Good evening, ladies and gentlemen, and welcome to PT Bank Mandiri's first quarter 2022 results briefing. Thank you all for joining us today. My name is Laurensius, Head of Investor Relations. Together with us today as speakers, we have Pak Darmawan, our CEO, Pak Siddik, our Chief Risk Officer, Pak Sigit, our CFO, and Pak Tim, our IT Director. Before we start, I strongly encourage you to download both our presentation material and financial statement currently available on the IR webpage of Bank Mandiri. Please note that a Q&A session will be opened after the presentation. Participants who wish to ask can use the Raise Hand button in the Zoom app, wait for your name to be called and your microphone unmuted.
Questions typed in the Zoom chat box are not prioritized in this meeting, and will likely be addressed after the call by the investor relations team. We are also happy to take questions via emails afterward, and we'll try our best to reply to your question as soon as we can. Now, without further ado, I would like to hand the presentation to Pak Darmawan, our CEO. Please, Pak. Thank you.
Thank you very much, Laur. Allow me to start this discussion by providing a short commentaries from the macro point of view. As a country, although the fight against the COVID crisis is not entirely out of the way, our ability to navigate and adapt to this difficult situation has improved meaningfully. This is true for the government, the businesses, and the people in general. The left chart shows Mandiri Spending Index, which we developed using our own internal customers transaction data. It indicates a slight decline in January and February this year due to the Omicron activity restriction, followed by a recovering trend in March, which is positive. As activity slowly reopens, we expect a rebound in the GDP growth to 5.2% this year, compared to 3.7% last year.
Reopening may also lead to higher inflation, but expected to remain within manageable level. Lastly, we expect around 50-75 basis points increase in the benchmark rate this year, which will likely benefit our margins. In general, our strategy execution positively impacted Mandiri financial performance in the first quarter 2022. We identified loan growth, cost of funds, and CASA, net interest margin, operational cost management, asset quality management, and result from our digital initiatives to be key strength during the quarter. Pak Siddik, our Chief Risk Officer, will later on run through the details on asset quality trend. On the other hand, yield and growth in payroll loans, despite improving, were the key challenges we must address. In summary, the first quarter 2022 gave us a good start for the year. Consolidated profit grew by 70% year-on-year.
Pre-provision operating profit grew by 26%. Loans and CASA grew by 9% and 12% respectively. All thanks to well-managed ratios such as NIM improving, lower cost to asset, and lower cost of credit. As a result, return on asset, as well as return on equity, increased in first quarter 2022. This slide shows the bank's loan growth profile. By segment, growth was led by SME, micro commercial, and some consumer loans. This is in line with our strategy to move toward higher-yielding assets. Our subsidiaries, BSI and Bank Mandiri Taspen, also contributed to the overall consolidated loan growth. While corporate loan growth is on the lower end, it is worth noting that we are growing meaningfully more toward the high-quality private corporates as well. The bottom left chart shows you that.
Against a total corporate loan growth of 6.1% year-on-year, private corporate grew by 12.1%, while state-owned corporate was flat. Moreover, growth by type of use focused more on the investment loans at 13.2% year-on-year, while consumer loan grew by 10% and working capital was flat. Our digital initiatives, and more importantly, the impact it brings to our financial performance, has been delivering positive progress. The new super app, Livin', has been downloaded more than 12 million times, leading to 11 million number of registered mobile app users. Number of transaction and value of transaction went up meaningfully. This helped us attract and retain more saving deposit, and at the same time, lowering the cost of funding in saving deposit, as shown on the bottom left chart.
The combination of higher-yielding assets and lower cost of funds through various efforts have led to improvement in NIM, as you can see on the right-hand side chart. Next, operational costs had improved in first quarter. On bank-only term, our cost-to-income ratio had come down to 36.3%, and cost-to-asset ratio down to 2.4%. Some data points on the right-hand charts show increase in productivity in branches or per employee, which also helped in achieving efficiencies. Indeed, over the past 10 years, asset per branch ratio had gone up meaningfully. The same goes to number of debit cards holder per ATM, which went up as most of the customer's transactions are done through our super app Livin'. Equally positive, PPOP to employee has gone up as well. This slide provides a quick summary of our subsidiaries performance.
On aggregate, assets managed under subsidiaries grew 16% year-on-year in first quarter, driven by BSI, AXA Mandiri Financial Services, Mandiri Taspen, and Mandiri Tunas Finance. Aggregate subsidiaries contributed IDR 976 billion in profit, or 12% higher year-on-year. We expect this positive trend to continue in the coming quarters. The strong consolidated growth in PPOP and net profit in first quarter of 25% and 70% year-on-year respectively, had resulted in a multi-year high quarterly ROE of 18.1%. With all the initiatives and strategy in place, we aim to keep ROE at around this level in the short-medium term.
On guidance, we sharpen our NIM target between 5.1%- 5.5% range for 2022, and cost of credit between 1.4%-1 .7% while keeping loan growth unchanged. That is all from me. I will now pass on the presentation to Pak Sigit, our Chief Financial Officer. Please, Pak Sigit.
Thank you, Pak Darmawan. Ladies and gentlemen, now allow me to go through our financial highlight. Our total assets during the first quarter 2022 increased by 9.5% year-on-year, driven by 8.9% growth in loans and 27% increase in government bond and marketable securities, which is part of our effort to optimize the ample liquidity environment we are in. On the liability side, growth was driven by the increase of wholesale funding on the back of the first ESG repo issuance in Indonesia, amounted $500 million. CASA also grew by 12% year-on-year, led by the savings deposit, which was 16% higher year-on-year. This, combined with a lower time deposit, grew CASA ratio to more than 70% consolidated as of March 2022.
Relatively higher loan growth drove our bank-only loan-to-deposit ratio higher in first quarter 2022 to 83.7% from 80.4% in fourth quarter 2021. It is also worth noting that the bank-only LDR on the rupiah currency remained to be very low at around 79% in first quarter 2022. Forex LDR, however, is on the higher side. Other ratios, such as the MIR, LCR, and NSFR are positioned safely and healthy. On the P&L side, net interest income was up 17% year-on-year to IDR 20.5 trillion in first quarter 2022, driven by the improving net interest margin trend we saw during the quarter.
Non-interest income was up 13.6% in first quarter 2022, supported by gain in recovery, higher loan and deposit-related fees, and fees from the mobile app, new Livin'. Total revenue grew by 16% year-over-year to IDR 29.7 trillion, higher compared to the growth in operational cost of 4.6%, leading to a positive jaws and lower cost-to-income ratio. Pre-provision operating profit was 25% higher in first quarter 2022, both in year-over-year term and quarter-over-quarter term. Furthermore, our provisioning was down meaningfully during the first quarter 2022, which helped net profit to grow by 69.5% year-over-year to IDR 10 trillion.
Most of the key consolidated ratios are showing positive results in first quarter 2022, starting with net interest margin, which was 5.3% or 13 basis points higher Q-on-Q and 21 basis points higher year-on-year. Our cost-to-income ratio came down to 40% from levels above 45% in the last couple of years. Equally, cost to asset ratio had also come down to 2.77%. Asset quality ratios are showing encouraging trends in general, and credit costs were kept at very healthy level of 1.57% during the quarter. All the above led to the increase of the consolidated return on assets to 2.32% in first quarter 2022, and return on equity to 18.1%. The next slide shows the group's loan and deposit breakdown.
In line with our strategy. Growth of loans during first quarter 2022 was led by commercial at 9% year-on-year, SME and micro at 11% year-on-year, and consumer at 8.9%. Our subsidiaries also contributed meaningfully to growth at 11.9%. On deposits, we de-emphasize our time deposit with 9% drop year-on-year, while focused growth was largely on the cheap funding, such as saving deposit and demand deposit, as you can see on the right-hand chart. Our strategy moving toward higher yielding asset has helped us stabilize our loan yield trajectory, which saw a sequential improvement in first quarter 2022, as you can see in the top left chart. At the same time, our initiative on CASA had led to decline of our funding costs. Both combined supported the uptrend in net interest margin.
The bottom right shows the net interest margin of bank only as well as key subsidiaries, BSI and Bank Mandiri Taspen. With a relatively stable net interest margin trend in both subsidiaries, we were able to improve our consolidated NIM as well in first quarter 2022 to 5.3%. Our consolidated non-interest income saw a growth of 13.6% year-on-year in first quarter 2022. Higher recoveries, loan and deposit related, as well as e-channel fees, more than offset the decline we saw in gain from fixed income. Our consolidated non-interest income to total revenue remained at healthy level of 29.1% during the quarter. Trend in operating costs during first quarter 2022 was good, with both cost-to-income ratio and cost-to-asset trending down.
In first quarter 2022, our consolidated cost-to-asset ratio was 2.8% and cost-to-income ratio 40%, lower relative to historical levels. I would like to now pass the presentation to Pak Siddik, our Risk Director. Please, Pak Siddik.
Thank you, Pak Sigit. Ladies and gentlemen, now please allow me to run through some updates on the asset quality trend up to the first quarter 2022. Overall, the indicators that you see on this slide are showing positive progress for the group. The COVID-19 restructure book continued to decline, as shown in the top left chart, which resulted in falling loans at risk on the top right chart. The trend in the NPL ratio was also encouraging, with a consolidated level of 2.66% as of the first quarter 2022. As a result of the above, we were able to lower our credit costs to 1.45% bank only, and 1.57% on a consolidated basis in the first quarter 2022, lower compared to the previous quarter and the previous year.
We intend to keep our credit cost level between 1.4%-1.7%, as stated by our CEO earlier. On this slide, we would like to emphasize the healthy provisioning coverage that the bank had set aside. Our NPL coverage remains quite high at 247% as of the first quarter, which is higher quarter-on-quarter and year-on-year. On a wider coverage perspective, which is loan loss reserve to loan ratio, we are now at about 7.2%, among the highest in the industry. Our loans at risk coverage is also very healthy at 64% if we exclude the COVID restructured book, and about 39% including it. Next, I'd like to discuss about our COVID-19 restructure book positioning and risk profile in more detail as of March 2022.
The outstanding bank only COVID restructured loans dropped to IDR 67.7 trillion, lower compared to IDR 70 trillion in the fourth quarter last year. The decline was driven by the exit of previously low-risk accounts, which now makes 44% of total COVID restructured book. Medium-risk and high-risk COVID restructured loans remain manageable at around 40% and 16% respectively, as you can see on the table. Note that the provisions set aside for a particularly high-risk group is 63% as of the first quarter 2022. Lastly, the total provisioning level had reached 16.7% of the restructured book, multiple times higher than the 2.45% NPL ratio that we have identified from this COVID portfolio, which I will go into more details in the next slide.
We'll have to continue to watch these accounts very closely and continue monitoring existing COVID-19 restructure book to adjust our provisioning level if needed. The following slide shows the performance of NPL ratio in our COVID-19 restructure book. As of the first quarter, the ratio stood at 2.45%, where NPL was at IDR 1.66 trillion against a total COVID restructure book of IDR 67.7 trillion. On a breakdown by segment, consumer banking and micro banking took the bigger portion of the NPLs of around 79%, followed by SME banking and wholesale corporate banking as well as commercial banking. Once again, the 16.7% provisioning level for COVID restructure loan we saw in the previous slide suggests that Mandiri has a good buffer should NPL surprise on the negative.
Of course, the likelihood of any surprises will depend on the development of the COVID-19 crisis, the government actions to contain the crisis, as well as the economic recovery and all other moving variables which we have to continue to monitor closely. As regards to the credit cost, yeah, we ended the first quarter with 1.57% on a consolidated level, meaningfully lower as compared to the 2.1% we booked last year as a group. Moreover, the bank-only cost of credit has dropped to about 1.45%, slowly approaching the pre-COVID level. Although we acknowledge that COVID-19 is not out of the woods yet, we believe that the business recovery is more likely to happen this year as activities are returning closer to normal, hopefully.
The coverage level we have kept at 247% for NPLs is another ratio suggesting that Mandiri has sufficient buffer in the event of the unexpected. Finally, I'd like to give you an update on our capital positioning. In general, the CAR level, which is at 18.2% in the first quarter, is well kept within the optimal level. It is worth noting the seasonality low CAR during the first quarters of every year. On a yearly context, we intend to maintain CAR and Tier 1 ratio at around 18%-20% range in the near to medium term. I'd like now to pass the presentation over to Timothy Utama as our Chief Technology Officer to discuss more on our digital initiatives and its performance. Please, Pak Tim.
Thank you, Pak Siddik. Ladies and gentlemen, allow me to give a brief update of our digital progress. As you can see, on the chart, where, you know, we launched our Livin' in last year in October. Since we launched actually, Livin' has been downloaded over 12 million times. From the chart, you can tell that the growth of the users has been very encouraging. We have seen a 51% growth, where total number of Livin' users have reached 11 million. If we follow that with the number of transactions, it is actually very encouraging. We see a 71% increase in the frequency. What does it mean? It means that I think our client believes we...
The clients believe that what they see in the apps have got use cases, therefore it pushes up the frequency of the transactions to a very encouraging number that touch you know it 71%. Equally, the growth transaction value for the first quarter grew nearly 50% to IDR 508 trillion. If we compare what we have seen in Livin to what we have in ATM, the transactions in Livin actually has surpassed that of ATM in a significant way, both in the transaction value and volume. Again, it shows that people have shifted doing the transactions that previously done in the ATM machines, now they moved to Livin for their day-to-day needs. What is left in ATM is basically the actual cash transaction or cash withdrawals.
What is equally interesting is actually we have, since the launch of Livin, 1 million new-to-bank accounts opened digitally on this app. This can be done reasonably fast. Usually we time it, we measure it. Normally, can hit about 95% up to 5 minutes, but not more than 10 minutes, 100%. This is very encouraging. In less than six months, we have seen a number of 1 million new accounts open, and usually we don't see this in the market. That's very encouraging. If I can move to the next slide. This is where many times we got asked with the changes in the landscape of fast payments in Indonesia.
Though those that have been following us know that the central bank introduced BI-FAST. BI-FAST was introduced late last year in December, and the pressure on fees actually of BI-FAST has been offset significantly because of the higher transfers that we saw in Livin'. The fee base we are very happy to report it has gone up significantly to a much higher number, despite that BI-FAST has actually taken down its fees for transfers from this compared to that of the traditional transfers. The composition of BI-FAST actually has been growing quite fast. Because of the ability for us to drive the volume, that is not only from transfers, but from all other transactions, we can sustain even drive a higher fee-based income.
What I can say about BI-FAST, I think our timing was very good with that. Livin' was designed specifically to address the financial needs of our clients as well as other day-to-day needs. Therefore, it pushes out the number of transactions with the right use cases that clients can use. At the end of the day, I think what I would like to stress here is with Livin', we create ecosystem, where in that ecosystem, we can see transactions going up financially and also for other needs, which I will cover later in the following slides.
If I move to the next slides, I think what I would like to report as very encouraging outcome is the higher users stickiness will drive a good outcome, which is the cost of funds at the end of the day for our bank, and that has been covered by my colleagues before. Here you can see on the chart where the bars represent the number of transactions per person that has gone up significantly, and by Livin because of the use cases that we believe that has been built, that has been responded positively. That increased from 16 to 25 since the you know with the latest number, but. We believe that is gonna continue to grow.
The other piece that is very encouraging is the fact that the transactions within the Bank Mandiri ecosystem is actually growing. What does it mean? It means that money that is transacted between account holders are within the Bank Mandiri ecosystem. The other very encouraging outcome is the number of accounts that I mentioned earlier, has got a percentage of 20% now open accounts done digitally through Livin. That is, I think, a very, very good number considering that we've only launched this for six months. The outcome is actually reasonably clear. It pushes down the cost of funds by about 50 basis points, as you can see on the right-hand chart. At the same time, the balances of the demand deposit or savings account keep growing.
That's again a testimony of the market has responding very strongly to the launch of our super app Livin. If I can move to the next page, I would like to just touch a bit in terms of what the super app is all about. Behind the super app, we actually developed and invested significantly in modern technology stack, completely a digital native. What it does, it gives us the agility whereby we can accelerate time to market, releases of new use cases, and that would generate new revenue streams. From that perspective, you can see and you will expect to see launches that we have been doing now and next month, for example, after the Lebaran holidays, we will be releasing two new buttons, if you like.
The first one is actually a use case for investment, and that will be launched along the side with the lifestyle button that we call it for belanja and wisata in the Indonesian context. What it does is now all our clients will be able to invest in mutual funds. What it will provide is actually different to perhaps some other competitors that we have. For mutual funds, now everything is built in one app, our super app Livin. Other banks may have that in different apps that is outside their main apps. The other piece is actually why we built it here.
You know, when people are able to invest, obviously, peace of mind of security is gonna be very important, and we believe the Livin' by Mandiri will provide that ability to give investors that peace of mind. We also democratize investment. The ticket size, it can be as low as IDR 100,000 to make investment in mutual funds. That hopefully will provide a very different prospect and new revenue streams to the bank. In terms of lifestyle, I think I've mentioned that briefly. We will introduce a lifestyle button where clients are able to, for example, buy tickets for their holidays. We combine it with AI. We do packages and also other stuff like golf reservations and the likes.
Following that, we will also launch our smart branch concept that is gonna be integrated in our Livin. Now let me change gear to give you a brief update on, in terms of our wholesale super platform, which is Kopra. On the screen, you can see that overall, Kopra actually has really helped Mandiri being positioned. You can see that the opportunity is enormous. We have seen significant growth from the transactions be it in trade and guarantee, cash management, FX. These are the major components in Kopra. Transaction volumes and values has grown significantly. Volume has almost doubled. Value again has touched almost 64%, which is completely you know, showing a good response from the market.
The registered users, again, absolutely a significant increase in the percentages that is shown there, 189%. Then followed with fee-based income that is growing significantly by 98% to IDR 175 billion in first quarter 2022. I think what Kopra does is actually positioning the bank to become the operating bank for our clients. You can see that we have done the research where with Kopra, it will increase the product holdings of each clients. With that, actually the corresponding increase is significant. If a client has got one product holding versus five product holdings, the current account average balances will increase significantly from IDR 0.3 billion to IDR 25 billion when you have a higher number of product holdings.
You can see that on the chart we've broken down the number of product holdings that is based on today's context from our portfolio. What it does is it gives us enormous opportunity. We just move up the percentages from one product holding to three product holding, the average balance will go up 10 times. That is actually giving us an upside going forward that we'll keep pushing, providing the right use cases for our Kopra. What it does, obviously, is a reduction we can already see with the increase in our CASA. The cost of funds has dropped significantly from 2%- 1.4%, as you can see on the chart on the right-hand side.
I'll move on to the next slide, which is my last slide. What Kopra does beyond just the products that you have seen before, the ability to provide the cash management, trade, and custody, FX and the like. What really is gonna be coming to this full story of Kopra is the ability to create value chain for our wholesale clients. When we create this value chain, you can see that the potential is enormous. The corporate clients have... Actually, we have identified now 100,000 potential suppliers that we can finance, as well as 30,000 potential distributors that we can finance. This is just based on the principals that we are today managing at the top level. What you can see is a potential increase in terms of loans for supplier financing as well as distributor financing.
With that, I think this is gonna be our focus going forward. We look forward to having this opportunity and drive it through where we become the operating bank accounts for our clients, because we have the ability to provide the right use cases and solve their problems with solutioning in the value chain context. With that, I will stop here and pass it back to Pak Siddik, who will elaborate more on the ESG. Please, Pak Siddik. Thank you.
Thank you, Pak Tim. Ladies and gentlemen, let me now touch on our ESG initiatives. In general, we are on track and very much aligned with the banking regulation on sustainable practices under POJK 51, which covers sustainable financial products and services, human resources, and corporate governance. Some of our sustainable financial product and services are the $300 million worth of sustainable bonds we issued last year. Our very recent ESG Repo worth $500 million, electric vehicle financing for retail customers and sustainable loans. In addition, we also continuously educate our clients through workshops and group discussions forums. For the social aspect, we participated in several corporate social responsibility programs, along with loan disbursement through our financial inclusion channel, such as agent banking, P2P lender, et cetera. Our sustainable portfolio has gradually increased throughout the year.
As of first quarter of 2022, about 25% of the total loans is categorized as sustainable portfolio, which consists of 50% MSMEs, 42% sustainable palm oil, and the remaining being financing toward renewable energy, clean transportation and more. Moreover, Bank Mandiri is committed to support sustainable banking by prohibiting financing projects that endanger the environment and social. Some of the credit policies can be seen on the right-hand side of the slide. This slide provides specific updates on our palm oil exposure. Out of the total outstanding IDR 86 trillion in the first quarter, about 80% is wholesale corporate banking and commercial banking, while 20% are SME and micro business, which are largely lending to the plasma farmers. Mandiri is currently actively financing more than 70,000 CPO farmers. Moreover, we also have a strong policy in managing palm oil sectors.
Some of the criteria we ask in our debtors are ISPO certification requirement, no child labor, and growing palm tree in sustainable land, no peatland policy. Some of these policies can be seen on the upper right of the slide. The bottom right chart provides an update of the mix between ISPO certified and uncertified palm oil-related loans. Here, we believe we are making a good progress of currently having around 90% of our exposure in certified ones. On sustainable operations, we have implemented various initiatives to reduce GHG, greenhouse gas emissions. One of the initiative is the collaboration with PLN for electric vehicle as operational cars, the first in Indonesia. We also strive to save on energy consumption, considering that energy use is closely related to emissions, which eventually has an impact to climate change. Our digital platform also contributes to lowering carbon footprint.
For instance, we launched the Livin super app as described by Pak Tim, for our retail customers in October last year. The app usage had led to lower transaction done in ATM or branches. Less mobility is required to do transaction with us, which is good in context of the carbon footprint. Even account opening can be made through Livin, paperless for example. Lastly, diversity is a corporate culture value for Bank Mandiri. We believe that diversity brings creativity that may not be found in a homogeneous working environment. The bottom left chart provides a quick detail of the demographic of our employee. Lastly, through various channel, Bank Mandiri has carried out several CSR and financial inclusion initiatives that have had a positive impact on approximately 640,000 Indonesians through.
The first one is Mandiri Sahabatku program, which provides entrepreneurship and financial management training program to around 14,992 Indonesian migrant workers. Second one is collaboration with fintech companies such as Amartha, Crowde, Akseleran, and Investree, with loans that have been disbursed amounting to IDR 1.2 trillion to more than 81,300 borrowers, who are mostly micro customers. The third one is program for distributing banking product to all corners of Indonesia and providing job opportunities through 163,000 banking agents. That is all from me, and I'll hand the presentation back to Lau for Q&A session. Thank you.
Thank you very much to all speakers. Ladies and gentlemen, now we are entering the Q&A session. We would like to limit maximum two questions per person. The first question comes from the line of Harsh Modi. Please ask your questions, JP Morgan. Thank you.
Hi. Thanks for the opportunity to ask questions. First one is on provisions. You lowered the guidance. How shall we think about normalized provision numbers for the bank over the next two to three years? Do you expect the way things are going to ultimately hit a number below normalized? That's one. Second, on the cost income ratio, pretty solid cost numbers. How do you expect that to fare in the course of the year? Do you think there's enough revenue upside to offset any kind of cost pressures? How are you looking at inflation impacting your cost base in the course of 2022? Thank you.
Thank you, Harsh. Maybe the credit cost question goes to Pak Siddik, and we'll get to the cost-income ratio after that. Thank you. Please, Pak Siddik.
Thank you for the question, Harsh. The normalized credit provision or cost of credit numbers in the long run or steady state, we've done some simulation depending on the mix of the credit portfolio that we have by segment. As per our recent strategy to actually increase the mix of the higher yielding segment, which are commercial banking, SME lending and microlending to a higher proportion. With the very good quality of credit underwriting, that kind of higher mix, we would expect that we would maintain at between 1%-1.4% on a steady state basis in the long run.
The question that you said, whether it is possible to actually achieve below 1% cost of credit, that depends, you know, because again, you know, if we were to go more into the wholesale banking growth phenomena, which is corporate banking mostly, then we would be able to achieve probably lower than 1% cost of credit. But maybe at the expense of volume, because we see that the higher margin and the higher opportunity for growth will be from the commercial banking, SME and micro, including consumer banking going forward. That's why one of our strategy is actually to increase the mix of the retail banking part going forward, so that opportunity to actually get higher margin will be higher in the future.
Between 100-140 basis point, that's our take for now.
Thank you, Pak Siddik. Maybe on the cost-income ratio, Pak Sigit. Please go ahead. Thank you.
Thank you. We expect maintain our cost-income ratio at least below 40%. For the bank only today, we already at rates around 36%. We expect in the long term 40% below 40% is our expectation. As Pak Darma mentioned that we focus to increase productivity as Pak Darma mentioned in the previous slide, because we are successful to improve our people per employee and then asset per branch. I think we will continue to shifting or changing strategy with focusing on our digital initiative. We also expect to maximize our platform digital Kopra and Livin as a support to growing business in the future.
We expect that this is our strategy to maintain our cost-income ratio below 40%.
Thanks, Pak.
Thanks, Pak.
Maybe just to add on the point.
Yeah, yeah.
On inflation. Maybe just to provide a context, we are officially expecting an inflationary environment of roughly about 4%-5% this year. The cost-income ratio that we have, which is below 40%, have already incorporated that assumption. I think it's very important to note that the key here is the ability of the bank to also boost their revenues. Again, it's a 4% average increase in the cost side of things. We do believe that there is a potential increase on revenues coming from the new streams of Livin', the fee income from Kopra and Livin', the improving NIM that we're witnessing, that is not coincidental.
It's very much within our strategy of going to high yield. Ultimately, we think that the jaws can be kept positively, you know, including and considering the 4%-5% inflationary rate that we're expecting in our assets.
Thanks, Laurensius.
Thank you.
If I can just slip in one more question on CET1 ratio, there was a very sharp decline of almost 150 basis points. It seems like Bank Syariah Indonesia had a very sharp decline in CAR as well. Could you just explain where those tier one shifts came about from? Thanks.
Basically, on the CAR level, Harsh, I think one thing that is worth noting is the seasonality that we have in the first quarter. In the slide that you know you would probably have in front of you'll see that you know we provide an example of the first quarter of 2021, which was also at about 18% level, but it sort of normalized toward the end of last year. If you look at the 2021 level, the full year, the December level, then that will be to the 19% level. The first quarter decline in quarter-over-quarter you know tend to be very seasonal, Harsh. Thank you.
The next question's come from the line of Jayden from Macquarie. Just go ahead and ask your question. Thank you.
Thank you. Well done on the first quarter, and thanks for also upgrading the guidance and showing the conviction. The two questions I have, first around cash recoveries was quite strong in the first quarter. It almost doubled. What's the view on how that can sort of remain for the rest of the year? Is there some sort of recovery target that you have? Obviously, as the economy improves. My second question is around loan repricing. You mentioned that your expectation is 50-75 basis points of higher rates, and the NIM has been strong off the back of the strategies you mentioned, Lau, on pivoting the loan portfolio. What's your thoughts around repricing maybe in the second half, and the competitive environment? Those are my two questions, and thanks very much.
Thank you very much. On recovery, Pak Siddik, perhaps? Yeah. Okay. Thank you. On the repricing ones, Pak Sigit, our CFO will address that one. Thank you.
Okay. On recoveries, I think we have a very strong number in the first quarter. That's driven by one big recovery from our wholesale banking, which was achieved by our special asset management team. That number may not, I guess, repeat itself, because these are one-off things. If you look at our latest forecast for recovery for full year, you know, so we are aiming, as of now, to achieve total recovery from written off accounts of around IDR 5 trillion toward end of the year. This is compared to IDR 4.6 trillion in 2021. As we achieve about IDR 400 billion group's increase in recovery for the full year this year.
Thank you, Pak Siddik. Pak Sigit, go ahead on the repricing profile. Thank you.
We have an internal calculation that, because of our loan today, around 85% of our loan is non-fixed rate. We have opportunity to repricing if BI rate increase, for example, 50-75 basis points. We expect that our internal calculation, if BI rate increase 25 basis points, it's impact to our net interest margin around 8%-11%. We believe that increase of BI rate is positive to Bank Mandiri, because we have an opportunity to reprice our loan. We also see that around 30% of our corporate loan is reference rate.
Automatically, when the price increase, we can adjust the price to our debtor.
Thank you, Pak Sigit. Maybe just to add as well, Jayden, when it comes to existing loans, existing ones in our book, there are, you know, 80% of them that are repricable. More importantly as well is the level of rates that we provide to the new loans, which is typically about 150 basis points higher than the current running yield. For example, we are, you know, looking at current running yield of about 5.5% for corporate loans, for instance. If we look at new loans that we sort of disburse, we would basically chase at the 6%-6.5% level. Obviously, that can varies depending on the competition or, you know, and all that factors.
The new loans that we onboard in the subsequent quarters, even in the first quarter, should, you know, theoretically, you know, be yield accretive as well for the bank.
Thank you. Next question coming from. Last question. Sorry. One last question coming from the line of. That's Melissa Kuang. Please go ahead.
Hi there. Thank you for taking my question. Just back on the margins. In terms of your margin guidance of 5.1%-5.5%, does it take into any consideration the ability to pass through the rates, or would most of it come from your loan mix split? Maybe you can give us a little bit of a breakdown as to how much from the loan mix and how much from the margin if BI were to raise rates. That would be helpful. In terms of the second question, just wanted to ask in terms of the supply chain of the SMEs you were talking earlier in the corporate and identifying those. Are those SMEs already banked by other banks, and how are you going to bring them over?
Onto the Mandiri platform, or are these SMEs currently not banked and you just found these new opportunities that you're going into? Thank you.
Thank you, Melissa, of Goldman Sachs. Pak Sigit, on the first question on the NIM, whether or not it is a function of loan mix or, you know, repricing. Go ahead. Thank you.
Thank you, Melissa. We revised our guidance up mainly coming from loan mix. We expect to shifting our retail from 34%-36% in the next years. We're also shifting our loan growth into high-yielding assets such as SME commercial also micro. We also focus a growth in investment loan compared with working capital, because we believe that investment loan has a higher yield compared with the working capital. For the loan repricing, I think it's bonus if we can do in the second semester when the BI rate increase.
We of course has tried to see the opportunity, but I think focus for Bank Mandiri is shifting to high-yielding asset.
Yeah. Thank you very much, Pak Sigit. In short, you know, a big driver of our NIM improvement, you know, lays on the change in loan mix, obviously as well as the cost of funds. Repricing will be very much case by case. Repricing is something that is not within the control of the bank. It will depends very much on the competitive environment, et cetera, et cetera. If repricing environment is easier than our expectation, then that is gonna be more of a bonus for us as opposed to plan A strategy when it comes to the NIM. Now, let me just address the other question about regarding the potential SME and value chains.
Let us get back to you in terms of data and the precise, you know, answer to this, but it's really a mix, right? It's either, you know, those that has been with the bank, but there is potential to basically increase limits or really suppliers or distributors that is not yet with the bank, but, you know, attached with the bank's value chain, right? So has somehow a business relationship with Bank Mandiri's key corporate clients, key wholesale clients. And of course, you know, that's something that we see as, you know, upside potential. In terms of how much of them are banking with other banks and therefore, an opportunity for us to grab market share, we'll get back to you on that after the meeting.
I guess that is the last question. With this, I would like to close the analyst meeting. Thank you very much, Pak Darmawan, Pak Siddik, Pak Sigit, and Pak Tim. Thank you.