Good morning, everyone. We would like to thank you for joining us for Bank Rakyat Indonesia's First Quarter of 2025 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 recently appointed Group CEO, Pak Hery Gunardi; our Director of Finance and Strategy, Bu Vivi; our Director of Risk Management, Pak Mucharom; Director of Micro, Pak Akhmad Purwakajaya; Director of Network and Retail Funding, Pak Aquarius Rudianto; and Director of Corporate Banking, Pak Riko Tasmaya. 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 morning.
Secondly, during Q&A session, please submit your questions via chat box along with your name and company. We will select the questions to be answered. I would now like to introduce Pak Hery Gunardi, our Group CEO, to begin the meeting. Please, Pak.
Thank you, Siaga. Good morning, everyone. As a proof of the March 24, 2025 Annual Shareholder Meeting, BRI has welcomed a new management team. I bring experience from a long career in banking, including leadership roles at Bank Mandiri, where I served as Director of Micro and Retail Banking, then as CEO, and most recently as CEO of BSI for over four years. Continuing the role, Pak Agus Noorsanto as the Deputy CEO, Pak Solichin as Director of Human Capital and Compliance, and Ibu Viviana, on my left, Director of Finance. Joining me are nine new directors. It's bringing strong expertise to support BRI's new phase of growth. The first one is Pak Akhmad Purwakajaya. He's a Director of Micro, former CEO of Jamkrindo. This is something like government insurance, and a long-time BRI leader with deep experience in micro and regional banking. The second one is Pak Alexander Dippo.
He's a Director of Commercial Banking, comes from Bank Mandiri, with strong expertise in small and commercial business segments. The third one is Ibu Farida Thamrin as a Director of Treasury International Banking, formerly with Bank Mandiri and Bukit Asam, with a strong background in treasury and finance. The next one is Pak Riko Tasmaya, Director of Corporate Banking, bringing nearly over 30 years of experience from HSBC and Citibank, most recently as President and Director of HSBC Indonesia. The next one is Pak Aqua Rudianto, Director of Network and Retail Funding, previously lead network development at Bank Mandiri, and bringing valuable experience in retail funding. The next one is Ibu Nancy Adistyasari, Director of Consumer Banking, joined from Bank BJB, where she served as a Managing Director for the past four years while previously working at Bank Mandiri as well.
Pak Hakim Putratama is Director of Operations, previously Director of Operations at Bank BTN, another one of state-owned banks, with over 25 years of both domestic and global bank experience. Pak Mucharom, Director of Risk Management, former Risk Director at Bank BNI, with over two decades of experience in risk and governance. The last one is Pak Saladin Effendi, who is Director of IT, joined from Bank Syariah Indonesia, joining with me together, carrying a role at Bank Mandiri and several international banks, bringing deep IT and transformation expertise. Now, let's discuss the current macro situation. We see limited direct impact from tariffs. I understand there are so many questions about the tariffs, with only 8.4% of BRI corporate loans tied to export-oriented borrowers. Furthermore, trade talk may ease short-term pressures. For 2025, we expect GDP growth is of 4.9%, in line with the 2024.
Key factors towards this first one are fiscal policy. A slightly wider deficit in 2025 should support domestic demand in our core segments. The second one is the monetary policy. Despite currency depreciation, BI has held rates, suggesting possible cut if the market stabilize or guidance assume no further rate cut. Inflation is expected to remain moderate at 2.65%-3.03%. Purchasing power is still below pre-pandemic level for the middle and lower segments. We continue to monitor this trend closely to stay agile in our strategy. First of all, I'm excited to lead BRI into the next phase, building on our strong retail base to create a more dynamic and customer-driven institution. Our focus is on strengthening our funding franchise to support sustainable asset growth beyond micro, aiming to grow our savings market share above 21%.
Ahead of our second quarter 2025, more detailed updates, here are our immediate priorities. The first one is funding transformation. We would like to boost brands and also the relationship manager productivity, aligned under the Retail Funding and Network Directors. This one is under Pak Aqua Rudianto, deepen cross-segment collaboration and launch product targeting in the emerging affluent, drive low-cost funding growth through better retail and wholesale synergy. The second one is a Core Revamp, to recalibrate our micro model with a sharper focus in asset quality and loan officers' productivity. We also would like to strengthen talent through upskilling and also improve the career path. We also would like to expand payroll lending and unlock value in pawning and also bullion bank. As we know, two months ago, Pegadaian, we got a license approval from OJK as a bullion bank or one of subsidiaries under BRI.
The third one is building strong foundation, enhance capabilities across business, risk, and also operation. We have to implement very strong three pillars, including business, risk, and operation, to make sure our business is running well and invest in scalable system and stronger execution discipline. Currently, we remain within the guidance and are monitoring asset quality closely. No immediate change will be made without full impact assessment. The Director of Micro will soon share further detail of the some initiatives on improving asset quality in micro and regrow micro once the asset quality is manageable. The total asset grew 5.5% year-on-year, supported by 5% loan growth and a temporary rise in liquidity for the Ramadan season. Excess liquidity is expected to normalize in second quarter 2025, supporting margins.
Loan-to-earning asset declined to 70.9% from 71.4% year-on-year, while earning asset rose to 92.3% of the total asset from 92.1% year-on-year, reflecting improved efficiency. PNM and Pegadaian contribute 10.6% of the total loan. Pegadaian loan rose 29% year-on-year, boosting overall loan growth. Loan loss reserve declined to 6.1% as pandemic era buffer utilized provision remained elevated at 5.9% versus 4.9% pre-pandemic. Deposit strategically slowed down year-on-year to 0.4%. CASA grew 7.1%, increasing LDR to 86%, plus 273 basis points year-on-year. LDR may be higher than in 2025. fee-based income, fee, and commission income rose 6.3% year-on-year, led by loan admin and e-channel fees. fee-based income are set to drive non-interest income growth in 2025 as recovery income is low. Leverage increased to 6.9x from 6.7x , following a higher payroll ratio of 86%. Leverage expected to rise further over the next year.
As of first quarter 2025, BRI key metrics are in line with our expectations. Reported net interest margin increased by 16 basis points to 7.68% quarter- to- quarter, which is at the upper end of our guidance for 2025, supported by more efficient cost of fund and declined by 15 basis points to 3.48% as we continue to optimize our liabilities. Cost to income ratio increased a little bit year-on-year to 40.7% from 37.4%, primarily due to holiday pay being disbursed in first quarter 2025 versus second quarter 2024, implying cost growth should slow in second quarter 2025. Cost of credit was 3.53% in first quarter 2025, while our net cost of credit in first quarter 2025 was much lower at 2.07%, both representing improvement year-on-year. Furthermore, the gross NPL ratio improved 14 basis points year-on-year to 2.97%.
Now, I would like to turn the call over to Bu Vivi, our CFO to discuss our financials in more detail. Bu Vivi, please, your turn. Thank you.
Thank you, Pak Hery. Good morning, everyone. I would like to start to discuss about our balance sheet and also P&L. Our loan book fell below our guidance, growing by 5% year-on-year. I think you might aware that since the second half of 2024, we slowed down our micro business in bank-only level due to the asset quality. The growth in micro business contributed by Pegadaian that grew 29% year-on-year, especially pawn lending that grew 37% due to the increase in the gold price, while in the same time, PNM grew only 4.5% year-on-year. As of March, both subsidiaries contributed 10.5% to our portfolio. Micro growth remains low but shows some increase in disbursement month-on-month basis in March. Micro loan growth at bank-only level saw first quarter - 2.8% year-on-year after deducting with around IDR 5.7 trillion write-off.
Our consumer portfolio grows slow to 8.8% year-on-year, primarily due to BRI Finance subsidiary, while the bank-only growth in consumer was 11.5%, as payroll growth reached 10.6%, and mortgage growth stood at 14% year-on-year. Our corporate portfolio growth rate slowed in the first quarter to 13% year-on-year. In this quarter, the largest drawdowns on corporate loans came from agriculture and mining segment, drawing down over IDR 28 trillion among our top five borrowers. We still hold our long-term aspirations that we will maintain the compositions of corporate segment between 18%-20% out of our total loan. We understand that having this corporate business is very important, so going forward, it will generate wholesale transactions that at the end will bring more CASA to the bank. Next, we move to the liability side. Our overall deposit growth year-on-year slowed to 0.4%.
CASA increased 6.7% as our CASA ratio reached 65.8% and continued to be maintained well above historical levels. As our loans slowed down, Rakyat have more opportunities to manage our liquidity so that our loan deposit ratio decreased by more than 200 basis points, actually, to 86%. Our cost of fund also decreasing. We had strong deposit growth Q- on- Q to prepare liquidity for the festive season. In first quarter 2025, we took on time deposit up to 9% Q- on- Q and 5% current account growth. We saw a positive improvement on the compositions of current account and time deposit. The compositions of retail current account improved to 32.27%. Last year, it was only 25.6%. For time deposit, retail portion also improved to 42.6%. Last year was only 38%. We believe, more importantly, going forward is the increase in the saving account.
As of first quarter, the saving account grew 4.7%. This is a positive indicator that we could be seeing improvement, actually, in the saving growth. If you can see here, if we want to break it down, the retail saving account growth roughly around 7%, and then the micro saving account roughly around 2.4%. Our cost of CASA stood at 1.64%, as 58% of our CASA is saving account with an average marginal interest expense in the first quarter of 0.32%. We are positive on the outlook of cost of fund given the decrease in the SRBI issuance and the rate of a central bank. However, please note that our net interest margin guidance does take into account the high loan deposit ratios at our peers. Next is our capital positions. Remain elevated with total CAR of 24%. Tier one CAR is also close to 23%.
Our full-year dividend payout ratio increased to 86% and was paid via interim dividend in January and final dividend, I think it's a couple of days ago. Over the medium term, we would like to see that our capital adequacy ratio decrease from the current level. The appetite, actually, is to have the capital adequacy ratio roughly around 20% for stronger future loan growth. I would like to discuss our income statement. Here in the first quarter 2025, we saw improvement on quarter-on-quarter basis of our net interest margin nearly 20 basis points to 7.68% compared to the fourth quarter 2024, as the lending yield increased by nearly 50 basis points to 12.87% in the quarter. If you remember, there were no modification loss in the first quarter, but we do have a modification loss in the fourth quarter 2024.
We need to remind you that in the second quarter 2025, we might have modification loss around IDR 1 trillion, and it will impact our net interest margin year-to-date roughly around 7 to 10 basis points. The revenue driver, along with a decrease in the quarterly OPEX of 4.6%, helped to support higher PPOP growth of 2.2% to IDR 29.9 trillion quarter-on-quarter. However, we would note that the increase in intentionally higher credit costs offset the stronger PPOP data. As a result, our net profit declined 9.7% Q- on- Q. The asset quality impacted our profitability measures as of return on asset and also return on equity. Going forward, we expect our NII to grow positively by accelerating growth in consumer and also manage our cost of fund better. Move to the next slide.
Our consolidated NIM stood at 7.68%, with the decrease in year-on-year NIM being a function of no one-time payment that we received last year, roughly around IDR 691 billion. NIM at PNM and Pegadaian subsidiaries contributed roughly around 100 basis points to this consolidated NIM. Our consolidated lending yield in the first quarter increased to 12.87%. However, we are cautious that this could decrease going forward as we have modification losses and might continue weaker loan growth in micro due to the revamping in the business model. Next slide. Non-interest income continued to report strong growth, while the core operating expenses growth was seasonally high up to 11.7% due to the Ramadan incentives that moving to the first quarter last year was on April 2024. We believe we are still able to maintain our guidance 3%-4% OPEX to asset as our target.
I would note that fee and commissions up to 6.3% year-on-year and recovery income contribute 77% of bank-only non-interest income. We did experience a sizable increase in net gold fee income as Pegadaian business remained very strong, increasing to around IDR 400 billion from IDR 87 billion year-on-year. On the OPEX side, aside from the personnel, we also see an increase in other OPEX growth, and this is caused by the Kupedes insurance premium. This is not the Kupedes that we disbursed in 2025, actually, but it is the Kupedes that we disbursed in 2024. We amortize the expense every year. Our cost to income ratio was in line with our guidance, 40.7% in the first quarter. We believe it will stay within guidance up to December 2025. I would now like to turn the presentations over to our Director of Risk, Pak Mucharom, to discuss our asset quality.
Thank you, Bu Vivi. I would like to discuss our asset quality and how it will perform through the remainder of 2025. Our consolidated NPL ratio decreased by 14 basis points to 2.97% year-on-year as we continue to see improvement in corporate asset quality and seeing early signs of better small business performance as NPLs in these segments decreased by 97 basis points and 77 basis points to 2.4% and 4.7%, respectively. We still see 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 improvements in the NPL ratio for small business as we guided in last year. Our Special Mention L oans are improving, decreasing to 5.32% from 5.68% in the year-ago period.
The decrease was primarily driven by higher restructured loan, which in micro totaled more than IDR 25 trillion, while write-off increased by 7% or IDR 659 billion year-on-year to IDR 10.3 trillion. As we forecast 2025, we anticipate write-offs and restructuring will remain around this level, but we did front-load some cost of credit in January, as we mentioned was likely during our last earning calls. We anticipate that first quarter will be in the peak and cost of credit can decline through in the second half of 2025. We carefully conducting portfolio reviews periodically so that we can inform you if anything could change in this assessment. Talking about the provision, our provision for loan and financing stood at IDR 81.8 trillion, representing 6% of total loans.
From 2015 till 2019, before the pandemic, our loan loss reserve to loans never over 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 remains elevated at 201%, and we would expect this can remain around 190%-200% in 2018-2025 as our portfolio is much less tied to corporate lending than our base. Our loans at risk ratio seasonally increased by 120 basis points to 11.5% from 10.7% quarter- to- quarter as special mention and NPL stock increased by over IDR 8 trillion and IDR 2 trillion, respectively. This is in line with our guideline that last quarter where we said that we expect the decreasing trend and loan at risk to continue, but the first half of 2025 will be a little challenging due to the seasonality.
Our cost of credit stood at 3.53% in the first quarter of 2025 and is above full year 2025 target of 3%-3.2% because of the management overlay from January that is currently at IDR 2.3 trillion. We anticipate the cost of credit based on normal operation would continue to trend lower through 2025. Our net cost of credit was 2.07% in the first quarter of 2025, as we show over 55% of write-offs in March and anticipate that recovery income will pick up in the second quarter of 2025. We write off IDR 11.4 trillion in first quarter of 2025, which is slightly above our full-year analyzed target, as we show elevated write-offs in March of IDR 4.2 trillion, mainly led by micro and small, but also impacted by around IDR 800 billion in corporate write-offs of textile company that had been fully reserved.
Based on our data, we do not see asset quality deteriorating further, but we do believe that cost of credit will remain around 3-3.2% for full year 2025, and we could see a similar trend to full year last year with a high cost of credit in the first quarter and then declining as the years move on. Now I would like to turn the presentation over to our Director of Micro, Pak Akhmad, to discuss our ultra micro and also micro business. Pak Akhmad, [Foreign language] .
Thank you, Pak Mucharom. The contribution of PNM and Pegadaian to consolidated micro loans increased to 23%, while at PNM, the growth slowed to 4.5% and Pegadaian grew 29.9%. BRI remains committed to maximizing Pegadaian and PNM's contributions through strategic synergies. Pegadaian leverages BRI's network to expand gold savings and gold pawning service, while accelerating cashless transactions. Pegadaian also is showing strong growth in its bullion banking business, which now reports nearly 800 kg of gold deposits and nearly 2,300 kg of gold custodian storage. The current global demand for gold-denominated products has been tailwind for Pegadaian and continues to drive their growth, while we have been deliberately slowing loan growth at PNM as we are cautious on a higher cost of credit at the business, which currently stands at 4.6% versus only 2.3% at Pegadaian.
I would note that the net interest margin at PNM in the first quarter stood at seasonally low 24.9%, and at Pegadaian was 19.7%. Next slide. Our micro loan growth in the first quarter of 2025 decreased by 2.8% 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. Only KUR Mikro is growing at the bank-only business, up 3.8% year-on-year. KUR is expected to be the primary micro disbursement source in the first nine months of this year, as we anticipate that Kupedes growth can improve as the year progresses from - 8.9% currently, as Kupedes disbursement stood at the modest IDR 31 trillion in the first quarter of 2025. We are seeing borrowers per loan officer decrease to 483 from a high in 2022 of 528.
This is in line with our intention to prioritize the relationship between loan officer and customer while we work to improve digitalization. Additionally, we have seen loans per loan officer remaining relatively stable at IDR 18.1 billion, a figure that will start to rise as we improve our micro performance. We are in the process of reviewing our micro portfolio more holistically with input from risk operations and our network directorates to prioritize process improvements, risk mitigation, and digital implementation to integrate rural and urban micro strategies. To sustain long-term growth, we continue to focus on three main areas. First, Human Capital, by revamping the capability to retrain, reskill, and upskill, and redesign the recruitment and career progression in micro.
We also focus on Operations by adding supervisors to all our micro units to reduce micro branch managers' workload in operations so they can focus on building relationships with micro clients. The third focus is on Risk, by improving credit risk scoring and loan underwriting process. In the next slide, we talk about the number. Currently, IDR 64.9 trillion remains on our balance sheet at March 2025 of the 2023 Kupedes disbursement, while IDR 7.2 trillion were written off and IDR 129.5 trillion were paid off. Of remaining 2023 disbursements, there are currently 18.2% in special mention and 8.8% in non-performing, and 11% has been written off, and 13.7% has been restructured. We are seeing that 2024 Kupedes vintages are looking better than 2023 Kupedes, but we are still monitoring the portfolio until it all has fully seasoned.
Now, I would like to turn the presentation back to Pak Siaga to organize the question and answer segment. Thank you.
Thank you, Pak Akhmad. We'd like to now move to the Q&A segment. We are changing the format at the moment of our Q&A. For those of you who have been on past calls before, we would ask that any question for management be submitted in writing to the chat box. If you'd like to ask the questions. I am now reading the first question submitted in the chat box from Pak Raymond. Many of us have understood issues and challenges that BRI is facing now. Perhaps can you share with us your observation with regards to key issues and/or challenges that BRI is facing now, such as retail or tight funding, micro value chain transactions, asset qualities, i.e., micro loan cleanups, or human capital, to name a few. Pak Hery, could you please assign the questions?
All right. Thank you very much, Pak Raymond, for the questions. First of all, yeah, to respond to your question, in regard to your question, we basically identify several items that will become the game changers for BRI going forward. It's in line with your statement. It's not a pair. You know, we just less than one month joining the BRI, you know, the new teams. So basically, in this case, we just, you know, would like to identify what is the big problem to bring BRI in terms of the financial performance is much better in the future. The first one is how do we lower cost of fund? We will focus on retail funding by boosting the engine such as a sales force, campaign, value proposition, and also increasing the productivity of digital channels. Basically, in terms of the digital channel, BRI is very strong.
For example, mobile banking, BRImo, currently we have almost 40 million registered users. The next one is the POS, EDC. We have currently more than 340,000 EDC. We have QRIS, almost 5 million. Also, the agent banking, we call it the BRILink. This is something like digital infrastructure that we have. We have to push more, you know, in the future. Of course, we will make BRImo as a leading super app by delivering superior retail transaction enabled by exceptional customer experience, UI, UX, embedded finance, conversation, AI, and seamless integration with corporate banking. We also drive subsidy synergy to drive cross-sell product holding ratio and also the stronger primary bank relationship with retail customers. For example, with BRI Finance for auto loan and SME, BRI Life for consumer and micro insurance, BRINS for commercial insurance.
We also would like to transform the transaction banking business model across cash management. For example, we would like to upgrade QLola seamless online to offline integration, trade digital trade system, token-based documentation and settlement, and also the treasury, for instance, advanced treasury management system. That's the first one. The second one is basically we are facing a little bit of problem in terms of cost of credit. We know we would like to improve COC with the build the new engine. We will focus on fixing micro in small businesses while driving consumer business growth through payroll loan. BRI is very strong in terms of number of payroll currently.
Micro 2.0, we actually would like to reinvent micro business model enabled by micro sales force revamp, customer lifecycle management, including also the graduation organization and distribution transformation and core on the specialization capability building and leadership, and also the credit risk excellence. We also would like to drive sales force productivity for small and upper small segment by strengthening the value chain capture, revamping people model, for instance, performance management, reward and consequences, and also the upgrading overall sales and risk capability of the sales force. The last one is we will rebuild the foundations. This is basically the second mention in terms of how do we manage a better cost of fund and also the better cost of credits.
Of course, we'll support also by enabler in terms of the whole with revamp or People Model, people management, talent management, training, and also education for sales force who are running the business in the field. Also, can we empower very strong, strong risk management, not only for enterprise risk management, but also including also the retail and consumer risk and also the wholesale risk. The next one is operation centralization and improve customer experience. Those three what I think we already identify that we would like to overcome next couple of months. Hopefully, the result, of course, will be gradually improved. We will meet in the second quarter on June 2025. Next, yeah.
Thank you, Pak Hery. This is another additional question from Pak Raymond. Over the past three years, broad lending rates have been very competitive despite funding costs were higher. How do you see major banks such as BRI opportunities to reprice our lending rates? If yes, where can lending rate be repriced towards consumer or mortgages versus corporate versus commercial or SMEs? Bu Vivi.
Morning, Pak Raymond. Thank you for the questions. Of course, opportunities to reprice up lending is a very ideal situation for banks. I think we also understand that we need to consider other factors. Competitions, I think, is one of them. Talking about competitions, bigger banks like Rakyat, Mandiri, BNI probably has a higher opportunity to reprice up lending rate. We will have two options. If we want to pursue growth, usually we will keep our lending rate low. If we want to keep margin, then keeping lending rate or increasing is very important. In this case, for Rakyat, I believe considering the current situations, we would not aggressively push growth. Talking separately about each segment, consumer is very, very competitive. I think most players in this segment using pricing strategy.
However, we saw a potential going forward to reprice up the yield actually by doing some diversifications, especially on a payroll loan. Currently, 60% of our payroll disbursed to civil servant, police, and army, or we know as an ASN/TNI, while disbursement to SOE and private only contribute around 6, probably 60, sorry, 16%. Pricing to the ASN/TNI borrowers group is very, very competitive. We aim to increase the consumer yield by continue to acquire new payrolls, notably from private or SOE group companies. Talking about the other product like commercial mortgage, our strategy is also diversifying the target market to help improving the yield in mortgage as well.
For SME and commercial segment, probably it's a bit tricky because we cannot only talk about lending rate, but probably more on ecosystem profitability or customers' profitability since most of the client sources is coming from the value chains. Yes, we do have a potential or an opportunity to reprice, but we also considering other factors. Thank you, Pak Raymond.
Thank you, Bu Vivi. The next one, we got a question from Jayden. Any revised financial guidance following the revised U.S. tariff regime and slower growth prospects? Any views from the incoming management on how quickly to resolve outstanding restructured microloans? Pak Riko, would you please respond?
Thank you, Pak Siaga. Good morning, Jayden. Thank you for the questions. Let me address you first on the first question about the U.S. tariff impact. If you look at BRI exposures as of March 2025, the export-oriented borrowers to the U.S. is about 8% of the total corporate borrowers, which is around IDR 60 trillion in loans to exporters, about IDR 20.8 trillion exported to the U.S. Out of the IDR 20.8 trillion, most of our borrowers export less than 10% of their products to the U.S. The rest of the majority of their exports is going to China, India, Europe, Japan, and also ASEAN countries. Additionally, from the overall IDR 60 trillion, approximately IDR 49 trillion is from palm oils, about IDR 9 trillion is from pulp and paper, and nearly IDR 6 trillion is from coal, and about IDR 1.5 trillion is sugar and fishery.
Now, if you break down the loan portfolio by sector, 31.9% of our portfolio is in trading sectors. This can span a lot of agricultural-related trading because we are still more rural in portfolio mix than our peers. We're cautious on the impact from the Chinese products, of course, particularly in textile. Yes, it is a concern. I think we also have to keep in mind that borrowers at the MSME level tend to adapt to changes in the operating environment and pivot to areas of opportunities. As of now, I can share that there's no revised financial guidance from us. On the second question on the restructured micro loans, currently we are assessing the portfolio very carefully. We're also reviewing our policy related to the maximum tenor of the restructuring.
Based on our findings, we see that there are plenty of customers who are willing to repay their loan. However, they require also longer tenors. Current policy is at the maximum of 1.5 x of the rest of the tenor. We also look at how to mitigate against failure in restructuring. We have increased these bucket provisions through MO, which increased the coverage close to 40%. The step that we are also doing is we implement several conditions for loans restructured in micro with the four conditions that we are implemented in this action. First one is the customer still has a good business prospect. Second one is customer still has payment capacity. Third one is customer has a good intention to repay the loan. The last one is a customer has collateral that is sufficient to cover the loan.
We do not allow restructuring to improve loan collectibility. That is for me, Jayden. I hope this clarified your questions. Thank you so much.
Thank you, Pak Riko. The next one, we got the question from Ferry Wong. The question is like loan growth forecast in 2025 and 2026 and the credit cost outlook if there is any changes versus last time. The second question is like should the tariff wars continue and GDP growth fall to 4.5%? What do you think about your loan growth and NPL and the liquidity condition so far?
Okay. Thank you, Pak Ferry. I think if we are talking about loan growth forecast in 2025, 2026, you know that the loan growth, our guidance for 2025 loan growth is 7-9%. If we are talking about the following year, probably it is too early to tell now, but positively probably like 1% higher. That is what our current estimations, but it is too early to tell about 2025, 2026.
For credit cost outlook, I think so far the first quarter cost of credit was 3.5%. As you may be aware, usually in Rakyat, the first quarter COC is the highest and hopefully it will continue to decrease by the end of December 2025. I think last year we written off around IDR 39 trillion-IDR 40 trillion and we need provisions. I think the level of write-off this year probably still similar like what we had in 2024. I think it will require provision cost similar into last year provisions. The provision should be similar. I think the COC guidance should be still within the guidance 3%-3.2%. However, probably it might be end up in the higher end of the guidance. What is the next question?
Should tariff wars continue and GDP growth fall to 4%?
What do you think about the loan growth?
Okay. Your next question is about the GDP growth if it is below 5%. We do have our internal research that especially for MSME, the MSME loan has a stronger and positive correlation to GDP growth as opposed to the interest rate. If the MSME loan growth actually has a positive, I think it's 0.6 correlations with the GDP growth. This shows that the MSME loan growth depends more on the economic condition. Therefore, if your question is GDP growth fell to 4.5%, it would result in a slowing down in the MSME loan growth as well. However, we are estimating that the GDP growth this year remained relatively manageable, 4.9%-5%, slightly declined from last year due to the global macro dynamic.
Thank you, Bu Vivi.
[audio distortion]
Okay. Thank you very much for all the presentations. Before we close the presentation, I would like to explain and also mention the 2025 guidance. Basically, the guidance still remains the same with the previous guidance that we already made. The loan growth will keep between 7%-9%. Net interest margin will still keep the growth between 7.3%-7.7%. The cost of credit mentioned earlier by Bu Vivi as well, we can keep from 3%-3.2%. The NPL below than 3%. The last one is a cost to income ratio. We will keep between 41%-43%. Okay. Hopefully the analysts, the investors can see the guidance that we already have until today.
Thank you.
Thank you very much.
Thank you, Pak Hery, for the remarks on the guidance for full year 2025. Since we are running out of time, I think the last question from Ferry would be our last question of today's earnings call. Next, after the call, we would address the existing or the remaining outstanding questions, three emails. Of course, thank you for joining us today at our earnings call for first quarter 2025. We appreciate your continued support for BRI. Please do not hesitate to reach out to us at investor relations through one-on-one meetings or emails or call if you need additional information or follow-up. Thank you, everyone, and have a good day.
Thank you.