Sigit Pebrianto: Good morning, everyone, and welcome to BNI's Q3 2026 earnings call. My name is Sigit from BNI's Investor Relations, and I will be your host today. Thank you for your attendance. First, I would like to introduce our board of directors who are here with us. First, we have Bapak Putrama Wahju Setyawan, President Director. Ibu Alexandra Askandar, Deputy President Director. Bapak Paolo Kartadjoemena, Finance and Strategy Director. Bapak David Pirzada, Risk Management Director. We also have other members of BNI's BOD and senior management as well. Today's presentation will highlight our earnings resilience supported by our record high PPOP, our strategic business expansion, and continued improvements in underwriting.
Sigit Pebrianto: We want to discuss our strengthening CASA franchise and solid capital position, which support our ability to navigate the ongoing market volatility. We will begin the call with a presentation from our BOD, and then we are going to have a Q&A session. Please feel free to submit your questions in the Q&A box on your Zoom app. Without further ado, it is my pleasure to invite our President Director, Bapak Putrama Wahju Setyawan, to begin the presentation. Bapak Putrama, the floor is yours.
Putrama Setyawan: Thank you, Sigit. Good morning, everyone. Thank you for joining us today. I want to start with our overall performance for the first nine of 2026. We know the environment is very dynamic and challenging for all banks, but I am grateful to share that we have delivered a record high core profit. Our PPOP reached IDR 27.5 trillion.
Putrama Setyawan: This is a record high for us, growing 11.6% year on year, and our net profit also grew 6.6% to IDR 16.1 trillion. How did we do this? We grew our business strongly. Our loans grew 22.2%, and our CASA grew 19.6%. Yes, our NIM was under pressure, down by 30 basis points, but this is an industry-wide issue. We are not alone. The industry also dropped by 30 basis points because we grew our volume strongly, our total profit still increased. At the same time, we are keeping the bank safe.
Putrama Setyawan: Our asset quality is getting better. Our loan at risk, or LAR, improved significantly from 10.4% to 7.8%. We also keep a strong reserve buffer at 3.8%, which is higher than the industry average. We grow fast, but we remain prudent. Let me talk about our loan growth. Our market share increased to 10.6% in August. We added about IDR 180 trillion new loans year on year, and the main driver is our core business, the large corporate and middle corporate, or what we often call the enterprise segment. This segment grew very strong. We also participate in the government program, the Agrinas loan. I know many investors were concerned about this last quarter. You worried about the risk and whether the government would pay. I want to give you an update.
Putrama Setyawan: We always make sure the risk is well managed and properly structured. I am happy to share that in September, we already received the first payment. So the program is running well and the risk is handled. But I want to emphasize that we are not just chasing growth. We are growing with discipline. As you can see on the right side, our risk management is working very well. Our NPL formation went down in almost all segments. Bank wide, it dropped from 2.0% to 1.3%, with the most significant improvements seen in enterprise and commercial segments. We do see a little pressure in the consumer segment, but the team is watching this very closely. Overall, our new loans are much healthier than before. Before I pass to the CFO, I want to talk about our funding. For our bank, funding is the most important thing. It is our foundation.
Putrama Setyawan: We strongly believe that we cannot grow our lending in sustainable way if we do not have strong and stable funding. So we put a lot of focus on this. I am happy to share that our strategy is working. Our low-cost funding strategy, growing much faster than the market. Our current account grew 25.9%, while the industry only grew around 9.8%. Our saving grew well. Because of this, our CASA market share is improving. How did we do this? We focused on traditional banking and digitalization.
Putrama Setyawan: Our business platform, BNIdirect, is used by more and more corporate clients. For retail, our app, wondr, now has 16.6 million users, a very big jump of 58%. This also helps us to get more payroll accounts. In short, because we have strong funding growth, we have the power to keep growing our loans safely and sustainable in the future. Now I pass the time to Pak Paolo, our CFO. Silakan Pak Paolo.
Paolo Kartadjoemena: Thank you, Pak Putrama. Let me start on page 7 with our NIM dynamics. Usually, when we see NIM compression across the banking sector, it is driven by rising funding costs. However, our experience this year has been slightly different. If you look at the top right chart, our year-to-date cost of fund remained very stable at 2.8%. The 30 basis point of NIM compression from 3.8% to 3.5% was primarily driven by a 33 basis point decline in our loan yield. We see this as a reflection of the strength of our funding franchise. Even though we grew our deposits by over 20% and gained market share, we managed to keep our funding costs flat. We were able to grow our balance sheet meaningfully without having to overpay for deposits. That said, we are not just relying on our funding advantage. We are actively managing the asset side.
Paolo Kartadjoemena: If you look at the bottom left chart, you can see the quarterly trajectory of our loan yield. After bottoming out at 6.9% in the H1 of the year, we successfully repriced our assets in the Q3, bringing the yield back up to 7.1%. We are executing this repricing very carefully. We want to protect our spreads, but we also want to avoid triggering client attrition. We believe the Q3 recovery is a good indication that our balanced approach is working. Given the global volatility we are seeing, having a strong balance sheet is absolutely critical. We are entering this period of uncertainty from a position of strength. Our liquidity is deep, with a loan-to-deposit ratio of 87.9% and an LCR of 143%. On the capital side, our total CAR stands at 19.2%.
Paolo Kartadjoemena: This is nearly 5% above the regulatory minimum, providing us with over IDR 40 trillion in excess capital. If we look at asset quality, our metrics compare very favorably against the broader industry. Our NPL ratio is maintained at 1.9%, which is better than the industry average of 2.1%. More importantly, our NPL coverage ratio stands at 193%, significantly higher than the industry's average of 166%. Ultimately, these superior buffers, both in capital and provisioning, give us the safety and the flexibility to keep supporting our clients. On page 9, let me share our updated guidance. We are revising our loan growth guidance upward to the 10% to 13% range. This upward revision reflects a divergence between the broader domestic economy and the specific segments that we serve. Why are we able to grow faster in the market?
Paolo Kartadjoemena: It comes down to our balance sheet capacity and our strategic positioning. While many players in the market are currently facing liquidity and capital constraints, which naturally limits their lending capacity, BNI's strong balance sheet allows us to step in and capture high-quality opportunities. With our 19.2% CAR and 87.9% LDR, we have the funding and the capital to support our clients. Furthermore, our growth is less reliant on domestic consumption cycles. Our expansion is anchored in specific growth areas. We are seeing robust demand from the natural resources sector, which is supported by global demand. We are also actively supporting government strategic programs like the Agrinas loan, where we have ensured the risk is well managed and have already received the first repayment. I also want to reaffirm the rest of our guidance.
Paolo Kartadjoemena: We are maintaining our NIM guidance at 3.3% to 3.5%, and our credit cost guidance remains at 1% to 1.2%. We believe these levels reflect a prudent balance between profitability and risk management. While we maintain cautious on the macro outlook, we are highly confident in our specific growth trajectory and our ability to execute. Turning to page 17 of our financial results, I want to highlight the balance in our growth strategy. We delivered a 22.2% increase in loans, which is aligned with the 19.6% growth in CASA. Because our loan growth was well aligned with our funding capacity, our net interest income increased by 13.6%. This drove our PPOP to a record high of IDR 27.5 trillion, growing 11.6% year on year. However, consistent with our commitment to long-term integrity, we did not let this strong top-line performance lead to complacency.
Paolo Kartadjoemena: We chose to increase our provisioning charges by 18.6% to ensure our buffers remain robust. As a result, our net profit grew by a solid 6.6% to IDR 16.1 trillion. We believe this represents high-quality, sustainable earnings built on a foundation of prudent risk management and disciplined funding. Looking at page 21, our 22.2% consolidated loan growth was driven primarily by our wholesale segment, with balanced contributions from large corporate and middle corporate. I also want to highlight a very important detail about our loan composition. There is a general market perception that when the domestic economy moderates, corporate CapEx or investment loans will slow down, and companies will only draw on working capital loans because they are short on cash. However, our data tells a different story. Our loan growth is equally split between working capital and investment loans. Both grew by around 25% year on year.
Paolo Kartadjoemena: This tells us two things. Firstly, our clients are not just surviving, they are still expanding their capacity. Secondly, this ties back to our earlier point. Because our growth is anchored in resilient sectors like natural resources and strategic infrastructure, we are seeing genuine investment demand driven by global markets, not just distressed borrowing. Finally, I want to draw your attention to the yield table on the right. In Q3, our blended loan yield recovered to 7.1% from 6.9% in the previous quarter. This confirms that our cautious asset repricing strategy is yielding tangible results without causing significant client attrition. Finally, on page 24, let me address our funding dynamics directly because I know the rising cost of funds in Q3 is a key focus for many of you.
Paolo Kartadjoemena: You can see in the bottom left of our chart that our Q3 cost of fund ticked up. I want to be very transparent about the reasons why. In June, there was unexpected announcement regarding the withdrawal of government SAL funds from state-owned banks. The immediate market reaction was intense deposit competition as banks built liquidity buffers at all costs. We participated in that competition as well to protect our franchise, and that is reflected in the Q3 numbers. However, the situation has since evolved in a more constructive direction. The government has now provided a clear stage timeline for SAL withdrawal. In BNI's case, our SAL-related term deposits once reached IDR 95 trillion before coming down to IDR 75 trillion in September, and will decline further to around IDR 55 trillion by November. This clarity actually is very helpful.
Paolo Kartadjoemena: It allows us to prepare our liquidity in stages rather than reacting to a sudden shock. The broader message is this. Liquidity in the system is available, but if you need to secure it in massive size, you have to pay up for it. We expect the cost of fund to remain elevated through the Q1 of next year, but we do not anticipate a significant further worsening from our current levels. We also received additional support just last week. Bank Indonesia maintained the benchmark rate at 5.75% and announced a reduction in the reserve requirement ratio. Both measures are constructive for bank liquidity and funding stability going forward. More importantly, our structural foundation of our funding remains intact. Our CASA grew 19.6% to IDR 733 trillion, with current accounts up 25.9%.
Paolo Kartadjoemena: This was not achieved by simply paying higher rates, but more driven by deepening our transaction banking relationships. 93% of our wholesale current account balance comes from users of BNIdirect, and wondr continues to drive retail deposits. Because of this low cost sticky deposit base continues to grow, we have the foundation to manage through this period of elevated funding costs and to grow our loan book in a sustainable way. I will now hand it over to Bapak David, our Risk Management Director, to walk you through our asset quality in detail.
David Pirzada: Thank you, Bapak Paulo. Good morning, everyone. Let me begin on page 29 by giving you a clear picture of our asset quality. At the bank-wide level, I am pleased to report that our portfolio has strengthened over the past year. If you look at the top left, our special mention loans improved from 3.6% to 2.7%. More importantly, our loan at risk dropped from 10.4% down to 7.8%, and our gross NPL remains stable at 1.9%. I also want to highlight the bottom right chart on our recovery efforts. As we write off legacy loans, our recovery rate remains very healthy. In fact, our recovery to write-off ratio improved to 66.1%, which shows that even when we write off loans, we are recovering a significant portion of the value. While our corporate, enterprise, and commercial segments all show strong improvements, we are seeing some pressure in the consumer segment.
David Pirzada: This is primarily driven by macro factors affecting household purchasing power. We are monitoring this closely and have tightened our underwriting criteria for consumer products. However, because consumer loans are a relatively small part of our total portfolio, it does not change our overall positive trajectory. I want to show you why our asset quality is improving and why we are confident that this is structural, not just cyclical. If you look at the chart on the left, 56% of our NPL formation in 9 months of 2026 came from loans that were originated before 2022. Similarly, 55% of our write-offs came from this older vintage. These are legacy issues from the pandemic era, and we are successfully clearing them out. The more important metric for the future is our NPL formation rate.
David Pirzada: As you saw in our management highlight earlier, our bank-wide NPL formation dropped significantly from 2% to 1.3% year-on-year. What is driving this? Our new underwriting standards are working. If you look at the corporate and enterprise segments, NPL formation dropped sharply to 0.2% and 0.8% respectively. I also must note that in the consumer segment, NPL formation ticked up slightly to 2.7% due to household purchasing power pressure. But we are managing this tightly. Because the rest of our book is performing so well, the total NPL formation in 9 months of 2026 was only IDR 8.1 trillion, which is a massive 34.6% decline year-on-year. Write-off also dropped by 47.4%. The story here is that the drag from our legacy portfolio is shrinking and our new book is performing very well.
David Pirzada: I want to emphasize our provisioning philosophy and why our reserves are so resilient. Despite the fact that our asset quality is improving and NPL formation is falling, we did not release our reserve to artificially boost short-term earnings. Instead, we continued to build them. As you can see on the top left, even after deducting our write-off, we actively added another IDR 6.8 trillion to our loan provisions in the first 9 months of the year. Because of this proactive build up, our loan loss reserve now stands at 3.8%, which is higher than the industry average of roughly 3.49%. Now I want to address the NPL coverage ratio on the bottom left, which decreased from 206% in December to 193% in September. I want to be very clear that this is not because we reduced our reserve.
David Pirzada: The drop is simply because our write-off volume significantly reduced this year by 47.4%, which is driven by strong recoveries and better legacy asset resolution. Because we are writing off fewer loans, our absolute NPL base is not being artificially shrunk as much as it was in previous periods. More importantly, if you look at the broader risk picture, our LAR coverage actually improved from 46.9% at the end of last year to 48.3% in September. This tells you that our buffer for the entire at-risk portfolio is stronger than ever.
David Pirzada: I also want to draw your attention to the bottom right table, which shows how we allocate this reserve. Our Stage 3 coverage is very strong at 57.1%, and our coverage for NPL is even higher at 63.5%. Given the current global uncertainties, we believe this conservative approach is absolutely necessary. Our total credit cost for 9 months of 2026 remains stable and within guidance at 1%. By maintaining this strong buffer, we are fully prepared to absorb any unexpected shocks and protect the bank's long-term earnings stability. With that, I will hand it back to the team for the Q&A session. Thank you.
Sigit Pebrianto: Thank you, Pak Putrama, Pak Paolo, and Bapak David Pirzada for the presentation. We will now move on to the Q&A, and we will begin with several questions that have already been submitted to us. Please feel free to submit any questions that you have on the Q&A box on your Zoom app. The first question is related to liquidity and cost of fund. This one comes from Handy Noverdanius from CGS Securities. The question is, how do you see the liquidity competition with regards to cost of fund now versus June to July 2026 period? Pak Paolo, may I invite you to take over this question?
Paolo Kartadjoemena: Thank you, Pak Handy, for the question. If we compare the current situation to June-July period, the acute pressure that we felt back then has eased somewhat. However, I also want to be very clear that the overall outlook remains very dynamic, and we are managing this with a high degree of caution. In June and July, the market was hit by unexpected announcement regarding the withdrawal of government SAL funds from the SOE banks. As you know, this triggered a sudden and intense competition for deposits as banks rushed to build liquidity buffers. The situation today is more manageable because the government has provided a clear and phased timeline for BNI. Our SAL deposits, as I mentioned earlier, once reached IDR 95 trillion and now has come down to IDR 75 trillion in September, and this will naturally decline further to around IDR 55 trillion by November.
Paolo Kartadjoemena: This clarity allows us to plan our liquidity and funding in stages. Looking at the cost of funds, we saw that the pressure peaked in August at 3.3%, before easing slightly to 3.1% in September. For the Q3, our cost of funds was 3.2%, compared to 2.6% in the Q2. While our nine-month year-to-date cost of fund remains stable at 2.8%. Going forward, I must stress that we are not out of the woods yet. While the SAL issue has clarity, we are facing a tough global backdrop.
Paolo Kartadjoemena: A high US CPI could keep global interest rates higher for longer, and these factors could continue to put pressure on the rupiah as well as on domestic liquidity. Therefore, we expect funding costs to remain elevated and somewhat volatile through the H1 of next year. We are not assuming any rapid relief from this pressure. Our strategy is to maintain the structural strength of our CASA franchise, which grew 19.6% year-on-year to IDR 733 trillion and is driven by transaction banking to keep our cost of funds as competitive as possible while we navigate these external uncertainties. Thank you.
Sigit Pebrianto: Thank you, Pak Paulo. Moving on to the next question. This is about loan demand, still from Handy, from CGS Securities. The question is whether BNI is seeing stronger demand from private corporate borrowers and which sectors are driving that demand. Pak Putrama, could you please share your perspective on this topic, Pak?
Putrama Setyawan: Thank you, Pak Handy. To give you the broader context, our wholesale loans grew by 31% year-on-year as of September 2026. Even if we exclude the Agrinas program loan, our underlying wholesale growth remained very strong at 22%. Importantly, this growth was broad-based. We saw equally strong momentum from both SOE and private sector corporates. To answer your question specifically on the private corporate segment, we are definitely seeing healthy demand. The growth here is concentrated in resilient sectors that are less exposed to cyclical swings of consumer discretionary spending. Specifically, we are seeing strong demand from natural resources, FMCG, healthcare, and telecommunications. These are sectors with relatively stable defensive demand profiles.
Putrama Setyawan: Looking ahead, our pipeline for the remainder of the year remains robust, and in addition to natural resources and utilities, we are observing new loan demand momentum emerging from two key areas, data centers and government-related spending. We will, of course, continue to underwrite these opportunities with our usual prudent risk management, but the underlying demand from this sector clearly supports our revised growth guidance. Thank you.
Sigit Pebrianto: Thank you, Pak Putrama, for the insightful response. Our next question, also from Handy, is about wholesale loan repricing. The question is how much repricing has been completed so far, and how much remains in the pipeline. Pak Paulo, may I hand this back to you? Thank you.
Paolo Kartadjoemena: Thank you for the question. As of September, we have successfully repriced IDR 161 trillion in loans within the wholesale segment. This covers both corporate and enterprise. This represents around 16% of our consolidated loan book, and we achieve an average upward rate adjustment of approximately 79 basis points. I am pleased to say that this result has exceeded our initial targets, both in terms of volume and yield increase. What is particularly encouraging is that we were able to execute this while maintaining strong client retention.
Paolo Kartadjoemena: I also want to share a bit of practical insight on how we achieve this without triggering client attrition. In practice, when we ask for higher loan pricing, clients will naturally negotiate. We often accommodate their requests, but in return, we ask for a deeper relationship, specifically more usage of our transaction banking services. This naturally results in higher current account balances.
Paolo Kartadjoemena: This is a win-win approach, another reason why our current account grew by an impressive 26% year on year. It reflects a very healthy competitive dynamic where we improve our loan yield while also strengthening our low-cost funding base. I also want to clarify the scope of our repricing. The 16% that I mentioned applies specifically to our managed rate portfolio. On top of this, about 30% of BNI's loan book is floating rate, which automatically reprices when the benchmark rates move. If we look at our total repricing effort, we have effectively repriced about 46% of our total loan book. Looking ahead, we will continue to apply this disciplined relationship-based pricing approach to new loans in our pipeline. Our focus remains on improving loan yields to support our NIM while strictly maintaining our prudent risk management standards.
Sigit Pebrianto: Thank you, Pak Paolo, for the clear answer. Turning to asset quality, I have a question from Handy from CGS Securities, and also from Melissa Kuang from Goldman Sachs, and also from Andrey Wijaya from RHB Securities. The question is whether there are any signs of distress in the wholesale portfolio, and also, please, could you give us an update on retail loan quality in BNI? Given the nature of this question, I would like to invite Bapak David Pirzada to walk us through the latest development of this topic. Please, Pak David.
David Pirzada: Okay. Thank you for the question. Let me address this by looking at both the wholesale and retail portfolios. Starting with wholesale, the latest portfolio indicators show that asset quality has actually improved across our corporate, enterprise, and also commercial segments. As highlighted in our presentation, our overall SML declined to 2.7% from 3.6% a year ago, and our LAR also improved significantly to 7.8% from 10.4%, while gross NPL remains stable at 1.9%. However, I want to be very transparent about one specific area we continue to monitor closely, which is SOE construction. As of September 2026, our total exposure to SOE construction companies subject to restructuring amounted to IDR 16.4 trillion. To put this into perspective, this is only about 1.6% of our consolidated loan book, and we hold an overall LLR coverage of 43% against it.
David Pirzada: To give you a more granular view, PTPP and Adhi Karya recently signed restructuring agreements. Our combined exposure to these two names is IDR 2.9 trillion, with an LLR coverage of 14%. We do not expect any material increase in provisions for these two, primarily because most of our exposure already has a dedicated source of payment and is therefore excluded from the restructuring. Meanwhile, our exposure to Waskita Karya and Wijaya Karya, which are also expected to undergo restructuring, stands at IDR 13.9 trillion, but we already hold a very solid LLR coverage of 48% for these names. Should any additional provisioning be required for this portfolio, we have the flexibility to utilize our existing general provisions supported by our ample loan loss reserve. We are assessing this exposure individually, taking into account the restructuring progress and also each borrower repayment capacity.
David Pirzada: Turning to retail, we do acknowledge that pressure remains in consumer lending due to household purchasing power dynamics. However, I am pleased to note that consumer LAR actually improved by 54 basis points in September compared to August. This was mainly driven by lower early-stage delinquency in our payroll loans. Overall, the improving wholesale portfolio and our healthy recovery rates provide strong support. While we remain vigilant on consumer lending, it remains a relatively small part of our total exposure. Our strong provisioning buffers and targeted monitoring allow us to manage these specific areas of pressure while maintaining the broader improvement in our asset quality. Thank you.
Sigit Pebrianto: Thank you, Bapak David. Staying with you, Bapak David, because I have a related question from Angus Mackintosh from Smartkarma and also from Handy of CGS Securities. What are BNI's key priorities for lending to SOEs? Please, Bapak David.
David Pirzada: Okay. Thank you for the question. Our approach to SOE lending is highly selective. We focus on entities that have clear strategic national importance, and very importantly, they have a stable underlying demand and strong cash flow visibility. Year to date, our new lending to SOEs has been primarily directed towards sectors that fit this risk profile. We have extended loans to financial services, aviation infrastructure, manufacturing, and also in telecommunications.
David Pirzada: These are fundamental, strong franchises with resilient business models. Conversely, we have been deliberately and systematically reducing our exposure to construction contractors. This is a conscious rebalancing of our portfolio by shifting our SOE exposure towards stable infrastructure, financial, and manufacturing entities, and away from high-risk contractors. We are actively de-risking our wholesale book. This strategic shift is a key driver behind the improvement in our overall wholesale asset quality that we discussed earlier. Thank you.
Sigit Pebrianto: Thank you, Bapak David. I have another question. This one is related to the latest development from the MSCI announcement, which proposed to put Indonesia into the standalone market. In light of the recent MSCI announcement, this question is from Linda Lowira from Eastspring, and Sarah from Barclays also asked the same topic. In light of the recent MSCI announcement, how is BNI approaching capital management, particularly regarding share buybacks and dividends? Pak Paolo, could you please share management's perspective on this topic?
Paolo Kartadjoemena: Thank you for the question. Let me address this question in three parts. Firstly, our capital, then our dividend philosophy, and lastly, our buyback approach. First on our capital position, we remain in a very strong position with total CAR stood around 19.2% and Tier 1 CAR at 18% as of September. We have a very comfortable buffer above regulatory requirements. Regarding the recent MSCI announcement, I want to provide some perspective for our shareholder composition. The government and Danantara hold 60% of BNI shares, providing a very stable anchor. Foreign passive funds account for only about 5% of our total shares, and while we fully acknowledge that broader market sentiment may drive short-term volatility, this structure significantly limits the portion of our shareholder base directly exposed to passive index-related selling. Secondly, on our dividends.
Paolo Kartadjoemena: Our philosophy is to balance shareholder returns with the capital required to support our business growth. We target a Tier 1 comfort range above 16%. Because BNI is currently in a strong business growth momentum, as you saw with our 22% loan growth, we need to retain earnings to fund this growth. Therefore, going forward, we may need to normalize the high payout ratios that we have paid in the past. We want to ensure a sustainable dividend policy rather than over-promising.
Paolo Kartadjoemena: Thirdly, on buybacks. We do have an active buyback program, but I want to be very clear about its purpose. We do not conduct buybacks for capital management purposes as we do not cancel the repurchase shares. Our program is designed for employee stock allocation. We execute it opportunistically, mainly when we see a significant deviation between short-term market sentiment and our underlying fundamentals. It is a tool to manage our equity story responsibly and not a mechanism to artificially support the share price. Thank you.
Sigit Pebrianto: Thank you, Pak Paolo, for the clear answer. Next question is related to BNI's cost-to-income ratio position. The question is, I would like to hand over this question to Pak Paolo. Pak, the question is: What cost-to-income ratio level is management aiming for, and how much further upside could we see on the cost front? I would like to hand over this question to Pak Paolo. Please, Pak Paolo.
Paolo Kartadjoemena: Thank you for the question. We aim to reduce our cost-to-income ratio from the 45% to 46% range down to approximately 40% over the medium term. Our nine-month cost income ratio of 45.8% reflects a conscious decision to front-load certain expenses. Operating expenses grew 12% year-on-year, higher than our typical run rate, as is primarily driven by personnel expenses, which rose 15% year-on-year, while G&A expenses remain relatively flat with a modest 1.5% year-on-year increase. Why did we make this move? Our Project BRAVE, our national network transformation initiative, rolled out in July 2026, is currently underway. It is transforming our physical network from administrative service centers into proactive sales and business development hubs. For the remainder of the year, our focus remains on strengthening execution discipline and embedding these operational changes.
Paolo Kartadjoemena: Transitional costs are necessary to execute this shift, and management is comfortable in maintaining OpEx at an elevated level for now, provided we continue to maintain positive jaws with revenue growth. Once the network transformation is fully optimized, we expect OpEx growth to normalize. Concurrently, the impact on this year will be even more favorable on the top-line side as the outlet and sales productivity improve. In the long term, we recognize the importance of accelerating our fee-based income streams. To support this, we plan to enhance our wholesale banking platforms to capture higher-margin businesses and strengthen our revenue outlook for the coming years.
Sigit Pebrianto: Thank you, Pak Paolo. Please stand by, Pak, because I have another question. This one is from Ferry Wong from Citi. The question is: Could you please elaborate on your Agrinas loan outstanding and the next interest principal payment? Please, Pak Paolo.
Paolo Kartadjoemena: Regarding the Agrinas loan, the first principal repayment was last month, and the outstanding loan to Agrinas from BNI now stands at IDR 45.8 trillion. Principal payments over the next 5 years will amount to IDR 9.2 trillion annually, and this is paid on every 25 July. The interest will be calculated at an effective rate of 6% on the outstanding loan balance. Hopefully, this answers your question. Thank you.
Sigit Pebrianto: Thank you, Pak Paolo. I have another question, Pak. This is from Andrey Wijaya from RHB Securities. The question is related to our ROE. What are the key drivers to accelerate earnings growth and improve ROE going forward, particularly to narrow BNI valuation discount related to peers? Please, Pak Paolo.
Paolo Kartadjoemena: As demonstrated by our consistent track record, core profit expansion will be driven by strong top-line momentum, supported by diversified revenue growth, as well as disciplined cost management and well-managed credit costs. Looking ahead, the higher booking rates are expected to persist, backed by a robust deal pipeline. Our expansion is anchored in resilient sectors such as natural resources and strategic infrastructure, benefiting from genuine investment demand driven by global markets, as well as momentum in government-related spending.
Paolo Kartadjoemena: As macroeconomic conditions stabilize, we also anticipate a recovery in loan growth within the currently lagging retail segment. To support our lending strategy, the structural foundation of our funding remains solid. Approximately 93% of our wholesale current account balance is generated by BNIdirect users, while the wondr platform continues to drive growth on the retail deposit side.
Paolo Kartadjoemena: Although tight funding competition is unlikely to ease rapidly through the H1 of next year, our growing sticky deposit base provides a strong foundation to navigate this environment, with any improvement in the market liquidity serving as a further upside catalyst. On the fee income side, the exploration will be driven by leveraging our enhanced transaction banking platforms, particularly in wholesale banking and digital channels. This will expand non-interest income and diversify revenue away from pure interest margin dependency. We expect a deeper user engagement across our digital platforms, as well as an enriched product offering to further bolster fee income contributions. Furthermore, we see potential to lift ROE through the divestment of non-core ROE dilutive subsidiaries, aligning with controlling shareholders or the entire strategic initiative to streamline SOEs. Thank you.
Sigit Pebrianto: Thank you, Pak Putrama, Pak Paolo, and Bapak David for the insightful presentation and also Q&A. That brings us to the end of our today's earnings call. Given the limited time for any questions that we haven't been able to address, our investor relations team will follow up after the call. If you have any additional questions, please feel free to reach out to us to our email address, ir@bni.co.id. On behalf of BNI, thank you to our BOD and to everyone joining us today for your time and also for your thoughtful questions. We appreciate your continued trust to BNI. Have a great day, everyone.
