• GDP Growth Projection for 2025: 4.9% to 5.2%, in line with 2024's 5.03%.
• Fiscal Deficit Forecast for 2025: 2.5% of GDP, slightly larger than 2024's 2.29%.
• Net Interest Margin (Q4 2024): 7.8%.
• Return on Assets (Q4 2024): 3.1%.
• Return on Equity (2024): 18.5%.
• Lending Yield (Q4 2024): 13.1%.
• Loan Growth (2024): 7%, reaching IDR1,355 trillion.
• Net Profit (2024): Increased by 0.4% to IDR16.7 trillion.
• Cost to Income Ratio (2024): 41.6%, down from 41.9% in 2023.
• Gross NPL Ratio (2024): Improved by 17 basis points to 2.78%.
• CASA Ratio (2024): Increased by 295 basis points to 67.3%.
• Operating Expenses Increase (2024): 8.2% year-on-year.
• Net Interest Income Increase (2024): 3.4% year-on-year.
• Non-Interest Income Increase (2024): 24.8% year-on-year.
• Loan Loss Reserve (2024): IDR81.1 trillion, representing around 6% of total loans.
• COVID-19 Restructured Loans (End of 2024): 1.8% of total loans.

• Warning! GuruFocus has detected 4 Warning Sign with BKRKF.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PT Bank Rakyat Indonesia (Persero) Tbk (BKRKF) maintained a strong net interest margin of 7.8% in Q4 2024, aligning with their guidance.
• The bank's profitability remained robust with a return on assets of 3.1% in Q4 2024.
• Loan growth was driven by corporate and medium segments, which grew by 23.6% and 21.6% respectively.
• The cost to income ratio decreased year-on-year to 41.6%, reflecting effective management of personnel and SG&A expenses.
• The bank's CASA ratio increased by 295 basis points year-on-year to 67.3%, indicating improved deposit composition.

Negative Points

• Micro asset quality issues persisted, with a spike in micro SMLs to 5.72% year-on-year.
• Loan growth slowed to 7% in 2024, below the bank's guidance, particularly in the micro and small business segments.
• The bank experienced a decline in Q4 2024 PPOP by 4% quarter-on-quarter due to the absence of cash passage payments.
• The cost of credit was above guidance at 3.23% for 2024, driven by slower loan growth and higher provisions.
• Asset quality challenges remain, with elevated NPLs in micro lending and subsidiaries, and a high cost of credit expected to persist in 2025.

Q & A Highlights

Q: Would this year be the last year for the micro cleanup, and when can we expect micro growth, especially bank only, to return to low-10s levels? Also, for cupidase loans, are the new loans still insured, and how do you provision for cupidase insured loans? A: (Rustarti Suri Pertiwi, CFO) This year is the last year for the cleanup of the 2023 bad debt. By the end of 2025, we expect the remaining balance to be below IDR30 trillion. Micro growth, especially bank-only, is expected to be 7% to 10% in 2025. We have temporarily stopped credit insurance for cupidase loans since January 2025. (Agus Sudiarto, Director of Risk Management) The provisioning for cupidase loans remains conservative, with a loss given default at 53%, unaffected by the suspension of insurance.

Q: How do you manage the push to migrate KUR customers to cupidase loans, and why not accelerate provisions and write-offs to move on? A: (Rustarti Suri Pertiwi, CFO) We have implemented stricter criteria for KUR borrowers to graduate to cupidase, focusing on repayment capacity and preventing loan switching among family members. Regarding provisions, we aim to manage the portfolio prudently, allowing customers with willingness to pay to restructure. We are front-loading provisions in 2025, expecting a spike in the first quarter.

Q: Can you elaborate on the expected credit costs of 3% to 3.2% and the balance between bank-only and non-bank provisions? A: (Rustarti Suri Pertiwi, CFO) The bank-only credit cost is expected to be IDR38 trillion to IDR40 trillion, with subsidiaries like PNM planning to write off around IDR4 trillion. The modification loss from Krakatau Steel is expected to impact credit costs by 7 basis points. (Agus Sudiarto, Director of Risk Management) We anticipate reversals in corporate provisions due to upgrades from NPL to performing loans.

Q: What are your expectations for corporate loan growth, and what changes have been made to support this growth? A: (Rustarti Suri Pertiwi, CFO) We aim for 6% to 10% corporate loan growth in 2025, focusing on top market leaders with strong ecosystems. Changes include better account planning and customer profitability analysis, allowing competitive lending rates and improved RM capabilities.

Q: Could you provide an update on the dividend payout ratio and regulatory views on increasing it? A: (Rustarti Suri Pertiwi, CFO) The dividend payout ratio will be determined next month, with a basis of 85% and potential upside. Discussions are ongoing with SOE and FSA, considering new regulations that influence the payout level.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.