Half Year 2026 PT Bank Negara Indonesia (Persero) Tbk Class B Earnings Call
Speaker #1: Good morning, everyone, and welcome to BNI's first half of 2026 earnings call. My name is Sigit, and I'm proud to be your host today.
Speaker #1: Thank you for your continued interest and support for us, BNI, and today we will discuss our financial performance in the first half of 2026, how we navigated the evolving macroeconomic environment, and the progress we have made in strengthening our core business fundamentals.
Speaker #1: We are pleased to be joined today by our members of BNI's Board of Directors, first we have Bapak Putrama Wahyu Setyawan, President-Director. Ibu Alexandra Askandar, Deputy President-Director.
Speaker #1: Bapak Hussein Paulo Kartadjoemena, Finance and Strategy Director. Bapak David Pirzada, Risk Management Director. And the other members of BNI's management team also here, thank you so much.
Speaker #1: And today's presentation will cover on BNI's financial performance in the first half of 2026, overview on the liquidity environment, progress in our branch transformation and digital against the full year 2026 guidance and key strategy commitments.
Speaker #1: To begin today's presentation, it's my pleasure to invite Bapak Putrama, President-Director of BNI, to deliver his takes on the main highlights of our results.
Speaker #1: Bapak Putrama, the floor is yours.
Speaker #2: Thank you, Pak Sigit. good morning, everyone. Thank you for joining us today. Let me start with our first half results. Then I'll share how we see the rest of the year.
Speaker #2: In the first half of 2026, our core profit, we call it PPOP, reached 18.5 trillion rupiah, that is our highest level in the past 5 years.
Speaker #2: And what makes have an app what makes, me even happier in is the trend behind it. for 4 years, our PPOP did not grow much.
Speaker #2: Now we are finally seeing strong growth again, up 14.5% from last year. This growth is real. It comes from our core business, not from cutting cost.
Speaker #2: Our net interest income grew 14.2%. Our fee income grew 14.2%, which reached record levels. Now let me talk about where this growth came from.
Speaker #2: Our loan book grew by 190 trillion rupiah this year, that is 24% year-on-year growth. Most of it, about 85%, came from our core segment, large corporate, enterprise, and government-linked programs.
Speaker #2: Within this, our private sector loans, enterprise, and large corporate together grew by about 86 trillion rupiah, that's actually bigger than our growth to related parties like SOEs and government programs, which was around 76 trillion rupiah.
Speaker #2: For retail banking, we choose to be more selective, so the growth rate is, lower. Now, wholesale loans usually come at lower pricing. But I want to show you something important: BNI is not just lending money here.
Speaker #2: We are capturing the full relationship with our wholesale clients. Third-party funds from this segment grew 39% year-on-year, fee income grew 24%, and profit before tax grew 23%.
Speaker #2: We see an even stronger story in our newest growth engine, the enterprise segment. Year kasa, our low-cost funding grew 172%. Fee income tripled, and profit before tax grew 92%.
Speaker #2: Now, when we talk about growth, we also need to talk about the other side, asset quality. I'm happy to say our asset quality is stable.
Speaker #2: And even improving. Our loan at risk ratio improved from 11% to 8.1%. Our NPL ratio stayed steady at 1.9%. And it is not just the ratio that looks healthy.
Speaker #2: We also keep a strong buffer. Our loan loss reserve is at 3.8%, which is 20 basis points higher than our peers. To keep this buffer strong, we made a choice: we chose to raise our provisioning even though it means lower profit growth in the short term.
Speaker #2: Our credit cost is now 1.1%, that is higher than last year. But still within our full year guidance. Because of this choice, our net profit grew 6.6%, much lower than our PPOP growth.
Speaker #2: This might look strange at first, but we believe this is the right way to grow. When that run. Now I would like to update on something we are proud of: our transformation.
Speaker #2: In our last earning calls, we talked about brief, that stands for branch, region, area, value empowerment. Through brief, we want each branch to run more like its own small business.
Speaker #2: Each branch now has its own profit and loss, so they can take more ownership. This year we asked our branch to focus on one thing: growing kasa.
Speaker #2: Our low-cost funds. I'm happy to share that brief is now running nationwide. Next, let me give you some updates on our digital ecosystem. Wonder, our mobile apps grew 76% users in this year, more than half of these new users are new to BNI.
Speaker #2: Another good sign: BNI Direct, our platform for business clients, grew 21% in users, this led to 50% growth in average balance for current accounts from BNI Direct users.
Speaker #2: Now, later in this presentation, you will see our cover overall current account growth is only around 12%, where the gap between 50% and 12%, it's simple.
Speaker #2: We're letting go of some non-transactional current accounts. The ones that usually cost us more. Over time, we want to build stronger transactional current accounts and slowly replace the more expensive ones.
Speaker #2: So far, I've shared most mostly good news. We had a strong first half, our base PPOP in years, that gave us room to also do something early, like raising our provisioning, to make our asset quality even stronger going forward.
Speaker #2: But I want to be honest with you: the second half of this year, we'll be more challenging. Especially in managing our cost of funds.
Speaker #2: A few things are driving this. In the US, rates are expected to stay higher for longer. Our central bank has also been focused on keeping the exchange rate stable, so SRBI yield and volume have been going up.
Speaker #2: At the same time, loan-to-deposit ratio across the industry has been creeping up, all of this is pushing cost of funds higher, for the whole industry, not just us.
Speaker #2: We expect this to this to continue through the second half, half year. So what are we doing about it? Two things. First, we are being more selective and repricing some loans.
Speaker #2: Second, we are slowing the pace of loan growth, so it stays in line with how fast our third-party funds are growing. I will let our, CFO, Paolo, walk you through the numbers in more detail.
Speaker #2: Thank you.
Speaker #1: Thank you, Pak Putrama. Good morning, everyone. Let me walk you through the numbers in more detail behind what our CEO just shared. Our loan portfolio grew by 24.4% year on year, broadly in line with third-party funds that grew by 22.3%.
Speaker #1: One number I would like to explain, so it's not misread, our time deposits grew by 50.7% year on year, a large part of this about 76 trillion rupiah, came from the SAL, our Ministry of Finance fund placement.
Speaker #1: If we set this amount aside, our adjusted time deposit growth is closer to 20% year on year. Which is still healthy, but I want you to have the adjusted number.
Speaker #1: On profitability, net interest income grew by 14.2%, and fee income grew by 14.2% year on year as well. Together, our operating income grew by 13.6% year on year.
Speaker #1: After OPEX and provisioning, net profit reached 10.8 trillion rupiah, up 6.6% from last year. These are numbers we are pleased with. But let me take a few minutes to walk through what sits behind them so you have the full picture, not just the headline.
Speaker #1: Let me first start with liquidity. Since this is a theme on everyone's mind across the industry at the moment. Industry loan-to-deposit ratio has moved above 90%, and cost of funds has been rising for most banks, as competition for deposits intensifies.
Speaker #1: Against that backdrop, our liquidity position remains solid. Our loan-to-deposit ratio is 87.7%, still below the industry average of 91.7%. Our LCR is at 129.8%, and our NSFR at 132.3%.
Speaker #1: Both comfortably above the regulatory minimum. This gives us reasonable room to manage our funding, even as conditions become more competitive. Let me also touch on net interest margin, since I know this is also a top-of-mind for many of you.
Speaker #1: Year on year, our net interest margin came down from 3.8% to 3.6%. This is a trend we are seeing across the industry this year, driven mainly by rising cost of funds, and to some extent loan yield pressure as well.
Speaker #1: But if you look at quarter on quarter, the picture is a bit more encouraging. Our NIM was 3.6% in the first quarter, and held at 3.6% also in the second quarter.
Speaker #1: Our loan yield has also stayed steady, at 6.9% in both quarters. So even with funding cost pressure building across the industry, we have been able to hold our pricing discipline on the lending side.
Speaker #1: We view this as a modest cushion, should cost of fund pressure become more pronounced in the second half. This is also part of why, later in this call, you'll hear we have revised our full-year NIM aspiration, from 3.5 to 3.8%, down to 3.3 to 3.5%.
Speaker #1: We would rather share this with you now, with the reasoning behind it, than have it come as a surprise later in the year. Net interest income grew 14.2% to 22.3 trillion rupiah, non-interest income grew 12.5%, mainly on fee-based income, which grew 14.2%.
Speaker #1: Together, operating income grew by 13.6% to 34 trillion rupiah. Our OPEX grew by 12.6%. I will be candid with you, we have made a deliberate deliberate choice to front-load some of our OPEX in the first half, while our revenue momentum was strong.
Speaker #1: You'll see this reflected mainly in other allowance within the personnel expense item. Even with this front-loading, our OPEX growth still came a bit lower than income growth.
Speaker #1: So PPOP grew by 14.5% to 18.5 trillion rupiah, the number our CEO already highlighted. It tells us our core business is healthy and growing.
Speaker #1: Below that line, provisioning charges grew by 42.1%, as Pak Putrama mentioned, this too is a choice that we have made. Rather, we would rather build a stronger buffer now, while our core profit gives us the room to do so, than defer this decision to later.
Speaker #1: Because of this, our net income growth came in at 6.6%, lower than our PPOP growth. We see this as a trade trade-off worth making.
Speaker #1: It protects us and keeps our growth on a more sustainable footing. Let me give you a bit more color on where our loan growth came from.
Speaker #1: And revisit loan pricing from a slightly different perspective. On loan yield, quarter on quarter, our blended yield has held steady at 6.9%. In both the first and second quarter.
Speaker #1: This supports what I mentioned earlier, our loan yield is stabilizing, even as our loan mix continues to shift toward wholesale segments. On the loan growth itself, out of our 190 trillion in net expansion this year, a meaningful part came from SOE-related corporate loans, including financing to AGRINAS.
Speaker #1: If we set aside the AGRINAS portion and look only at our core SOE book, the adjusted growth is around 17%. Coming mainly from our top-tier SOE clients, names we have had long established relationships with.
Speaker #1: I do want to be transparent about one thing: our total loan growth at 24.4% year on year is well above our full-year guidance of 8 to 10%.
Speaker #1: This is by design. In the second half, you will see us moderate the pace, being more selective and aligning our loan growth more closely with how fast our third-party funds are growing.
Speaker #1: Our KASA grew by 11.2% year on year, which we believe compares favorably to what most of our peers are seeing in this environment. What I find particularly encouraging is our savings account growth at 9.6% year on year.
Speaker #1: It tells us that our retail funding franchise continues to hold up, even as deposit competition across the industry gets tougher. On current accounts, you will notice a 4.1% decline quarter on quarter, let me explain this so it is not misread.
Speaker #1: This quarter, we saw a meaningful price competition for current account deposits, some of this balance is what we would describe as non-transactional, funds that sit with us mainly for yield and move easily to whoever offers the higher rate.
Speaker #1: We made a deliberate choice here: rather than compete aggressively on price to retain the more expensive non-transactional funds, we chose to let some of it go to other banks.
Speaker #1: What matters more to us is our transactional current account, the balances tied to real business activity, payroll, and cash management. And here, the picture remains very encouraging.
Speaker #1: Through BNI Direct, our transactional current account balance grew 50% year on year. So while the headline current account number looks softer this quarter, the underlying quality and the transactional core of our current account, franchise, is getting stronger.
Speaker #1: Lastly, I want to be upfront that cost of third-party funds did pick up in the second quarter, to 2.63% from 2.49% in the first quarter.
Speaker #1: This is consistent with what was mentioned earlier, funding competition is intensifying industry-wide. We are watching this closely, and managing it as best as we can.
Speaker #1: Mainly by directing our growth toward stickier transactional deposits, like the ones I described, as well as moderation in loan expansion amount. With that, I will hand over to our chief risk officer, Pak David, who will walk you through our asset quality in more detail.
Speaker #2: Thank you, Pak Paulo. BNI's asset quality remains resilient. Our loan at risk ratio improved to 8.1% as of June 2026, from 11% a year ago.
Speaker #2: This is driven mainly by a reduction in restructured loans and special mention balance. Our employer ratio has held stable at 1.9%, a level that we view as an appropriate balance between risk, discipline, and growth.
Speaker #2: We still have work to do in the consumer segment, where NPL, special mention loan, and also large ratio continue to trend upward. We are also taking a more cautious stance in small segment.
Speaker #2: Its asset quality metrics aren't are not as weak as consumer, but they are not yet strong enough to justify accelerating growth there. That is reflected in small segment loan growth of just 4.9% year on year.
Speaker #2: On this slide, this highlights a showing our consistent progress in lowering new NPL formation over the past two years. In the first half of this year, new NPL formation was 5.8 trillion rupiah, this is down 26% year on year.
Speaker #2: On an annualized basis, that is 1.3% of our loan book, versus 2.1% a year ago. Which is why we view our credit cost of 1.1% as already conservative.
Speaker #2: The rate of trend also tells us the same story. 4.5 trillion rupiah in the first half, which is down 44% year on year. With loan at risk and NPL ratio continue to improve, we've been gradually recalibrating our coverage levels accordingly.
Speaker #2: Large coverage stood at 47%, and NPL coverage at 198%. Both levels we consider sufficient, particularly when benchmarked against our pre-pandemic coverage ratio. I will now hand over again to our CFO to continue.
Speaker #2: Thank you.
Speaker #1: Thank you, Pak David. Our CEO has already shared his view on the banking industry and how we are navigating the current situation. We delivered robust profitability in the first half of the year, supported by volume growth and resilient asset quality.
Speaker #1: That said, having observed an intensifying deposit competition since June, we have decided to recalibrate our guidance. We are revising our NIM guidance down to 3.3 to 3.5% from a first half realization of 3.6%.
Speaker #1: This revision assumes a full withdrawal of the Ministry of Finance's sale placements this year, in line with their scheduled maturity, which will raise our cost of funds in the second half.
Speaker #1: The upside is that this is a known one-off adjustment once it plays off, we begin next year with a more diversified deposit base and a less volatile funding cost trajectory.
Speaker #1: Loan growth was strong at 7.7% year to date, we are maintaining our full-year guidance range of 8 to 10%, reflecting a more measured pace of net loan expansion in the second half.
Speaker #1: Credit cost guidance remains unchanged at 1 to 1.2%. This brings us to the end of our presentation. I will now return the floor to the moderator for Q&A.
