Good morning, everyone, and welcome to Q2 2024 analyst meetings. We got an agenda lined up for today, for the company recent performance. First up, I would like to Khun Piti to opening remarks for this quarters. Over to you, Khun.
Good morning, and again, thank you for your time, your interest in our company. Maybe I, for interest of time, so that we can save time for Q&A at the very end of this meeting. May I pass to the next page on the executive summary? Got to admit that the second quarter is not an easy quarter, not just for us, but for the whole country. Recovery that we expect to see does not appear as we expect for is still very much uneven. So the strategy remain pretty much the same, that we want to stay conservative so that it would eliminate, help us eliminate any constraint in the future.
Meaning that if we have strong balance sheet, strong capital, strong liquidity, we would not be constrained by anything, which would allow us to do things that would benefit the shareholder in long- term. And we come back to this one. When we say conservative, at least in four areas, we want to continue to optimize balance sheet, not to grow into the area that would bring us any difficulty in the future and try to maintain net interest margin. And in order to do that, we need to have very prudent risk management. We continue to write off to bring NPL to very low level.
We continue to put management overlay in the area that we anticipate the further decline in asset quality or in the level of collateral value, so that we manage tomorrow today, and we will always be ahead of the curve. The third area is the cost discipline. Not only operating expense, but cost from all dimension. We would not invest into something that is in the hype cycle, and we have to regret in the future and have write-off impairment on top of the normal OpEx management that we optimize the branch network. We continue to improve our operational platform to become more digital so that we can save cost in longer term. And on top of that, we also manage our cost of funds, which our CFO, Khun Somkid, will explain to you later.
Cost of capital, bringing down the capital, the hybrid capital, that we would not need, at least in the near to medium- term, because of the strong core Tier 1 that we have. So at the end, we continue to have strong capital with very optimal cost. We decided to early redeem our Tier 2 and reissue only half of that, so that our cost will come down further in the third and fourth quarter. And in the fourth quarter, we will also early redeem our hybrid Tier 1, so that the cost in next year will come down even further. So all in all, the financial highlight on the next page. With that strategy, we don't mind to see loan growth going to the negative term.
If we have to exchange that with problem in the future, we would not do so we let the loan growth grow in an optimal way. Meaning deficit has to come down so that we would not be overly liquid and have too much cost. With that strategy, we can maintain our net interest margin and slightly go above the plan. The trouble still on the fee income, because when we decide not to grow loan too aggressively and grow in the area that we think that risk-return justified, the fee would not come. Because we have sizable fee income that relate to lending, being home loan and hire purchase or auto loan, that normally would come with the Credit Shield Insurance.
So when we lend less, the fee would come down. However, the fee in other area that we want to improve and move into the area that we believe we can be much better, like credit card and improvement in the mutual fund, we start to see a positive result in that area. By doing this, our efficiency ratio remain very much intact. Our Stage 3 remain in the area that we wish to see, and even better. By doing that, it allow us to put extra management overlay, as I mentioned, to cope with the unexpected event that may have in the second half of the year.
So all in all, by doing this, we can manage to grow our profit by 21%, and the detail would be discussed and shared more by Khun Somkid. And then, we can open for Q&A at the end of the meeting. May I pass to Khun Somkid, please? Thank you.
Good morning, all. Thank you for your time. So starting with the first page on the loan, which I think is the we reaffirm our direction to be conservative on the loan growth and asset quality. Like CEO mentioned, that we don't mind to see it have the slight negative on it. However, on the key products, especially on the top-up loan, still show the growth of around 5%-7% on the CYC and CYH. That will be the key to help improve our yield in the following pages. On the other hand, the corporate loan, we may see the slight drop from the repayment, and we don't roll over the low cost low UPN on it.
The focus on the mix of the loans still remain at the auto loan, about 30%, the retail mortgage, 25, and the commercial, including SME, around 38%. On the next page, we'll show the deposit. It has the slight drop in the same direction as the loan. Since we have less pressure on the liquidity, so we're back to manage on the deposit cost, especially, those we would select those that we can have the franchise value. At the end, the TD would be less on the cost side.
On the other things to mention here, Tier 2 that we have matured by end of June, we were over only 50%, and that will save cost in the second half of the year, around THB 330 million. Which, further to page nine, would show the NIM movement. In the second quarter, the NIM would drop by only two basis point, while the yield improved three basis point, the cost of deposit grow at seven basis point. This will show the increase at a very much decreasing trend, and we foresee that in the third and fourth quarter, we'll see less pressure on the cost of deposit and the NIM trend that could be stabilized. page eleven would show the fee income.
The CEO mentions, that the fee that would related to the new loan booking has been slowed down following the low booking. However, on the credit card still show the growth Q-on-Q, and mutual fund, especially from the Term Fund, not contribute around 2% growth Q-on-Q. To be mentioned here, that normally the Q2 is the slowest fee, slowest fee quarter for the bank, and we foresee that in the third quarter may show growth not much. Next page would elaborate more on the cost. In quarter two, we have the CI ratio of around 42%, which reflect the cost management following the slowdown of the income.
Especially on the variable costs that related to the business volume, that has been tight control, and the continue of the branch cost control, following the less use of the branch. page 14. In the second quarter, we set the normal provision of around 129 basis point. However, we use this opportunity to set the special provision around THB 1 billion, and sum up to be 163 basis point in total. The continues of the de-risking activity, including the sales and write-off, still continue, so that we can maintain the LLR at 152%. To page 16. Just to show the capital and a little touch on it.
On the capital ratio, you may see the drop of around 1.3%, which is the effect of only 50% rollover of the Tier 2 in June. And that's still our capital ratio is still the one of the highest in the industry, and that will save cost in the second half. So going to the asset quality part in page 18, showing the modified portfolio. Since we do not continue to split into the Blue or Orange Scheme, so we just show the total. It still remain at around 11% of the portfolio, with only 2% has in the deep modified scheme. And page 21 show the composition of Stage 1, 2, and 3.
The stage three, like I mentioned, that the de-risking activity still continue, so we can keep the stage three at around 2.64%, while the stage one improve from back to 2020, 89% to 89.6% in the stage one in June. And the next page will show the coverage by stage. You may see that the stage one and two, we remain the coverage on it. On the stage three, may be lower, which reflect the quality of the stage three portfolio is strong, is better. The other risk indicators still remain in check. And next page on the accrued interest, which we still keep conservatism on it.
To remind again that, on the Stage 3, all accrued interest on the Stage 3, we have set full provision on it. So, only this number here would show the accrued interest in the Stage 1 and 2, which still remain stabilized quarter-on-quarter. I think that's it from the key highlight on the Q2 performance. So, may I ask Khun Naris to share on the strategy update?
Good morning, everyone. I think on the strategy update, may I first jump to page 28. I think overall, despite the short-term economic slowdown that we are going through at the moment, I think the medium to long-term direction of the bank remain unchanged. We are still pressing ahead with the digital transformation and use that as the springboard to start changing other parts of the bank, including the revenue model, how we operate, all the channels, the back office, the mid office, as well as the overall structure of the bank, as can be seen in the framework shown on this page. So I think maybe I just give a quick update in term of the execution progress of each of these dimension.
On the next page, I think you're probably familiar with this page already. I think overall, we still maintain very healthy momentum in term of the growth of the digital transaction. The financial transaction grow by about 26% year-on-year. And if you look at the non-financial transaction on the right-hand side, you see that, in key product categories, namely deposit, retail lending and auto lending, the share of the digital channel continue to increase 99% for deposits, 90% for retail lending, and 83% for auto lendings.
On the next page, I think, when you look at the top line growth of the bank, there may be only limited growth, but when you look at the contribution of the top lines from the digital channel, you can see that I think we still to keep growing, replacing the sales from the offline channel. For example, the credit card booking, when you compare year-on-year growth, almost double. Now, digital channel accounting for 55% of the credit card new booking already. Or another area that has seen quite a significant growth is the deposit account opening. Also, similar growth rate, about two times the year-on-year growth, compared to last year's same period.
So I think, this strong momentum in terms of driving more digital, in terms of basic transaction as well as sales ongoing, and I think we are at a very high maturity already, in my view. The next four or five pages, maybe I'll not go through in detail, but just want to give you a glimpse in terms of what we are doing next. Given that the basic transaction or even the sales are quite at a mature level already, I think what's next, as I said on the first page, I think we try to use the digital capability as an enabler that would allow us to change the way we operate as a bank.
On page 31 is an example of how we use digital platform as a way to engage and talk to our customer. In the past, it would be the bank cold calling customer or send SMS, right? Not very personalized, not very timely, but I think what we can do at the moment, right, is basically using the mobile banking application. In various part of the application, we bake in the personalized message so that the application is talking to the customer. And this one, as I said earlier, we are talking about a personalized capability, meaning I can specify to the level of segment of one how the bank or how the application would talk to the customer.
We can also start doing some of the real-time or near real-time messaging capability, meaning the reaction from certain action by the customer would then trigger a certain set of messages to make it very engaging. Maybe another good example is on the next page in terms of how we want to transform the lending journey of the bank. In the past, more or less a paper-based process, and also the underwriting decision is happen at the end of the journey, meaning after the customer submit all the application, that produce a bit of waste, given that our approval rate still less than 50%, meaning we throw away half of the application that's submitted to the bank.
Maybe it's better to the bank as well as to the customer that we can screen out the customer earlier so that the customer don't waste their time, as well as the bank can save the operating cost on those. So what we have roll out already is a feature called My Credit. The customer can just click on a few screen on their mobile banking application, essentially keeping consent on the ENCB data to be shared to the bank.
And based on ENCB data, as well as the historical product holding and transaction pattern of the bank, then we give the customer a preliminary credit assessment so that the customer would know with 80-90% chance of the correctness in terms of their credit limit, if they were to apply to each of the products. So hopefully, this would help enhance the customer experience a whole lot, as well as improving the productivity of our sales staff, as well as middle office and back office staff. So I guess, that's give you a glimpse of in terms of how we leverage the digital capability to change the operating model and the business model of the bank.
Maybe I move on to the next transformation initiative, which is the ecosystem play on page 36. As discussed earlier, we want to be focused, we want to be selective. And what we want to focus on are the four ecosystems, which are the core customers of the bank. One is the car owners, the payroll customer, the homeowner, as well as the wealth customer. So moving on to the next page, just an update in terms of the car owner ecosystem. On the left-hand side, I think the momentum on the car insurance has been also very positive. And again, this one building from a very low base to start with.
We have seen multiple folds in term of the motor insurance from the digital platform. And again, I think there's still a little bit more upside that we can create, given that we have quite a low base. And this one working on a somewhat captive customer that we have in our auto lending portfolio. CYC booking via My Car widget may be slowed down quite a bit, but not because of the traffic, but more or less because we have tightened some of the underwriting policy, just in line with the softening economy overall. On the right-hand side, on RodDonJai, again, continue very strong momentum in term of the used car booking from RodDonJai platform.
As of second quarter, already account for about 31% of the new, of the used car booking on our AL portfolio. Next page, on payroll ecosystem. In term of acquisition, a strong uplift compared to last year. The new payroll company coming into portfolio growing at 31%, as well as the growth in the welfare loan new booking also up by about 53%. Alongside the traditional product, like payroll or welfare loan, we also want to engage with existing customer on what we call a service called My Work, which is a HR platform. We think this is somewhat a strategy for us to deepen the relationship that we have with both the employer and the employee.
So far, the number of companies on this platform is approaching 500 already, and about 50%, 50 companies of those, are using the paid version. Still an early day for My Work as a product, but I think we see promising results from the initial phase of rolling out for the last couple months. Moving on to the homeowner ecosystem. I think this one, lastly, we focus on further penetrating the existing customer using My Home widget, as well as credit card, as a vehicle to deepen the relationship.
On top of that, given the economy slowing down, we also want to push a little bit more on the refinancing, given that new, new or used home sales have been slowing quite a bit. We think, in line with what we have been working on the CYC, on the AL product as well. I think focusing on the customer who have repaid the existing debt quite a bit, and then we have a chance to observe their behavior and refinance that, is probably how we want to approach this market. Moving on to wealth. I think this one still a very strong momentum on the credit card usage.
Our Reserve card continues to grow both in terms of number of cards in circulation, as well as the spending per card, as you can see on the left-hand side. On top of that, we also start to gain momentum in terms of the product that we want to push a little bit more, both on the FCD account, which we brought it up to ttb Touch in terms of the capability that the customer can open the account as well as view the account via mobile banking. And you can see that the growth in terms of number of new account, as well as the balance, has gone up significantly, compared to last year. The same for structured note and Term Fund as well.
Also, I think, we want to make sure that we introduce the product that, in line with, the overall macro level. So what we call Wellness Investment is probably something that, more in line with the customer appetite at this stage.... So if I may jump to page 42, I think just want to touch on a little bit, in terms of the impact of digital capability on other channel. At the end of the day, the cost base of the bank, a significant part of it still lies on the offline channel. And by this, I mean, how we operate the branch, as well as how we operate the offline operations.
As you can see on this page, I think, the footprint that we have on other channels start to come down slowly. As the adoption of the digital channel increase, we expect to see more and more of the rationalization of the offline activities to realize the lower cost to serve overall. Last, on the last page, I just want to share a bit of the upcoming highlights on the digital capability on page 43. I think, on the mobile banking side, as I said, we are at the mature level, probably, one of the most competitive in the Thai market already. But I think there are still pockets of opportunities that I think we can capture.
For example, I think what we plan to launch later this year is the digital version of AL receipts. Given the current law in Thailand, we as a bank still obligated to send a physical receipt to the customer. We are digitizing that whole journey, including linking the bank database with the Revenue Department database to be fully compliant with the e-Tax law. This would hopefully save us the cost of sending the physical receipt to the AL customer, which last year we spent over THB 50 million in terms of sending this physical receipt to the customer. Structured note, as I mentioned earlier, with strong momentum without yet showing this on mobile banking.
So, given it's very well received in terms of product, we plan to bring that capability to mobile banking so that the customer can view, buy, sell structured note by themselves via our mobile banking platform. Also, I think just to make sure that we can do customer service even more timely and at a lower cost, we will incorporate ChatGPT capability in our chat platform via mobile banking starting the first MVP later this year.
Lastly, given that we have built quite a bit of capabilities for the self-service TTB card, we think that maybe we can ride on what we have built in terms of the infrastructure and the capabilities to also help our staff serve the customer better. So we are trying to migrate the capability that we have built for TTB card to be in the form of tablet as well, so that our staff both at the branch or the direct sales staff at the dealer nationwide can leverage this tool to better serve the customer. And hopefully, this one will be launched at the beginning of next year.
So I think, that's it in terms of the strategy, execution update, for quarter two. I pass back to Khun Da for Q&A.