6 basis points on marginal basis. This is actually one of the reasons why we are still very cautious with the funding costs entering 2025. Non-interest income continued to report strong growth, while core operating expense growth was in line with 6%-8% full- year 2024 growth target. I think most of the part of this slide I already explained previously. Next slide, please. Okay, n ext slide. Okay, this is about the operating expense breakdown. Our cost to asset full- year 2024 slightly increased than our guidance, 3%-4% OpEx to asset. I think we have been trying to deliver the message that we are hiring more people, so you might expect something like this last year and this year.
I think furthermore, the reported bank-only cost-to-income ratio has decreased to 37.2%. Our subsidiaries are keeping cost growth under control so far, and I think they are reporting positive operating leverage as well, helping to lower their cost-to-income ratio. I would like now to turn the presentation over to our Director of Risk, Pak Agus Sudiarto, to discuss our asset quality.
Thank you, Bu Vivi. Good day to all of you. Now, I would like to discuss our asset quality and outlook for full-year 2025. On the consolidated NPL ratio, as mentioned by Pak Sunarso, decreased by 17 basis points to 2.78% year-on-year. As we continue to see improvement in corporate asset quality, NPLs in this segment decreased by 126 basis points to 2.6%. Moreover, we continue to resolve the COVID restructured loan portfolio, where the NPLs fell by 66% year-on-year to IDR 3.2 trillion, from accelerated downgrades of our COVID restructured loan book.
We still see the NPLs rising in micro lending and our subsidiaries on a year-on-year basis, which we anticipate will remain elevated in micro and ultra-micro subsidiaries. Positively, we are already starting to see improvement in the NPL ratio for small business, as we guided to in third quarter 2024. Our special mention loans are improving, decreasing to 4.82% from 4.9% in the year-ago period. The decrease was primarily driven by higher restructuring of over IDR 49 trillion in loans in full year 2024, while write-off increased by 33.5% or IDR 11.4 trillion year-on-year to IDR 45.4 trillion.
As we forecast 2025, we anticipate write-off and restructuring will remain around these levels, but we will try to front-loan cost of credit similar to 2024. We anticipate that first quarter will be the peak, and cost of credit can decline through second half 2025. T he provision for loans and financing stood at IDR 81.1 trillion, representing around 6% of the total loans. From 2015 - 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 ratio. Our coverage ratio remained elevated at 215% and we would expect this can more lower in 2025, likely to 200%, as our portfolio is much less tied to corporate lending than our peers.
Our loan at risk ratio decreased by 100 basis points to 10.7% from 11.7% quarter- on- quarter. Special mention loans decreased by over IDR 10 trillion. That said, we expect the decreasing trend in loan at risk to continue, but the first half of 2025 might be a little challenging, as we anticipate seasonally higher SML ratio in first half 2025. On the cost of credit, it stood at 3.23% at year-end 2024 and decreased to 2.76% in the fourth quarter, but was still above our full- year target of 3% due to the delayed modification losses and higher cost of credit at our subsidiaries. In our net cost of credit, it was 1.32% in 2024 and in fourth quarter, decreased to 0.54% as a result of strong recoveries.
We write off IDR 45.4 trillion in 2024, above our target of IDR 40 trillion as micro write-offs were de-elevated in fourth quarter 2024. However, we also surpassed our full year 2024 recovery target of IDR 22-IDR 24 trillion and reached IDR 25.4 trillion or IDR 2.5 trillion per month, leading to the very low net COC for fourth quarter and full year 2024. Based on our data, we do not see asset quality deteriorating further, but we do believe that cost of credit will remain at 3%-3.2% for full year, and that we could see a similar trend to full year 2024, with a high credit cost in the first quarter and then declining as the year moves on. At year-end 2024, total outstanding COVID-19 restructured loans decreased to 1.8% of total loans, and 0.9% of total borrowers from 4.8% and 3.2% respectively at December 2023.
The COVID-19 restructured portfolio totaled IDR 19.2 trillion at year-end 2024, representing a decline of 64% year-on-year, mostly driven by improvement in the micro and small segment, and write-off of IDR 11.9 trillion . We anticipate most of this portfolio will be resolved by year-end 2025, and will possibly no longer provide this slide in future presentation as the relevancy has subsided. The COVID restructured portfolio continues to decrease, composed primarily of small and micro loans that account for 54% of the total.
At year-end 2024, 42.1% were current in payment, with 40.8% in special mention and 55% in non-performing loans. We feel the coverage of 28.4% is adequate to absorb any losses, as 32% of the loans are corporate restructuring that we do not see having a payment issue. Now I would like to turn to the presentation to Pak Supari to discuss on our micro portfolio. Please, Pak Supari.
Thank you, Pak Agus. Now I will explain the contribution of ultra-micro and micro business to BRI performance full year 2024. The contribution of PNM and Pegadaian to consolidated micro loan increased to 21.6%, while at PNM, the growth slowed to 6.2% and Pegadaian grew 26.3%. BRI is committed to maximizing Pegadaian and PNM contribution through strategy synergy. Pegadaian leveraged BRI network to expand goods [selling] and goods pawning service, while accelerating cashless transaction. Pegadaian also gradually introduced bullion services, including goods deposit, loan, trading, and custody. PNM enhanced the ultra-micro customer journey by strengthening risk management, optimizing weekly group lending, group meeting, and expanding ultra-micro insurance for new growth. This initiative was chosen by BRI for sustainable growth and greater value creation.
Our micro loan growth in 2024 decreased by 1.1% year-on-year, as we had tightened lending standards and increased KPIs related to asset quality, and required loan officers with high NPL ratios to focus on collection. This strategy has delivered positive results, with a recovery rate of 57.5%, amounting to IDR 12.6 trillion, which has also contributed to the overall performance of BRI. KUR is driving year-on-year growth up 5.2% as this segment reached IDR 167.8 trillion. To sustain long-term growth, we focus on human capital, organizational enhancement, business process improvement, and risk management. Over 27,000 loan officers received training to enhance marketing and leadership skills. We strengthened regional organizational structure, to accelerate ecosystem acquisition and business growth. Additionally, we tightened credit risk scoring, ensured stronger risk management. This strategic initiative reinforced BRI's commitment to sustainable growth, balancing expansion with risk control to drive long-term success.
Currently, IDR 79 trillion remains on our balance sheet as of December 2024 of 2023 [audio distortion] . Across this [vintage], the weakest performance is seen in the new borrower, which maintained SML and NPL ratio of over [18% and at 16] as year-end 2024. In 2024, new borrower account , only 12% of disbursement, down from 17% in 2023. Of remaining 2023 [disbursement], there are currently 15.3% in SML and 5.9% in NPL, and 5.9% has been written off and [11%-13%] has been restructured. I would like now to turn the presentation back to Pak Brett to organize the Q&A. Thank you.
Thank you, Pak Supari. We would now like to move to the Q&A segment. At this time, please raise your hand if you'd like to ask a question. When called upon, to remind you, please unmute your microphone and state your name and the company before asking your question. Please raise your hands now, and we'll aggregate the questions. First, we have a question from the Zoom that we will address. This is coming from Melissa Kuang at Goldman Sachs.
The question is, one, it's a two-part question, w ould this year be the last year for the micro cleanup, and when can we expect micro growth, especially bank-only to return to low teens levels? Q uestion two, for Kupedes loans, are the new loans still insured and how do you provision for Kupedes insured loans? I think Bu Vivi and Pak Agus Sudiarto can take this question.
Okay. T hank you, Brett. Hi, Melissa. Thank you for your questions. I think since last year, we have been delivering the message that we want to resolve the 2023 bad debt within two years, 2024 and 2025. This year actually is the last year for us to do cleanup for the 2023 batch. If you recall, in Kupedes 2023, now I think as of December 2024, it's only around IDR 80 trillion left. If we continue using this flow rate, by the end of 2025, these batches will end up with below than IDR 30 trillion. Hopefully, it's already rolled off from our balance sheet. That's for the first question. Then, when can we expect micro growth, especially in bank-only to be double-digit? Please keep in mind that when we are talking about micro, we will have two products, KUR and Kupedes.
KUR will continue flat or even negative because it depends on the government, while Kupedes actually in 2025, this year, we want to start to grow Kupedes again very carefully, by looking at the demand on the grassroots, the trend of the micro deposit itself, with using the same or more improved underwriting methodology that we are already implementing in 2024. We want to continue in 2025. In short, we would like to push Kupedes actually at least 7% in 2025, so we are aiming to have 7%-10% in 2025 for Kupedes. The whole micro together with Pegadaian and PNM would grow roughly around 3%-5% this year. I n the medium term, we might expect a high single digit or like lower double digit in the medium term for the micro segment.
For Kupedes insurance, I think now , starting January 2025, a ctually we are in the process of negotiating with the credit insurance, in particular discussing about the stop-loss features. While these negotiations are still ongoing since January 2025, actually we did not cover insurance in Kupedes anymore. W e stopped temporarily the credit insurance in Kupedes since January 2025.
Thank you, Bu Vivi and Pak Agus.
Okay, I will add some explanation about how we provision on our Kupedes loan. Actually, how we calculate in provision in Kupedes, same with the other products. The insurance company just impacted on our loss given default. Currently, our Kupedes loss given default is still at 53% as we maintain conservative stance. This LGD has not taken into account that insurance for the product. Therefore, the suspension of the Kupedes insurance will have no impact on the provisioning of the loan. Thank you.
Thank you, Pak Agus. The next question we'll take from the call will be from Jaden. Jaden, please unmute your line.
Yeah, sure. Can you hear me okay?
Yeah, we can hear you.
Great, t hank you so much for taking my questions. I guess this is more of a big picture question just on KUR and the migration. I think one of the slides you showed had a huge pickup in those that were migrated in 2023, and are now sort of causing some asset quality stress. How do you manage the push to migrate these customers going forward? I mean, surely there are just some that should not have a Kupedes loan. How do you ensure that the government sort of understands that, and you're able to sort of not repeat the same mistakes of 2023?
Then the second question is just on provisions and the balance of provisions. Why not just do a larger write-off and get it over with? It looks like the guidance is basically for fairly flat provisions overall and a fairly steady year. Why not just accelerate it and move on, and then hit the growth per Melissa's question? Thanks very much.
Jaden, Vivi is going to answer your question. I just wanted to add a little bit to your second question about maybe doing something, I guess, in the terms like a kitchen sinking. I f you look at the fiscal year 2024 numbers, we did have a write- back of about IDR 4.7 trillion coming from a couple of bank guarantees that were paid off, but also from a couple of bank guarantees on the corporate side that moved over to loans.
Some of the provisioning on the corporate side that you see, some of the cost of credit is actually associated with these loans. It would imply that when you look at a 3%-3.2% cost of credit for 2025, that that could imply that you see a higher cost of credit for micro in 2025 than you do in 2024, because a couple of trillion of this could be shifted towards micro instead of being towards some of the corporate that was moved over. M aybe Vivi can continue on your first question, and further commentary on the kitchen sinking.
Okay. T hank you, Jaden. It's about migrations, especially in 2023. One of the lessons learned that we got in 2023 is about how we determined the criteria on this graduation from KUR to Kupedes. One of the pushes in 2023 actually is because of the government put a new KPI to all the banks who disbursed KUR. One of the KPIs of the success of KUR disbursement actually is about graduations. That's why in 2023, we are a bit aggressive on these migrations. L essons learned from that, actually now we are implementing a more strict criteria for KUR borrowers that can be graduated into Kupedes. The first one is, the KUR borrower should be eligible to be graduated into Kupedes if he or she already enjoys at least IDR 70 million for two cycles. T wo cycles is how many years [audio distortion]?
10 years.
10 years, roughly around six to 10 years, s o he or she has to enjoy at least IDR 70 million for two cycles, six to seven years. The second one, we always consider the repayment capacity as the main decision function, before we decide whether he or she can be graduated into Kupedes. A nother aspect that we improved in 2024 actually is, we want to mitigate the loan , switching among the family members.
F rom previously, the husband, then now is the wife, next is probably the uncle. Now we are trying to have a single identity. F or one family, it's only eligible one KUR. T hat's also another measurement that we implement to make the graduations from KUR to Kupedes more prudent. Yeah, r egarding your second question about the kitchen sinking, I totally understand how all of you guys are thinking about this. Since 2024, you always give us a lot of questions and also insight why Rakyat is not doing a kitchen sinking, doing a massive write-off in 2024.
It's probably a bit hard for me to explain, but we are talking about a portfolio management here. F or example, the first one, we cannot just write off a lot of people in the same time, because it will impact their credibility in the FSA. W e do not want basically all of our customers basically to become bad debt customers. The second one, since the very beginning, we understand that most of them basically have a willingness to pay. W e give them an opportunity to do restructuring, but we limit the number of restructuring of Kupedes 2023. I t's a part of our effort basically to help them to recover. I think now this is the second year of Rakyat to resolve the 2023 batches.
I think so far it is still aligned with our aspirations that the COC for two years could be above 3%, s o 3.24% 2024. 2025, you might expect probably the same level of COC. I would note that since second half 2024, we are adding rules into our management overlay, specifically to add more provisions into Kupedes 2023, that are being restructured in 2024. B ecause we start in second half 2024, you might expect that in 2025, at least in the first quarter, you might see our provision and COC will spike, will increase significantly because we try to do a front-loading in 2025. That will be getting lower, and lesser and lesser toward the end of December 2025. I need to emphasize this.
I do not want you to get surprised with our posture of provision COC, for example, including profitability in the first quarter 2025, because the new rules have been implemented in management overlay since second half 2024. It might impact the provisions level at least in the first quarter, s o please do not be surprised with these conditions. If you are very familiar with the pattern, the first quarter every year in Rakyat always spikes.
Not to mention that in the first quarter 2025, we will have lesser working days. I t will impact the collection effort from our monthly NRM. The new rules in management overlay, it will put pressure in the provisions, at least in the first quarter. I just want to deliver this message earlier. Y ou might imagine that the provisions posture, the profitability posture of Rakyat might get pressure, at least in the first quarter, not to mention about the liquidity conditions. Thank you, Jaden.
Thank you for your question, Jaden. The next question we have is coming from Ferry Wong. Ferry, if you can unmute your microphone.
Yeah, hi. Thank you for the opportunities. Can you hear me?
Yes, we can hear you clearly.
Yeah, thank you. Yeah, I just had one question. Practically, I think this is still on the credit cost, because you're expecting that credit cost will be 3%-3.2%. Can you elaborate more on this? How much is going to be bank-only compared to non-bank? Could you please elaborate how much that you're going to expect in terms of, one, the reversal, the recovery, and also the loan modification losses on your 3%-3.2% credit cost? That's all from me. Yeah, thank you.
Thank you. Vivi, would you like to start? Then Pak Agus Sudiarto maybe can add in.
Okay, I will start. Ferry, thank you for your question. I will talk about the COC growth first. The guidance here is the COC growth, 3%-3.2%. I think for probably I will talk about the absolute amount. Oh, percentage is okay. T he bank-only will take up probably IDR 38 trillion-IDR 40 trillion. The rest will go to the subsidiaries. Please note that PNM, they plan to write off roughly around IDR 4 trillion in 2025. T hat's also put additional pressure in the COC.
That's why COC is still 3%-3.2%, t hat's with the assumption that PNM COC is roughly around 6%-7%. Okay, a nd the second assumption is the modification loss, like you mentioned, from Krakatau Steel. Modification loss from Krakatau Steel, hopefully in the first quarter, roughly around IDR 1 trillion. The impact roughly is around 7 basis points. That's the modification loss. A nother assumption is the write-off. Write-off 2025, probably still bank-only close to around IDR 40 trillion, probably.
Probably Pak Agus can explain or add more information on this. T his COC falls with the assumption that the loan growth is actually 7%-9%. Any numbers below that then might impact the COC as well. I think another assumption is about the net downgrade in NPL. Net downgrade, we are estimating roughly IDR 3 trillion-IDR 3.5 trillion per month, s o that's the basic assumptions for the 3%-3.2% COC for recovery.
Okay. T hank you, Ferry. I think the question from you about the reversal on the provisioning in the corporate segment, coming from the opportunity that we see from our restructured loan on the corporate segment, w e see there is one or two customers that will have an opportunity to upgrade from now from the NPL to the performing loans. B ecause of the upgrading of the classification loan, classification of them, then we can see the opportunity also to reverse our provision, not to fulfill right now. Because right now, all the NPL customers, even though it is special mention loan customers in corporate, the provision is around 80%-100%. O nce they upgrade into the performing loan, we see the opportunity to reverse the provisioning, t he reversal from the corporate segment, Ferry.
Okay, t hank you .
Thank you, Ferry. There's one question from the Zoom about the IDR 4.8 trillion write-back that we had on the non-loan provisioning. I mentioned it a little bit earlier, but just to clarify on that, just under IDR 2 trillion of that was related to when we had the Wijaya Karya loan that was a bank guarantee before we moved that to a loan in the second quarter, which we notified you of at that time. When we did that, it went from bank guarantee to a loan.
The provision moved. I t's a write-back on the non-loan side, but it's additional provisioning at the loan side. The other portion of it, about IDR 2 trillion of that write-back is because the companies paid back the bank guarantees in the line of credit that was outstanding. T hat was the rationale behind that write-back. The next question we have from the call was from Selvi Jusman. Selvi, can you unmute your line and ask your question?
Hi.
Hey, Selvi.
Hi. Can you hear me?
Yeah, we can hear you clearly.
All right, t hanks for taking my question. Thank you for the clear presentations. I just have two questions. I think in terms of your loan growth guidance of 7%-9%, I understand where it is coming from. I f I were to find out just by segment, especially in corporates, as you have been growing quite strongly in that aspect, what is your expectations of loan growth for corporates this year? A lso, given that traditionally you haven't been growing as quickly in the private sector, what has changed or where have you been focusing?
Is it more on the lending yield, or is it more on the service, the RM, or what are the factors that you have been paying more attention to? M y second question is in terms of the dividend payout, because I think Vivi earlier mentioned that you want to increase it further to 85% or even more. I guess that has been an ongoing discussions. C ould you give us kind of an update just in terms of how regulators are kind of viewing that payout level, and the potential for it to actually be higher for the full- year 2024? Those are my two questions. Thank you.
Thank you, Selvi. Vivi will answer those questions.
Probably I will take the easiest one, but it's the payout ratio. Hi, Selvi. Thank you. P ayout ratio will be determined next month. I think the basis now is 85%. Th e potential upside is there, especially with the existence of Danantara probably. Y eah, we might expect it higher than that. Y eah, it's still being discussed between us and SOE, and not to mention about FSA, because under new regulations, they also have a say on the dividend payout ratio. T hat's the dividend payout ratio for the corporate. Pak Agus, you want to give [audio distortion]?
Thank you. I think to support our growth in the corporate segment, we try to have sound growth in corporates with set up the criteria such as, we select our target market as top market leader, and then especially have good ecosystem business throughout the country, so we can support also not only growth in corporate, but also increase our CASA. Also, and not only in agribusiness, agriculture, also we try to expand our corporates in mining and also in gas. W e mix both in agriculture and other sectors, which also can support us to expand our acquisition in transaction in CASA. I think that's my addition. Thank you.
Thank you, Pak Agus. Probably I will add some more information, Selvi, s o you are asking about the corporate target loan growth. I think in 2025, we are aiming to have 6%-10% growth year- on- year, but y ou might expect that it will be higher than that, right? I n terms of compositions, in any scenario, the composition will be roughly around 19%-20% out of our total loan portfolio. T hat's probably a wiser way to see the portfolio in a wholesale.
Y ou asked about what changes actually in the way Rakyat are financing the wholesale segment. The first thing is our perceptions on how we see corporate clients. Previously, we are more and more on a lending side, b ut by using a better account planning, now we are seeing a customer as a whole. We are using the customer profitability analysis. W e can be more competitive in the lending rate side, because we see other opportunities from fee-based or funding, for example. T hat's the first thing that changed in Rakyat. The second one is also the capability of our RM itself. Now they become more and more customized to each customer, s o they understand their clients very well from asset and balance sheet. P robably that's two of the changes that we have been trying to implement so far.
Thank you, Bu Vivi. I wanted to make a couple of announcements just before we end the call. I know there's a couple more questions. We'll get back to you later on that because it's been a while that we've been on already. I think first, our AGMS is going to be held in March. It was originally scheduled for March 11th, but it may be delayed a little bit due to some events that are outside of our control.
I t may be closer to the end of March, likely around March 24th, b ut we will get back to you on a final date for that. W e will report our first quarter results the last week of April, most likely. I want to thank all of you for joining, and to thank our directors and team for preparing the call. I hope you all have a nice morning. Please feel free to reach out to us with any questions that you have. Thank you.