Good morning, ladies and gentlemen. Welcome to PT Bank Mandiri's second quarter 2025 results briefing. Thank you for joining us today. My name is Laurensius, Head of Investor Relations. I'm joined this morning by Ibu Novita, our Chief Financial Officer; by Danis, our Risk Director; and Pak Tim, our Operations Director, who will serve as today's speakers. Before we begin, I encourage you to download both the presentation materials and the financial statements, which are available on Bank Mandiri's Investor Relations webpage. For today's agenda, we will first hear presentations from our speakers. Once all presentations have concluded, we will proceed to the Q&A session. During the Q&A, please state your name and the institution you will represent before asking your question. We also welcome any follow-up questions via email after the session, and we will do our best to respond as promptly as possible.
With that, I would now like to hand over the presentation to Ibu Novita. Silakan, Ibu Novita.
Thank you, Lau. Overall, the economy remained relatively stable in the second quarter, with GDP growth reaching 5.12%, supported by higher investment. In addition, Bank Indonesia maintained a dovish stance this year, implementing a total of 25 basis point rate cuts between May and September, bringing the benchmark rate to 4.75%. We expect BI to further cut interest rates down toward 4.25% by the end of this year. Within the banking industry, loan growth slightly moderated to 7.9% in the second quarter, lower than Bank Mandiri's pace at 11%, reflecting softening demand. On the deposit side, the dovish BI policy increased market liquidity, resulting in deposit growth of 6.96%, which is more aligned with industry loan growth. Despite ongoing economic pressure, industry asset quality remained stable, with the NPL ratio at 2.22%, with Bank Mandiri at a lower level of 1.08% on June 25.
Now, we discuss our strengths and weaknesses during this quarter. In the second quarter, our asset quality remained resilient despite macroeconomic headwinds, supported by our ecosystem value chain strategy, while we also delivered strong non-interest income growth and maintained stable loan yields despite a lower benchmark rate. Profitability was pressured by higher post-audit operational costs and tight liquidity conditions that kept deposit costs elevated. Importantly, we exceeded guidance on both loan growth and credit costs, underscoring solid execution, though consolidated margins came in slightly below expectations due to ongoing funding cost pressure.
Against this backdrop, we revised our 2025 guidance, lowering loan growth to 8% up to 10%, NIM to 4.8 up to 5%, with expectations of improvement in the second half, supported by government spending, dovish monetary policy, better liquidity, while maintaining LDR around 90%, keeping cost of credit at 80 basis points up to 100 basis points, continuing to prioritize ecosystem value chain and server sectors. Additionally, for full year 2025, we anticipate the cost-to-income ratio to be approximately 45%, with a normalization toward 40% expected in 2026, as the 2025 one-off cost pressure subsides. Loan growth in the first half of 2025 was supported by strong momentum in commercial, credit card, and micro-KUR segments, which continued to deliver higher yields and strong asset quality. Within retail banking, growth was driven primarily by value chain financing, which recorded a 17.1% year-on-year increase and reflects our disciplined focus on ecosystem-based lending.
Selective expansion in corporate value chain segments further strengthened our position, helping us prioritize quality over volume while maintaining a profitable loan mix. The value chain focus has ensured that our lending growth is both resilient and sustainable. As a result, with this disciplined approach, we successfully maintained net NPL formation at just 84 basis points in the first half of 2025, demonstrating the benefit of our strategy in balancing growth with prudent risk management. In the first half of 2025, net profit declined 7.89% year-on-year to IDR 24.5 trillion, while PPOP reached IDR 40.7 trillion, down 6.43% year-on-year. PPOP income increased 7.82% to IDR 20.9 trillion, and revenue grew 5.43% year-on-year, despite operating expense rising 25.2% year-on-year. On the lending side, we maintained a disciplined stance. Our consolidated loan portfolio grew 11% year-on-year to IDR 1,700 trillion.
In parallel, we prioritized liquidity, lifting cash deposits 9.30% to IDR 1,355 trillion and supporting balance sheet stability. System-wide liquidity pressure led to a 38 basis point increase in our cost of deposit, which rose to 2.44%. Offsetting this, loan yield remained stable at 7.75%, supporting NIM at 4.92% in the first half of 2025. Risk discipline remained a key strength. Cost of credit improved 77 basis points, reinforcing asset quality and overall balance sheet resilience. ROA (Return on Assets) stood at 1.98%, while Return on Equity, though slightly lower, remained robust at 18.1%, underscoring our continued ability to deliver healthy returns. Next, digital innovation and our corporate ecosystem strategy continue to strengthen Bank Mandiri's cash franchise, both of which are central to our ambition to be a primary transactional bank of our clients, particularly in the tight liquidity environment.
As of June 2025, Livin' transaction volume grew by 16% year-on-year, driving savings deposit growth of 8.5% year-on-year, higher than the industry level of 6.5%, and reflecting strong customer engagement with effective low-cost funding capture. On the demand deposit side, corporate transaction value grew by 20.8% year-on-year in the second quarter of 2025, supporting demand deposit growth of 10.37% year-on-year, in line with the industry growth level. Looking ahead, we will continue to leverage our digital platform and value chain strategy to expand transactional cash, maintain pricing discipline, and optimize funding costs, reducing reliance on high-cost funding and reinforcing our leadership in transactional banking across Indonesia. As previously highlighted, we prioritize our profitability and liquidity over growth in 2025. Since the first quarter, deposits have consistently grown faster than loans, allowing us to lower our LDR to 90.2% in the second quarter.
In line with this focus, we maintained a stable loan yield trend despite pressure from benchmark rates. On the other hand, light liquidity continued to put upward pressure on our cost of deposit in the second quarter, although the trend has improved between June and August. Despite the lower LDR in the second quarter, we managed to keep NIM at 4.9% level. In the first half of 2025, non-interest income grew by 7.8% year-on-year to IDR 20.9 trillion, driven by treasury income and recurring digital fees, both of which delivered double-digit growth. Digital platforms continue to contribute strongly, lifting non-interest income to nearly 29% of consolidated revenue and highlighting the resilience of our diversified income stream. On the cost side, operating expense rose 20.2% year-on-year to IDR 32.7 trillion, bringing the cost-to-income ratio to 44.5% in the first half. This increase was largely due to one-off post-audit adjustment.
While this factor temporarily elevated costs, they are non-recurring in nature and position us well for stronger execution ahead. Accordingly, we expect the cost-to-income ratio to normalize toward our 40%-42% target range by 2026. With regards to asset quality, as of June 2025, loan at risk improved slightly to 6.92%, reflecting discipline and selective bookings. Our coverage level remained robust. Bank-only NPL coverage stood at 273% in June, well above our 230% internal threshold. Loan at risk coverage also remained strong, 44.5% on a consolidated basis and 42.4% for bank-only, both above the pre-COVID benchmark, providing a solid buffer against downside risk. Looking ahead, we remain confident in sustaining healthy asset quality throughout 2025. Loan growth will continue to be anchored in our prudent underwriting and supported by the strength of our value chain ecosystem, reinforcing both profitability and resilience.
Now, let me talk now about walk you through our financial highlights, starting with the balance sheet side. In the first half of 2025, we maintained our balance sheet healthy. Assets grew by 11.4% year-on-year, driven by loan growth as we shift our asset mix toward high-yielding assets. Our liability grew by 12.2% year-on-year, driven by third-party funds and wholesale funding as our effort to maintain stable liquidity ratio. Third-party funds grew by 4.56% Q on Q, higher than Q on Q loan growth at 1.72% as our effort to lower LDR toward 90%. We will continue to prioritize deposit growth, particularly transactional value chain cash, and reduce funding costs and further optimize the funding mix. Moving to the P&L side, total interest income grew by 12.9% year-on-year, driven by loan interest income, while interest income from bonds declined 7.84% year-on-year, reflecting our strategic shift toward high-yielding loan assets.
On the funding side, tight liquidity pushed interest expense up to 26.1% year-on-year, which tempered NII growth. Nevertheless, NII still increased 6.73% year-on-year. Non-interest income rose 7.82% year-on-year, supported by both recurring and non-recurring fees, bringing total revenue growth to 5.43% year-on-year. On the cost side, as we previously mentioned, OpEx increased 20.2% year-on-year as we booked one-off expense in 2025. As a result, PPOP declined 6.43% year-on-year, while net profit decreased 7.89% year-on-year to IDR 24.5 trillion. We are revising down our loan growth guidance to 8%-10%, reflecting softer loan demand in the first half. We expect loan growth in the second half to be stronger, supported by higher government spending and continuous dovish BI policy. For NIM, we also revised our guidance to 4.8%-5%, reflecting a late rebound of industry liquidity in 2025.
Lastly, with large improving and coverage still ample, we are lowering our cost of credit guidance to 80 basis points- 100 basis points. I would like to now pass the presentation to Pak Danis, our Risk Director. Please, Pak Danis.
Thank you, Ibu Novita. Ladies and gentlemen, allow me to provide an update on our asset quality as of June 2025. In line with our conservative loan growth strategy, asset quality remains resilient, reflecting disciplined underwriting amid a challenging macro backdrop. Loan at risk improved to 6.92% in the first half, supported by selective growth in wholesale and targeted expansion through our ecosystem value chain in retail. We expect LAR to remain stable at around 7% in the medium term.
Our prudent approach has kept NPL formation highly manageable, enabling us to revise down our 2025 cost of credit guidance to 0.8%-1%, while booking lower credit costs in the first half. Looking further ahead, we expect cost of credit to normalize toward 1%-1.2% in 2026, which represents a more sustainable level. Meanwhile, we remain well-positioned with consolidated LAR coverage at 44.5% and consolidated NPL coverage at 246%, well above our long-term comfort level of 230%, providing a strong buffer against potential downside risk. With this foundation, we are confident in sustaining healthy asset quality underpinned by robust risk management and the continued strength of our value chain strategy, which ensures both profitability and resilience. Finally, let us discuss our capital positioning. As of June 2025, Bank Mandiri Capital Adequacy Ratio increased to 18.4% from 17.3% in the first quarter of 2025.
Looking ahead, we aim to maintain core and tier one in the 18%-20% range over the near to medium term, balancing capital efficiency with sustainable growth. I would like to pass the presentation to Pak Tim, our Operations Director, to continue the presentation on our digital.
Please, Pak Tim. Thank you, Pak Danis. Good morning to all of you. I'm going to take my presentation actually in two parts. The first one, I'm going to provide the progress on our retail and then cover on the wholesale as usual. I think all of you have been following how Mandiri has progressed. I'm very happy to provide an update that just in four years after we launched all our capabilities in the digital format for our clients, we have gained strong adoption.
It is almost nearing 100%, and therefore Livin' has become the primary gateway to drive our retail transactions. As you can see, the registered users remain strong. The growth is encouraging, but what's more encouraging is we can see that the addressable customers that use Livin' has touched 96%. At the same time, we can see that all the accounts opened, the new bank accounts to Bank Mandiri opened, 91% has been done through Livin'. What it does with this addressable being in Livin' is obviously transactions. As we have been positioning ourselves, the reason these apps are developed is so we become the transactional bank. You can tell across the board at the chart that is presented, from frequencies to values to fee base, the growth has been very phenomenal and strong.
The growth of savings balances, that is the most important of these all, 87% now is all linked to Livin'. Let me move next to say that why is Livin' so strong? Obviously, because we have been providing the right use cases and we continue to find the right use cases, not neglecting the customer experience. This has positioned Livin' from an everyday payment perspective that can answer domestic and international needs of our clients with strong engagement. You can see that since we launched QR not too long ago, today QR has positioned itself as the number one feature in Livin', which before was transfers. Now QR has become that. You can see the shift that we see in the market from wallet apps to banking apps now. The growth has been phenomenal.
When we started as a baseline in the first half of 2023, today we're 7.7x of that being the number one feature. When it comes to beyond domestic, we do cross-border comprehensively. We have introduced remittance, as you've known, and we believe we are one of the most competitive with 18 foreign currencies where we can enable our clients to send money to. At the same time, we developed tap capabilities for payments with multi-currencies, as well as QR cross-border. What it does is actually for our clients that are traveling internationally, for example, with these capabilities, they can fund their own foreign currency accounts in Livin'. When they go tap using our capabilities, they can directly tap into their source of account that is of the same currency.
For example, if I'm in Singapore, I have a Singapore account, I can tap using my Singapore account, and therefore as a source of repayment, I don't have to go through the FX through the exchange. You can see that the transaction frequency has increased significantly to 21.7x. Let me move now to we have been talking about wholesale bank with ecosystem drive that we get into the retail. What it is is actually salary-based loans from our wholesale ecosystem for our top corporates. All the top corporates of Indonesia are our clients. You can see that we have introduced various loan products since our launch in October, but now we are moving forward with the likes of mortgages and Livin' Auto.
Again, it's showing strong adoption with great progress where we can see that the value has gone up significantly from when we launched only in 2024. Livin' Auto, similarly, when we launched in the last quarter of 2024, today we are seeing a strong progress adoption. Let me move now to beyond the loan side to the other parts of capabilities that we have been very focused, we have been focusing to developing good use cases with the investment. With Livin' in the single app, I can onboard transactions without moving out and in, and everything is on the app and allowing them to trade with well-curated investment products. We have enabled trading account openings now in Livin' through our securities company, which is Mandiri Sekuritas.
Today within Livin', we can see that account openings for trading has gone up significantly since we launched in the first half of 2024 to where we are today, 8.2x. We have allowed stock trading, and as a result, for retail stock trading, similarly, we can see a strong increase. The theme has been consistent across the board. What is more exciting now, not only have we launched primary bonds, we do have now secondary bonds that we just recently launched, and we are hopeful that this would be perceived very strongly in the market, and the data shows since early launch. Let me now move to the next one to say that for Livin', we will continue to upgrade, but I think what has been consistent is finding the right customer experience.
The use cases that we provide, the features that we have is reasonably comprehensive, but we will continue to improve that in order to drive engagement. More importantly, going forward is connecting the ecosystem where I am going to talk about corporate later on that we bring Livin' into this. Obviously, it is all about targeting the new segments for our expansion. Very soon, we are going to be launching two exciting new progress that is going to be embedded within the loyalty program and with a new customer segment. Let me now move quickly to address our Livin' Merchant.
We have launched this, and today what is important is not only the clients that have signed up to use this, it's showing 35% year-on-year increase to 2.8 million now because we have a clear business case and model for MSME merchants where we can penetrate through onboarding through online, and this technology or solution through Livin' Merchant can be a plus at the same time as a merchant solution for acquiring. What is important is the onboarding is very fast. We take all types of payments already, QR, including card acceptances for debit and credit. At the same time, now what is important is real-time settlement. For MSME, when we launched, we did three times real-time settlement a day. Now today, we moved to real-time settlement. You can see that as an outcome, the transactional frequency has significantly gone up.
The previous update we did was it has surpassed EDC. Today, it has surpassed EDC by 1.8 x. Let me now move to our platform for corporate, which is the wholesale. The transaction, the same theme, the transactional growth has been phenomenal. You can see from the graph. All we can see, the result is where we look for the current accounts. In Livin', we look for savings. In this part is current accounts, and the drive folder is all transactional. Let me move next just to quickly update. I think I'm reasonably confident to say that the one-click access that we provide on our platform is now really on par with global standard. You can see that if I were to group all of them from cash management, trade, AI-powered, and integrated ecosystem, I think we are leading.
To be fair, because we are not just a wholesale, but we have got a strong retail franchise. You can see that from a Livin' perspective, if we were to compare with all the other domestic and global banks, we have been able to perform an integration where wholesale needs for treasurers, liquidity management is done through this, working capital is done through this, and we use business intelligence as advisors from the AI power that we have. More importantly is the last part, which is about connecting the ecosystem through a corporate partnership with our Livin' and Livin' Merchant. I'm just going to show you the next slide to show you the importance of transactional where client engagement drives higher balances. When we see with corporate, the high engagement clients means they do 500 transactions or more in a month.
The moderate is about up to 200,000 transactions. Basic would be 80,000 transactions - 200,000 transactions. As you can see, when we correlate this with the data, the one that has got high engagement has got 12x more balances. This is exactly what we're going for. How do we do that is, again, by the right experience and the right use cases that they can see on the right. Updated before, our liquidity management is probably one of the best today with the capabilities of the companies even to structure their own accounts. We do have proactive collections capabilities as well as payables capabilities. At the same time now, connecting for both retail and wholesale where they are interconnected. I'm just going to move next quickly to nobody talks about technology without mentioning AI.
I do want to mention that we are investing heavily with agentic AI and AI in general. It gives a lot of insight to drive the business growth. That is where we are using a lot of these data points where we have 200 data scientists dedicated to do this. A lot of the things that you can see on the chart, whether it is productivity improvement, revenue growth, or even better, risk management, is done through our AI capabilities. That would conclude my presentation on the digital side. I think I am going to move straight into ESG, Lau.
Yes. Correct? Go ahead.
Okay. Let me take on the ESG update. I am thrilled to actually now present to you. We have been talking about ESG, being serious about ESG. You can see that MSCI, which is an external party, has given us a double-notch upgrade.
We have moved up from BBB in 2024 to AA now. What is quite exciting is to see how we are compared to all the larger national banks in Indonesia. Our jump in rating is probably the highest jump you can tell from those numbers without me mentioning it. I think it is worth mentioning to say that we are serious. Hence, the significant increase. How did we do it? I think we have been very clear. We have a clear framework that we are executing with discipline in the different pillars. Therefore, from governance, we are showing strong governance increase. From discipline execution for operations and beyond banking, you can see the increase. From policies, we can see the increase. Even for the portfolio, which I am going to unpack a bit more in the next page.
All in all, I think the recognition is appreciated, but it is showing our commitment and progress towards the ESG agenda for the bank. Next, I am just going to show that we remain committed to accelerating our financing with purpose and at the same time putting all the guardrails to ensure that we remain on track with our ESG progress, where the portfolio for sustainable portfolio has grown strongly to IDR 304 trillion, which is showing a strong increase. More importantly, I think we are pleased to share that our green financing has been growing strongly. That is supported, as you can see, in the breakdown below, be it sustainable agriculture, renewable energy, eco-efficient products, clean transport, water, and obviously, from an MSME, we continue to support that. The disclosure, which is a very important part of our ESG framework, we are continuing to look from the perspective of enhancing.
Not only have we got all the existings, but you can tell how we have been serious about enhancing the policies across for environmental, social, and also governance-related, be it code of conduct, AML, and so on and so forth. Now let me move to our sustainable operations bit as well as beyond banking. I think as a company of this size, we remain committed to continue to drive towards zero NZE or NZE by 2030. The progress is showing our dedication and commitment where we will continue to push to achieving NZE by 2030. On a diversity side, I think we remain committed. You can tell that Bank Mandiri's gender diversity for manager level is very strong at 46% are women. When it comes to total employees, even better, 52%.
From a sustainability banking perspective, we will focus on the areas that are aligned with the country all the way from Sahabat Disable or Disability Community that we support, Rumah BUMN, which is empowering and upskilling MSME. The number is growing. Rice milling, which is important as part of the nation now, and obviously, Mandiri Sahabatku. Last but not least, I think I want to mention that for our digital platforms, we are supporting MSME. For non-urban, merchant has penetration of 62.25%. Urban is actually lesser now. This is where MSME is going to be continued to be supported strongly with our digital platform. That would be the end of my update now. I'll hand it back to you.
Thank you. Yes, thanks. Thank you, Pak Tim, and thank you to all speakers that presented. We will now move on to the Q&A session.
To ensure an efficient flow, we will go one question or one person at a time. I understand that some of you probably have typed your questions in the chat box, but we would appreciate it if you can ask the questions directly just to make the discussion more engaging and to have better interaction. We will give 10 seconds-20 seconds just to give time for all of you to raise your hands if you have any question. We will call out your name, unmute your mic, and please ask your questions. Do not forget to let us know your name and your institution. Thank you. We will give it 10 seconds-20 seconds. Operator, if you could identify the hands raised here because we cannot see it from the front. The screen is blank here.
All right. The first question comes from the line of Melissa Kuang of Goldman Sachs.
Please ask your question. Hi. Thank you very much for taking my questions. Can you just share on the OpEx side, how much, um, emotional was the adjustment post-audit? Hello? Hi, can you hear me? Hello? Can you hear me? Hello? Hello? Hi, can you hear me?
Yeah, sorry. There's a bit of a volume issue. We can hear you, but not so clearly.
Okay. Can you hear me now better?
Moment, Melissa, this is on our side.
Okay, sure.
Melissa, can you try one more time?
Okay. Can you share on the OpEx side, how much, um, emotional was the adjustment post-audit? And what caused the need for the adjustment? When you mentioned CIR ratio to lower to 40% next year, how much are you expecting OpEx growth year-on-year for 2026? That's my first question. The second question is the additional IDR 55 trillion liquidity that you received.
What do you think is the impact to your funding costs? Does this really help lower overall funding costs with this liquidity? Also, on your loans growth, how are you going to expect to do and push on your loans growth? Is there a timeline you need to lend out this money? In terms of your new loans growth and NIM guidance, has this all been taken into consideration? Thank you.
Let me answer your question, Melissa. Thank you for your question related to the OpEx. This June, we booked our one-off OpEx recognition due to the post-audit. The amount is around 10%-12% of our total OpEx. We will recognize this one-off post-audit adjustment in 2025 starting this June. It will reflect on our NIM guidance, sorry, CIR guidance, cost-to-income ratio guidance is around 45%.
For next year, we expect a normalizing trend, our cost-to-income ratio back to the Mandiri level around 40%-42% on a consolidated basis. Next year, we expect our OpEx growth is around low single digit on the consolidated basis.
Thanks, Ibu Novita. Maybe for the IDR 55 trillion. In general, I think the spirit of the initiative is something that we highly appreciate, especially provided the challenging liquidity environment that the banking system is in over the last few quarters, if not years. Clearly, additional IDR 55 trillion for us and IDR 200 trillion for the system is something that we highly appreciate and potentially in the medium term would be positive. However, there are details that are needed when it comes to the execution and the use of the IDR 55 trillion.
Further detail about what does the government mean by real sector, for instance, what products are allowed, what products are allowed both on the asset side of the equation and the liability side of the equation, whether or not central bank placement on the BI facility is allowed, so on and so forth. As we speak, this discussion is ongoing. The IDR 55 trillion today is sitting with the bank at an annual cost of funds of about 4%. To give you context, in a situation where the placement at the central bank facility is allowed, there is a 25 basis point for us. On a net-net basis, if that's the case and that is to be done, generally, that will be our reoccurrative as leverage goes up.
Again, before concluding the actual impact of it, more details are needed before the bank can actually execute the IDR 55 trillion. In terms of growth and whether or not IDR 55 trillion can be easily disbursed toward growth, we will not say that it is easy, but clearly, it is not impossible provided our size that is quite big. For instance, Bank Mandiri's second quarter total disbursement of loans amounted to IDR 220 trillion, something that you can find on slide 25 of our full pack presentation. We disbursed IDR 100 trillion of corporate, IDR 50 trillion of commercial, IDR 10 trillion of consumer, IDR 22 trillion of disbursement of small. And we disbursed IDR 20 trillion of micro as well. Clearly, all those numbers adding up, IDR 220 trillion is higher than IDR 55 trillion. I think when it comes to capacity and engine to grow, our size does help.
Again, we need to be very careful and ensure that we have all the governance in place before we start executing this initiative. As regard to whether or not this has been incorporated in our loan growth and NIM guidance, the answer is yes.
Good. The next questions come from the line of Harsh Modi, JP Morgan.
Hi. Sorry, I am in a car, so there must be a bit of a lag. A couple of questions. One, if I look at your LCR, it is lowest in five years. How low can the LCR go from here, and what are the implications? Second question is, on loans at risk, was there any change in the definition of or the calculation of loans at risk? Sorry, the third question is one-offs.
I'm unclear a bit on are there any one-offs on either NII, interest income or expense, or on the cost side of it? I did not get that very clearly. Thank you so much.
Sorry, can you repeat the last part on the cost side of we missed you?
On the net interest income or on operating costs, are there any one-off items, and could you quantify that? I missed that part.
All right. Give us three seconds here. All right. I'll let Danis talk about the large definition, Novita to talk about the OpEx one-off, and I'll try to address the liquidity coverage ratio as well as the NIM side of the equation.
Yeah, silakan Pak Danis. Related to the question that do we have to change do we have any plan to change the definition of loan at risk?
Definitely, we do not have any change, any chance, and any plan to change the definition of loan at risk. I think the definition of loan at risk is still the same with current definition.
Thank you.
Ibu Novita, silakan OPEX.
Yeah, thank you, Harsh. Let me answer about the one-time OpEx and also on the one-time NIM, one-off post-audited. First, on the OpEx, like I already mentioned earlier, we have one-off adjustment from the post-audit, and the amount is around 10%-12% of our total OpEx is related to the one adjustment on the post-audit. We start to book that adjustment since June and until by the end of this year.
It reflects our OpEx growth on the consolidated basis is around 23%-25% consolidated, and bank only is around 30%-30% OpEx growth by the end of this year. It will impact our cost-to-income ratio. We expect our cost-to-income ratio is around 45%. We hope that next year, cost-to-income ratio will stabilize again to the normal level, around 40% on the consolidated basis. In terms of NIM, net interest margin, yes, we have also one-off. It is regards to the revenue recognition on one of our product mortgage loan. We recognize the revenue coming from one specific product, which is mortgage. Small part of our mortgage product is still on the recognition non-effective interest rate. Due to the audit adjustment, we adjust this recognition to comply with the regulation in an effective interest rate basis.
On liquidity coverage ratio, the LCR, the level we are at now is at 131%. That is a June number. Just as a context, the regulatory level is at 100%, so we are 30 percentage points higher than the regulatory level. We do plan that the LCR level will stay around the level we are at toward the end of the year. This is something that has not incorporated the IDR 55 trillion additional, which happened just recently. That would come as high-quality liquid assets, which is essentially accretive to the LCR. I think in an LCR context, we are pretty adequate, higher than the regulatory level. We would like to maintain it stable at this level and probably higher with the additional liquidity we just received for the rest of the year, at least in 2025.
As we go to the net interest margin, I think Novita has explained partly on that. But essentially, the 4.9% net interest margin that we have in first half 2025 would have been about 4.80% high without that small one-off, basically.
Great. Thanks for that. Sorry, just to understand, if I heard you correctly, next year, you are basically guiding for costs to be up 6%-7% from the total cost base of 2025. Is that what the guidance I heard? I'm just trying to understand, is it really one-off, or is it kind of embedded in the numbers now going forward on the cost?
Basically, a big part of the post-audit adjustment has been incorporated and embedded in the June number. Some of them would be basically coming on the subsequent months. In full year 2025, you'll see a full recognition of that.
That is embedded in the expectation of 45% cost-income ratio on a consolidated basis for full year 2025. None of that will be carried into 2026. Therefore, the pressure on cost in 2026 will be far, far much lighter. As cost normalizes toward the BAU sort of operationals, our cost-income ratio from 45% in 2025 expected will very much likely to move and trend toward the 40%-42%, probably 40% in 2026. On a growth context, this is to add to Melissa's question earlier. We are likely to see on a best-case scenario, high drop, big drop in OpEx growth in 2026. On a moderate-case scenario, probably a flat, if not slight decline in OpEx year-on-year next year. On a worst-case scenario, a single-digit growth of OpEx. That is the details, Harsh.
Okay. Thank you.
If I could just ask one last question. On slide 34, I see recovery rate going up very significantly to 110%. How sustainable is it, and what number should we think about for 2025 and 2026 in terms of recovery? Thank you. That was my last question.
I think that 110% is a function of lower write-off. That's number one. As opposed to unusually high recovery. For example, if you look at this slide, I do not know whether the slide is shown here, but if you look at the chart that Harsh was pointing at, the write-off is much lower now. In first half 2025, our write-off was IDR 2.81 trillion versus IDR 7.37 trillion in first half 2024. Clearly, our write-off has gone down from a historical level, or at least in the last few years' level.
If you look at the recovery rate in first half 2025, it was actually very similar across the last few years. Last year, we had IDR 3.03 trillion for recovery, so hence the ratio is 100%, if not higher. For recovery, Harsh, we believe that we will have more recoveries in the second half. We are aiming at around anywhere between IDR 6 trillion-IDR 8 trillion. As you know, recovery is pretty complex in the process. It's easier to talk about the pipeline, not the timeline for recovery. I think it's worth noting that the written-off loans has gone down meaningfully in that half.
Got it. Thank you.
Yep. We'll take two last questions, and it would be great if we limit two questions per person. From Jayden Macquarie and Joshua We'll start with Jayden.
Hi. Thank you so much for the opportunity.
I just wanted to understand a bit better on the lending rates. I think on slide 29, you can see that the consumer loan yield picked up. I assume that has to do with the recognition on effective interest rate basis. Can you let us know what the consumer yield would be on a normalized basis? My second question related to loan yields as well is with the IDR 55 trillion that's coming in and the recent BI easing, I guess, one, you're expected to lend all of the money, and BI has expressed a view that they want lending rates to come down to reflect the recent rate cuts. How do you see the outlook for loan yields in that kind of environment, especially in segments such as corporate and commercial? Thank you very much. Yeah.
On the first question, what would the consumer yield be without the one-off? If it's okay, we'll get back to you, Jayden, after the call, and to everyone that joins the call right now. Sorry. It would be around, it would be flattish. We'll get back to you with a more accurate sort of figure. A ballpark number for now is that the 9.03% yield in consumer would be similar to the level that we had in 2024, which is about 8%-ish. That's on the first question. On the second question, I think in general, the IDR 55 trillion additional liquidity, we explained that earlier, that we have to wait for additional clarity on what segments, what sectors that we can lend to, what instruments on the liability side that we can place this additional liquidity on.
That is something that we are still looking at. In general, an easing BI environment, an interest rate decline environment driven by the central bank, is something that might be yield-challenging for the corporate segment, especially due to the benchmark nature of it. For commercial and other segments, such as small, medium enterprises and others, especially for our subsidiaries, it is actually either no impact, if not positive. Most of our subsidiaries would actually benefit from a rate-cut environment. Multifinance are largely funded by bonds. Lower rate, obviously, is good for cost of funds, so on and so forth.
I think the short answer is that our net interest margin guidance of 4.8%-5% has incorporated a central bank rate decline toward 4.25% from 4.75% just recently, which means that we do incorporate 50 basis points of extra rate cut into our NIM guidance already. Is that clear, Jayden?
Yes. Thank you very much for that.
Thanks. Maybe last question from Joshua.
Hey, I'm audible.
Yes, sir?
Thank you so much for the opportunity. I just have one follow-up question on the cost side. First of all, I'm sorry to harp on this, but when you say 10%-12% of cost, are you talking about 10%-12% of the first half cost or second quarter cost or June month cost?
It's a total cost full year.
10%-12% of total cost full year.
Do you mind sharing with us what's happening in the audit? Because it's a big change. Is it a change in the way on how we book cost going forward? If you can give an example, it would be very helpful. Is it a backbooking of previous cost? Is it a combination of both? Thank you so much.
Unfortunately, it is confidential. We have high limitation in the disclosure of the audit as per internal regulations, governance, and on a regulatory context. We'll talk about it if you need after the call. Unfortunately, not much disclosure we can share on that.
Got it. If I hear you guys correctly, basically next year, FY 2026, sorry, FY 2025, the cost growth, just so I'm able to know better, is it saying 20%-23% cost growth consolidated for 2025?
Just want to check what I hear correctly.
OpEx growth consolidated. Your question is about
2025. Yeah. Including these one-offs, these audit adjustments, what is the rough range?
Yeah. 2025 OpEx growth year-on-year, including this one-off post-audit adjustment.
What is the growth, roughly? Sorry. I missed the number.
The full year 2025 growth will be very similar to the first half 2025 base, which is at anywhere between 25%-26% year-on-year.
Got it. On top, 2026, on that base, we are looking for base case, as you said, flattish to worst case, no single-digit growth.
Yes.
Got it. Thank you so much. Sorry. Just on the loan guidance, that is including the IDR 55 trillion additional money we got and the deployment of that, right?
Yeah. The answer is yes.
Got it. Got it. Thank you so much. All the best.
Thank you. Thank you very much to all participants, investors, and analysts. I'm happy to receive more questions, and we'll respond as fast as possible. Thank you again to all speakers. Have a good rest of the day. Thank you, and good weekend.