Good morning. This is the conference operator. Welcome to Credem's conference call presenting H1 2023 group results. Let me remind you that all participants are in listen only mode. After the presentation, a Q&A session will be held. To be assisted by an operator during the conference call, press star and zero on your phone keypad. Let me now turn the conference over to Mr. Angelo Campani, General Manager of Credem. Mr. Campani, you have the floor. Good morning to all of you. Thank you very much for joining us this morning for this interim report just before the summer holidays.
As we know, over the last few quarters, there was a very, very deep change in the economic backdrop, and monetary policies and rate hikes had, on the one hand, a positive impact on banking industry revenues, but also at the same time, it increased the level of uncertainty for households and for the economy at large. Having said that, Credem wants to play a major role to support the economy, the geography, where we have a franchise, and we want to promote a sustainable growth despite the time of very strong challenges we have to face up. I'm very happy with the way our group faced up to those challenges and generated value, not just for the bank, but also for households. That reconfirming the growth trends that are somehow add value, not just for the bank, but also for households.
That reconfirming the growth trends that are somehow quite different from what the industry is showing. Then I'll walk you through our competitive positioning and strategy. First of all, diversification and specialization characterizing our business model, where we can intercept, regardless of the scenario, the best of it and generate performance. We've managed to grow in a very fast way, and we acquired market shares, and we are very sound of this. This was reconfirmed by the stress test performed by the supervisory authorities, that reconfirmed our positioning among the top performing European banks, and the way we manage risk and combine the growth in loans and the quality of our assets.
The relationship we have with our customers, together with the investments we are making in a digital evolution to really reconfirm the level, the high level of service and really highlight the competencies and skills of our personnel, then our execution and over performance capability, the way our people are motivated. This is the strategic backdrop against which I will walk you through our best results ever from an economic and financial viewpoint, but this goes hand in hand with the sustainable volumes of loans and inflows. That's why our group can generate value over time, regardless of the economic backdrop. I would like to really warmheartedly thank our people, who are our best competitive advantage.
Before I walk you through our interim report, I'm sure you all read the news from the Prime Minister's O ffice of a possible tax levied on extra profits achieved by banks. We wait for the law text so that we can look at the impact in the coming weeks. Let's now focus on what depends on us and move to page two in the presentation. As you can see, in H1 2023, we reconfirm our strength, so to say. We still support households and companies, and our loans are up 3.7% year-on-year, whilst the banking industry is going down more than 2.2%. We are also increasing our customer base, thanks to our direct depositing, up 6.2% year-on-year direct funding.
That is quite in contrast with the industry average, which is going down in excess of 2%. We still retain a very high asset quality, top of, top quality, both in Italy and abroad. If we look at the coverage level, we are an NPL zero bank with a gross NPL or net NPL ratio below 1% already. Let's now move to page 3. The very strong growth in our revenues led to a result of absolute excellence, with a net offering equal to almost EUR 299 million, with a double digit growth. ROTE and ROE are 20.8 ROTE and 17.9% ROE. The constant growth growth our group has achieved and the asset quality constantly enables to improve our capital position.
We are with a CET1 ratio landing at 14.4% and a basis point of 600 basis points versus the direct requirements. Let's move on to page four now, and here we see a reference to our business model. We've already disclosed in the last half year report that our strategy enables us to keep the revenue growth at double-digit level. Now, the NII accounts for about 56% in Q2 2023, and commissions are used to give a greater contribution when we have negative rates. 41% is a recurring component of NIM, and it's a higher contribution than in Q2 2022.
This reconfirms that when you have a high diversification of your revenue sources, you can keep on growing and rapidly adapt to the fast changes in the economic background. Let's now move on to the next page. I talked about the different contribution provided by the individual segments, and it belonging to our group. You have to read it vertically, practically. Dark green is the commercial banking that is providing a strong contribution, mainly given to, driven by a rate growth. It's EUR 192 million. The light green part is the private banking, extended banking services and consumer credit, and the property is almost EUR 36 million. Again, thanks to the rate hikes on the one hand, and the excellent quality of our assets.
On the right-hand side, the gray part, you can see the pipeline that's called wealth management. It's in excess of 25% of the total, despite the consolidation of the new entity of Credem Private Banking and Euromobiliare was completed in the second half of the year. Of course, also commissions connected to assets under management. This is not a favorable moment for them. We think this business model can support the growth in revenues. Also going forward, we have to come to grips with a new normal, with rates going towards the ECB target, where this will have a big impact on the choices made by clients. Next, page 8, 6, is sustainability.
Sustainability plays a very important role for us. We are trying to grow following ESG criteria, which already made our non-financial report in last year, stating our objectives also for 2022 at the time. Now let me give you an update of what we have been doing over the first few months of 2023, and the projects we have in the pipeline for the future. First of all, we have extended our ESG policy to the remuneration policies for the entire group. We keep on investing to improve our ability to run climate risk analysis, and we've improved our scoring activities. Our ESG volumes covered by our ESG scorings are approximately EUR 17 billion. A strong portion, a big portion of our loans.
We think that this project we have embarked on will enable us to further complete our ESG pathway, and to provide more, more accurate information so as to increase our scoring as well, to improve our performance, environmentally related performance from our clients as well. In May, as you probably saw, we issued a new green bond, EUR 400 million was the issuance, and then we gave Cassa Depositi e Prestiti a mandate for our clients to be able to access the Sustainable Growth Fund and finance investment in sustainability projects. We have another project in the pipeline. At group level, we have activated, we've started a widespread photovoltaic project for about 60 photovoltaic system on group-owned properties that will enable us to significantly drop our CO2 emissions. Next slide. Let's have a look at our income statement.
As I was mentioning before, our revenue trend is reconfirmed as positive. Then net interest income is growing further, but also commissions stood their ground despite the high level of uncertainty still characterizing markets. So we reconfirm the increase of our revenues, 28.6% up and 38.6% up. We think we can speed up in acquiring new volumes and to generate volume over time. We will keep on investing in marketing activities to improve our offering to our clients. Then the revenue growth is much higher than the increase in operating costs, and therefore, our operating income went up 96%. Cost of risk is very limited. Also, thanks to a non-recurring item, it's right back for about EUR 10 million....
resulting from the optimization of the valuation of government guarantees on loans dispersed during the pandemic period. As you can see, despite, well, net of these write backs, the cost would still be, have been at a totally bearable level. There have been no major NPL flows to be recorded. Extraordinary items excluded a recovery of about EUR 9 million related to systemic charges that were cautiously accounted, provisioned for in Q1 2023, and that are higher than the final SRB quantification disclosed in Q2 2023. Net profit, this is our bottom line, lands at EUR 299 million almost. That's the best half year result ever achieved by our bank. Then net interest income on page 8, 9.
During the second quarter of 2023, we went on increasing our net interest income, thanks to the combined effect of two elements. On the one hand, the rate hikes, but also a very strong increase in volume, challenging environment, they managed to further increase our stock. Let's now move on to page 9. Always talking about net interest income. As you can see, the average rate on loans is up 41 basis points due to further increase in market rates. Whilst the banking industry was only growing 46 basis points at the average loan rates. We've managed to make our customers happy, thanks to commercial policies related to time deposits, with an average cost that is very close to that of the industry.
That enabled us to have an excellent result, when it comes to cost of funding, and we've attracted new customer, new customers and applying our business model-- leverage our business model to improve customers making investments and therefore, for us, having a better result on the fee side, fees and commission side. Then we want to have a focus on the growth of our net interest income going forward. For the second part of the year, we expect the growth to be stronger in the cost of funding. Maybe I am answering a question that will be asked, and can say that we expect deposits of 0.25-0.3 versus 0.17, which is the current value.
Let's move on to the next page, non-interest margin. We talk about our securities portfolios. We have, you see, a benefit stemming from Italian govies, a lower concentration on Italian govies. Again, we are very much diversifying our securities and also the HTC component of our govies is still high, 97%. Generally speaking, our portfolio, HTC portfolio, accounts for 58% of our total portfolio, is about EUR 56 million gross of taxes. Let's now move on to page 11. We move on to non-interest margin. Here you have the breakdown for the different types of fees and commissions.
Let me stress, we have a core interest margin going up 5.6% year-over-year, thanks to the excellent to the fact that our fees and commission stood their ground over time, despite market volatility and affecting assets under management. Also therefore, asset managers and brokerage fees. Q2 2023 led to the removal of commissions on current accounts, tied in with negative rates. We are recovering that with recurring, thanks to the new business volumes we have been generating, and then to the excellent growth of our NIM, we also have the insurance business that, for the quarter, landed at more than EUR 24 million. That's the excellent result of the insurance income. Let's now move on to page 12.
I think it's worth investing for the growth of our group, we are doing so across the board, we keep on investing to improve our IT platforms, digital innovation, we want to focus also on the service model to our clients. We have ad hoc initiatives to gain additional market shares. We want this to have a strategic impact, we want them to also be sustainable and governable, as we have had in the past, as we've done in the past. This strategy is going to strengthen our growth, sustainable growth, also protecting future revenues, recovering items, generating value, as it is always, as it has always been our mission. Personnel costs were related to the revenue growth as well.
We had admin expenses that we decided upon for marketing and technology to further support our project, the projects we have in the pipeline, and the year-on-year comparison, of course, is impacted upon by inflation effects. Let's now move on to page 16. We have stocks. We have a year-on-year growth of about 21.7. I, I think I understood, reconfirming our performance in the industry and the spark, some shrinking in the demand that was recorded in the business. The growth is also determined by residential mortgage, mortgage consumer credit that have been growing up to more than 26%. Sorry, I cannot hear very clearly. The sound is very poor. We go from EUR 3.4 billion in the first half of 2022 to the current result.
We're now on page 14, group customers funding net inflows breakdown, so it is growing, the funding is growing, and the net production for the group is in excess of EUR 2.8 billion, page 14, one of the highest values over the last 5 years. You see the current yields you find in the field. We have better results in the assets under management and assets under custody. After this, we will try and be as close as possible to the client, should the current market recover and should conditions improve. Well, we have more than EUR 500 million net inflows. That's direct deposits, and it's a trend reversal versus the industry trend, and it's the flight to quality effect, if you wish.
It's also the consequence of some very aggressive campaigns we've been conducting to acquire new clients. Also our customer base, direct customer base, is a huge pool for opportunity going forward to somehow move these masses to the investment world with a positive impact, of course, on our PNL. We're now on page 15. It's deposits, assets under management, and insurance. You see, we have a growth in direct deposits, as I mentioned before, and we also have a growth in assets under management in, in the insurance business because of the market conditions, and because we have actually recorded the flows that we've seen on the previous page. The total deposit is EUR 93 billion. That's the total customer funding, EUR 93 billion. Let's move on to the next page.
We are on the asset quality, and here you see we have very limited non-performing loan growth, and it's down to EUR 720 million, the growth of NPL. We have very limited cost of risk at 3 basis points, also thanks to some non-recurring writebacks I mentioned before in the range of EUR 10 million, in, to optimize the impact of our government guarantees on loans dispersed during the COVID period. Otherwise, it would be the net, net of non-recurring items, the cost of risk would remain still at very low level, around 7 basis points, well below the industry average. Let's now move on to the next page. It's the NPL coverage. We confirm it's a very high level of coverage, in excess of 74% on bad loans and in excess of 54% on total NPLs.
If we were to include the shortfall and the further levels in complying with calendar provisioning and addendum, we would have a coverage in excess of 62%. We also confirm the level on net bad loans on net loans landing at 0.23% compared and at 0.89% of the banking industry. Let's now move on to page 18 to talk about asset quality and have a few thoughts on asset quality. Again, page 18 in the presentation. These figures represent also show you even better our asset quality.
In case of potential deterioration of our assets, generally speaking, and in the banking industry at large, we would enter a potentially negative cycle, but with the best asset quality ever, with a very low NPL ratio, much lower than that of European banks and also of Italian banks. Let me particularly stress, on the right-hand side of the screen, the Stage 2 loans and total gross loans landing at slightly more than 6%, and it's practically half or well below the Italian and European average, more than 3 percentage points lower than the European average. We will keep on monitoring the positioning of our credit portfolio. I think that with the data just disclosed to you, make us very confident to manage any potential loan deterioration for you.
I think that with the data just disclosed to you, make us very confident to manage any potential loan deterioration or or a deterioration of the economic conditions or of the banking industry. Let's now briefly comment on page 19, comment our assets and liabilities profile. It is, there are three points to be made. First of all, customer loans went up and, well, due for banks, increased driven mainly by the TLTRO repayment, around EUR 4.55, 55, EUR 4.55 billion. We've made a number of initiatives then that I disclosed a few slides ago, and then, that was customer loans increased and the security portfolio reduced, and then increase in wholesale bonds, the result of the EUR 400 million issue in May of a senior non-preferred green bond.
Let's move on to page 10, 20. We have bond issuances and maturities. The last issuance had a very good result demand-wise, both foreign and Italian demand. Currently, we have no more funding needs, but if we look at 2024, for instance, there might be a chance, of course, subject to supervisory authority providing their clearance, to have EUR 500 million senior non-preferred that are coming due the following year. We can keep on issuing to reinforce our MREL buffer requirement. We move on to page 21. We look at liquidity, look at our reserves. They are very sizable, EUR 16.16 billion. Covering, if you look at the total direct funding, it's about, covers about 44%, and our deposits is has increased.
Look at the quality comment. If we look average private deposits, not just retail, but also private banking, the average size is below EUR 22,000. That's the granularity of deposits. It's retail, private, and small business, and account for about 80% of our deposits. The remaining 20% is connected to the rest of the business. We have liquidity indicators that you can read on page 22, our liquidity indicators and ratios. We have a very high level above regulatory caps for the first liquidity ratios. LCRs went down, was tied in with the payback of the TLTRO, the repayment of the TLTRO.
Then, of course, from now on, we think we will have a, a ratio that will be much closer to this year, this quarter's, we are fully confident that they will be perfectly covered and reached. Then page 23, consolidated capital ratios. We have Credem Group and Credem Holding. 15.8% is for Credem Group, and 14.4 is Credem Holding. We more than offset the increase in RWA, thanks to the, our organic capital generation. The increase in RWA was mainly due to volume expansion and the effects of Credemleasing's capital increase. The, the current CET1 ratio enables us to have a very high buffer versus the regulatory requirements, the buffer is 680 basis points higher.
Let's now move on to page 24, where I would like to summarize our medium-term features, so to say, that make us, or put us in a position to be able to have a very positive competitive positioning, to be able to face up to uncertainties going forward. You see, a very important characteristic is sort of diversification. Diversification that is provided by making a, a comparison between our funding mix, with the funding mix of the peer group. This specific feature enables us to intercept customer or clients' needs and to diversify our revenues, and therefore growth in a sustainable way through different economic cycles. At the center of the slide, you can see...
our ability to grow very fast, very, and you see loans and our performance over the last 10 years of the Credem Group, I mean, versus the industry average, is really stunning. Look at the track record, it's very, very clear, our loans, and we can somehow project it also going forward, you can. Then, the item, the third item, is that one of our features of excellence is our asset quality. We are best in class, asset quality wise. Of course, we are showing it through the cost of risk versus the cost of risk shown by a peer group. Here we have shown and proven our ability to go through very complex economic cycles, but retaining a very vice, a very high level of quality in our portfolio and asset quality.
I think that's it from my side, and I'm here ready to take your questions. This is the conference call operator. We are now starting the Q&A session. If you want to ask a question, please press star one on your phone. To be removed from the Q&A queue, press star two on your phone keypad. Please ask your question using your handsets. Thank you very much. If you want to ask a question, press star one now on your phone keypad. First question comes from the line of Luigi De Bellis with Equita SIM. You have the floor, sir. Good morning to all of you. We can't hear. I have a few questions. The first one is on the NII. What is the growth trend you expect in the coming volumes as we're looking at 2024, well, looking at the current interest rate curve?
The second one is on fees and commissions. What are your expectations for the, for Q3, for, for instance, assets under management and banking and insurance fees for full year 2023? Then a third question on costs. You talked about a phase where you can accelerate client acquisition. Could you elaborate on expected costs for 2023 versus 2022, and how the new taxation will maybe change your sales strategy or commission strategy for this year? Thank you very much. If I understand correctly, because the sound was not very good, and you are asking us to tell you about our lines, in the item lines in our P&L, and I hope I will answer your question as to the NII.
As I was saying before, our expectations are gonna be of a higher beta, so higher expectations of, from clients to be better remunerated. We hope, we're gonna close at around EUR 960 million for 2023. On the commission, fees and commissions, we think we can close the year still going strong. As I mentioned before, I talked about the countermaneuver, as I call it. We've removed some of the commissions that were tied in with the negative rates, and then assets under management, that is somehow struggling in, in the fee performance. If we put together insurance and banking fees, we think that we can reconfirm the guidance we gave.
As to the cost trends, I can reconfirm the trend we've seen or for the interim report, for the half year report. We think that we have the growth potential, organic growth potential that is sizable. We in the previous years, we've seen this, and we have the precondition for this to be reconfirmed this year as well. We are still going to use that kind of lever. It's a flexible one because it's also connected to marketing initiatives. We have attached a plan with certain products, and we can change them over time. I don't know whether I answered your question. Maybe you had another one on assets under management and how we can grow in that direction. I think that in the second half of the year, there could be some recovery in our, on our production side.
It could still be in the negative, but it's gonna be offset by the market effect, which at current conditions, it will have a more positive impact, and it will offset and overtake the very, well, low negative trend we will record in commissions. I would, stock wise, I would be slightly in the positive. I would say would be slightly in the positive. Let me remind you that if you want to ask a question, you may press star and followed by 1 on your phone. The next question comes from the line of Noemi Peruch from Mediobanca. Go ahead, madam. Good morning. I have 2 questions. Maybe I lost the follow-up you gave.
Could you give us a, could you elaborate or give us your comment on the new, on what is being discussed as to the extra, on taxing the extra profits or, on banks or something? You had given a guidance on a 3.5 inflation rate. Are you still confirming that, or are you going to update it also in the light of, the, or what will happen in, what happened in the first part of the year? Your policies to acquire market shares. Is your markup going to be lower than in the past, to be aggressive? We see the term offer for your assets under management. Are you providing, the, the term at the same conditions? Thank you very much. I hope I got all your questions, and I will, answer them exhaustively.
Let me start starting from the tax on extra profit. It's not easy to answer because as you well know, it's something that was raised last night. There's no text yet, so we'll have to look into the text first and foremost in the coming weeks, then as soon as it will be available, of course, we will have thoughts on it. Today, it's very hard to have a view to be expressed without a final text at hand. What you mentioned about costs. As I was telling your colleague before, we have a guidance around 66.5 for our growth rate. It's the tax, the cost growth rate, and I think there's room for us to acquire new customers, new volumes.
This is a lever that can be used in a flexible way. It can be dosed depending on the view we take, time after time. We have this very effective products that can be used to run an attack, but they can also be withdrawn if necessary. Then I'm answering another one of your questions. We have a very rich offering, and therefore, we can intersect client needs. Let me give you an example. We were talking about products used to attack with special rates for private customers or to corporates. We have features within the group. We have digital services that we can provide that make us stand out from the competition. Our strength is the group approach.
It's a very far, very complete approach, also in advisory, consultancy, and the competencies and skill, and skills of our people. That really makes us stand out. Having said that, I'm also referring to rates, as you mentioned. We also looked at it during the presentation, one of the pages. We have an average remuneration rate of loans, which is slightly lower than that of the industry, because we have very high-level counterparties we're dealing with, so it's historically, this is what we've always done. Of course, it's a cost of risk for very high-quality counterparties. We are in excess of 2% on loans. As we could see, loans over 10 years, we are growing, and we're around 2%, also for direct deposits. There's something very interesting also to be noticed.
If we were to take a snapshot of our group 10 years ago, in 2013, Total business slightly higher than EUR 60 billion, if added to the current total business, we land slightly below EUR 130 billion. Just to reconfirm our track record, in 10 years, we practically doubled, net of the few acquisitions we've made, we doubled our size, and I think that is very meaningful as a thing to look at. Next question comes from the line of Manuela Meroni with Intesa Sanpaolo. Go ahead, madam. Good morning, congratulations for the results you have achieved. NII and your guidance, NII guidance for 2023, you expect a slowing down of your NII in, you know, in the second half.
When, when you think, when are you gonna have your NII peak, maybe in Q3 or maybe you already have it in the second quarter this year? What can we expect NII-wise for 2024, as you still have a strong volume growth. You've already engaged in a higher repricing than the market average, so I was wondering whether we can expect a growing NII also in 2024. Second question is on cost of risk. During the last call, you said a cost of risk lower than 25 basis points this half year. You have a very low cost of risk. Is there an update on the guidance you gave us on the cost of risk that we can expect? Thank you very much for your question.
As to the NII peak, it has to be assessed, very, also in view of the monetary policies that will be applied. We expect it anyway in Q3, as a matter of fact. With an acceleration impact on the following months, practically, and on the deposits, that should be around 25-30 basis points, and net of the tax effect. Sorry, gross of the net tax effect. I was telling your colleagues, 2023, NII EUR 960 million, maybe higher. In 2024, there will be a number of items that will have an impact. There will be a reduction in the customer spread. This has to be taken into account, also. The new mandatory reserve, and as you also said, a positive impact is also to be expected.
We expect a limited shrinkage of the non-interest income, sorry, of that interest income between 2023 and 2024. The other question on cost of risk, sorry, but the sound is very, there's a very big echo, it's very hard to understand what is being said. Net of non-recurring items, recurrent 7%, recurrent 7% from year to year, and I would expect it to be around 15 basis points for the following year. I think we're still talking about cost of risk. We could have a cost of risk below 25 basis points. We're talking 2024, I think. St ar and one on your phone. For further questions, press star and one on your phone. Mr. Campani, there are no more questions in the queue for the time being. Very well.
I would like to wish you a nice and relaxing holiday. Have a good day to all of you, and thanks for joining us today. See you next time. Thank you. This is the conference call operator. The conference call has come to an end. You may disconnect your phones. Thank you very much.