Good afternoon, and welcome to Techcombank's third quarter 2023 financial results presentation. This event is being broadcast live, so those joining us in the audience today, please remember to put your mobile devices on silent. Jens Lottner, our CEO, will begin with opening remarks, and Alexandre Macaire, CFO, will share more details of the financial results and business updates, followed by a questions and answer period. Jens and Alex will present in English with live Vietnamese translation available via a separate link. We'll have another call in Vietnamese tomorrow for retail investors. We expect to wrap up today's presentation and Q&A around 4:00 P.M. Hanoi time. With that, I'll turn it over to Jens to begin the presentation.
So good afternoon, everyone, and thanks for joining today. So I really appreciate everyone taking the time. And what I will do is I will quickly run through the highlights of this quarter and then really hand it over to Alex to give a deep dive on the numbers and give further explanations. So in terms of the overall results, I think they're very much in line with what we have expected and also what we guided over the last quarters. And in terms of TOI, we saw actually an improving trend for the first time, and we actually saw quarter-on-quarter growth, but also year-on-year, if you compare to the third quarter, 2022 .
Overall, we are in line with our expectations, and again, we believe actually that there is a kind of a turning point, given the improvements in the underlying business drivers. PBT is still down year-over-year. However, we're actually up quarter-over-quarter, mostly driven by the strong TOI, what we have talked about, but also because we actually maintained a very strict cost discipline, like what we have done in the quarters beforehand. Overall, as I said, we should be in line to achieve the targets which we have outset at the AGM. Return on assets, while down compared to year-over-year, and 2.4%, is still a very strong number.
And again, I think it just shows that we have asset quality as well as profit generation very much structurally under control. And we're basically continuing to really run this as a very, very profitable franchise. CASA is a little bit down compared to last quarter, where we saw an uptick. However, if you look into the growth of CASA, we actually have, in the second quarter, where our total CASA increased, but our term deposits increased even more because there's still an underlying demand from our customers to invest in term deposits. So therefore, the quota came down because TD growth was higher than CASA growth, even and despite CASA still growing 3% quarter-on-quarter.
NPL got up a little bit, and especially we saw an increase in our retail and SME book, whereas the quality on the wholesale banking side was very much contained. The credit cost increased also, but again, much more moderately. The reason is that the quality of our collaterals, and which we always stressed in the past, still holds very much. So therefore, even if the NPLs are slightly increasing, the credit costs are following actually on a lower path. Overall, we are pretty sure that we will contain everything within the guidance we have given at the beginning of the year. CAR, again, remains very, very strong. We are standing at around 15%, which makes us one of the strongest in the country.
We continue to actually put the profits we are making into our retained earnings, so we will continue to keep actually a very, very strong capital base, which allows us to continue on our future growth trajectory. Overall, I think the numbers which we have achieved in this quarter show that the business plan which we had put in plan at the beginning of the year continues to hold, continues to unfold. We are probably somewhere seeing a lot of the value drivers bottoming out from where it should start and increase again. With that, I hand it over to Alex to give you further details. Thank you. Alex?
Thank you very much, Jens. Good afternoon, everyone. So let me start, as usual, with an overview of the macroeconomic environment. Overall, the economy continues to be on an improving trend. The GDP growth reached 5.1% at the end of September year to date compared to 4.1% in the previous quarter, and we expect that it will be in the range of 4.8%-5.5% for the full year. Manufacturing PMI is now close to 50, and we've seen two consecutive months of increasing orders, particularly from the South Asia markets. Exports also showed clear improvements. We are now back to almost the same level as last year. Finally, FDI disbursements continue to hold up very well. They continue to improve actually through the year.
Though in short, we are still in the down part of the business cycle, but we are clearly progressively making our way up.
... On the monetary side, credit growth remains subdued, but also showed some sign of acceleration at the end of September. Credit growth in the banking market was up 6.9% versus 3.4% year to date at the end of the previous quarter. So we believe that this trend will continue until the end of the year and also into 2024, in line with the improving business environment. For the time being, banks in general have a lot of liquidity. You can see that in the fact that the term deposit rates and the interbank rates keep decreasing. For term deposit rates, they are already down 210 basis points since the beginning of the year.
On the asset sides, banks continue to price aggressively, because essentially, they want to stimulate credit demand and fill their credit quota. As a result of that, you should not expect a dramatic improvement in net interest margin, at least in the short term. Looking ahead, we think that there is a potential for term deposit rates to continue to decrease by maybe 20 basis points before increasing again slightly in 2024. Let's look now at the financial highlights. So Jens commented on them already. I would say, just like he said, the bank overall is tracking in line with our expectations. There is good top-line momentum. TOI in the third quarter was up both quarter-on-quarter and also year-on-year. Our credit assets and our deposits grew between 3% and 7% quarter-on-quarter.
Our NIM was still on a downward trend if you average it out over 12 months. However, if you look at the third quarter in isolation, then the NIM was actually up 40 basis points on the previous quarter. On credit risk, we expected an increase in the NPL. We mentioned that during the last analysis presentation. This is exactly what we've seen, and it's in line largely with the maturation of our credit books and also the overall position in the economic cycle. At 1.4%, I would say that the NPL is still within our target range, admittedly, maybe toward the higher end of the range, but still in the range.
Actually, if you include the bonds that we hold on our balance sheet in the calculation, then the NPL, the true, I would argue, NPL is not 1.4%, but actually 1.3%. Our CASA ratio, Jens mentioned it, went down to 33.6% this quarter. This was driven by a large inflow of term deposits and more generally, a significant growth of customer AUMs, and this is driven by customer risk appetite, no? So not exactly something we can control. However, the important thing is that our CASA balances continue to grow for a second consecutive quarter by 3%, quarter-on-quarter. Overall, it's, I think, a robust performance in a still challenging environment. This slide provides an overview of our PBT.
We generated a PBT this quarter of VND 5.8 trillion, which compares to VND 5.6 trillion in the second quarter of the year. NII increased by VND 1 trillion quarter-on-quarter, which is quite significant, and it benefited from the lower cost of funds and improved net interest margin that I mentioned earlier. NFI was also up on the previous quarter, and we saw very robust performance from bancassurance and IB businesses in particular. Our OpEx went up. This is traditionally what we see every year, and this is linked to seasonality. However, we continue to control our costs very tightly, and the year-on-year growth for the first nine months of the year is only 6%. So let's like...
Let's start to deep dive a bit more into the performance of the bank now, starting with NII. So our balance sheet expanded significantly since the beginning of the year, and I think that's what also sets us apart from most of bank in the market. So we reached almost VND 700 trillion of interest-earning assets this quarter. And this expansion was enabled, as I mentioned, by a very robust growth as well of customer deposits. The whole other highlight is the fact that our customer funds started decreasing significantly this quarter. So we announced it in the previous analyst presentation, and we're happy to see that things panned out as we predicted. So the decrease in customer fund was around 70 basis points during the quarter. And at the same time, our asset yield held up quite well.
You can see that it went down only by 10 basis points and remains at an elevated level of 8.4% during the quarter. So this confirms the guidance we gave last time, that the NIM would stabilize in Q3, from Q3, and then hopefully start increasing from there. If we move now to lending balances, so as I mentioned, our credit balances increased 3% quarter-on-quarter, reaching a year-to-date growth of 11.4% year to date, looking at the bank only, which is very significantly above the average of the industry, as I mentioned. Most of the growth this quarter came from our corporate loans while the SME and retail books remained broadly flat.
As you can see, this growth has been delivered without sacrificing on margins, because as a matter of fact, the average credit yield on our lending books increased from 9.6% to 9.7% this quarter, and we expect this rate to start moderating going forward, and the mix of our assets, finally, between short-term and medium-long term, stayed broadly flat. Now, looking at our credit exposures in a bit more details, like in the previous quarters, we continue to see strong momentum and strong demand from the retail sector across our wholesale and business banking segments. I think this is very similar to what we observe in the rest of the industry.
So the overall credit of the banking sector to retail customers were up 19% year to date at the end of July, to give you some perspectives. For us, the retail sector actually has gone down as a proportion of our overall assets from 73% at the end of 2022, to 71% at the end of September 2023. Our retail loans are starting to pick up again, which is good news on the back of a robust mortgage production from primary mortgages as well as secondary mortgages. Even if the pickup this quarter is still modest, I think it's a good trend to see. Now, a quick focus on our deposits.
We recorded, I mentioned, another consecutive quarter of increase in our CASA balances, and the progression of this quarter was particularly significant for our affluent customers, private and priority segment. And this is in line actually with the investment cycle, and we will have a deep dive slide a bit later, which will help you understand a bit more the dynamics. But with interest rates staying low and investors taking more risk, we can expect, and we hope that this trend of increasing CASA balances will continue. The other significant driver of CASA beyond the investment cycle was our aggressive new-to-bank client acquisition. Year to date, we have increased our customer base by 2.2 million over the first nine months of the year.
During the third quarter, we launched a new proposition targeting specifically merchants and household business owners, and this helped us acquire a significant number of new customers with a very high contribution in terms of CASA. We mentioned during the last analyst presentation that we anticipated the average deposit rate to go down, to start going down, and this is also what we saw this quarter. As you can see, the average rate on our deposits went down from 5.2% in Q2 to 4.4% in Q3. Let's look now at our fee income. That was also an area of strong performance for the bank in Q3. The trend is quite-- The trend is quite encouraging.
Letters of credit, cash, and settlement were up 109% year-on-year for the first nine months of the year. This is quite impressive growth and validates the investments we made in our digital infrastructure. We are making it increasingly simple and convenient for our customers to bank with us, and in exchange for that, they are rewarding us by giving us an increasing share of their wallet. Cards is another area of strong performance. As you can see, year-on-year growth was 39% for the first nine months of the year. We are constantly refining our propositions with very important products to be rolled out in the next quarter, so we hope on this trend and this momentum to continue. But the main highlight is the very stark rebound in our bancassurance and IB businesses.
IB fees nearly doubled quarter-on-quarter, and this across our bond as well as equity businesses. We continue to progress our market share on equities and reach almost 7% on the Ho Chi Minh City Stock Exchange. Bancassurance fees was up 75% quarter-on-quarter, reflecting the efforts we made in the enhancement of our services. We also rolled out a new bank phone banking platform and new offerings. In September, we reclaimed the number one position in the market in terms of annual premium equivalence. So very strong and robust performance from our Bancassurance business. Turning now to OpEx.
So, as I mentioned, the second half of the year, as you know, is usually a bit higher than the first half in terms of costs, for reasons which have to do also with the activities surrounding the bank's anniversary. In particular, this year was the thirtieth anniversary of the bank, and therefore, we spent a bit more, and this reflects in our cost this quarter. However, if you look at staff costs, if you look at marketing, actually, they are very tightly controlled and flat or down compared to the previous year. Let's look now at the asset quality, and let me spend maybe a bit of time on this slide to explain the dynamic.
So obviously, as I said, NPL is going down, is going up to 1.4% if computed on a 12-month average basis. If we include in the calculation the bonds we hold on our balance sheet, then actually the true NPL, I would argue, is 1.3%. Now, in the increase that you observe between Q2 and Q3, there are several drivers. So maybe let me just go through them one by one. So the first one is the maturation of the credit card books. So we grew our books of cards very significantly last year, and this new- we knew by doing that, that there would be a lagged effect on our NPL.
This accounts for around 25% of the increase in NPL between Q2 and Q3, and is not linked to the overall economic environment. Second factor has to do with fraud, some cases of frauds from some SME customers. This accounts for around 15% of the increase in NPR, and is again not correlated to the economic environment. There is not an underlying trend behind that. So finally, the residual impact of the economic conditions can be estimated therefore at around 20 basis points.
And going forward, the decline in interest rates and also, the fact that property supply is still too short to satisfy the demand in, in the real estate sector, all this, we think, will help release some of the pressure we're seeing by increasing credit affordability for customer and also facilitating liquidation of, assets and collateral. So having said that, this was for the bad news. If we look at the good news, you see that the total delinquent assets, so the sum of special mention and NPL, actually lowered to 2.7% at the end of Q3 from, 3% at the end of Q2.
So, this suggests, and we come back to this in more detail later, that the rate of formation of new delinquency is actually slowing and is now lower than the cure rates. So more on this, as I said, later. Finally, our coverage ratio went down and is now slightly below 100%. The reason for that is that we hold very high value collateral against our loans, and therefore, even when a loan moves on to NPL, the amount of provisions we will have to book for that would be relatively insignificant, and this explains why the coverage ratio is going down. Like, in the previous quarter, I'm also providing some insights into the structure of our book, by bucket, by interest rate bucket.
So what you can see is that the average loan-to-value continue to go down and is now at 53% across our books. The proportion of interest receivables on our interest earning assets is also stable or going slightly down at 1.4%. The credit structure of our assets by CI rates or by customer interest rate is actually improving a bit, right, with 44% now of assets yielding 10% or more. And then the average customer interest rates is also, as I mentioned, holding up well. You're seeing a decrease in the bucket below 8%, and this is linked actually to the working capital loans, where there is a lot of competition in the market at the moment, and therefore, CI rates are going down.
Finally, on capital and liquidity, so Jens mentioned it, our overall capital adequacy ratio remains among the strongest in the industry at 15%. On liquidity, the structure of our funding remain very stable, and our regulatory ratios are improved quite a bit ahead of the new requirements coming into force from the first of October this year. Finally, a glimpse into how our performance compares to peers. As I mentioned in the previous quarter, the disruptions in the bond and real estate market clearly have impacted us more than other banks, more on the average of the industry, I would say, due to the characteristics of our business model.
This is why you would see some convergence in our performance with the rest of the market. But I would say we will have to see how things developed for the other banks. But we can already notice that we are again able to control the percentage of delinquent assets better than the other banks, and significantly better than the other banks. And this ratio, as we mentioned, went actually down in the third quarter. So overall, we will aim on to continue to optimize the trade-off between risk and return, which is one of the traditional strengths of the bank. Moving to the forward-looking guidance.
So for GDP, the government actually revised their guidance yesterday in front of the National Assembly, and the full-year target of the government is now 5%, north of 5%. For the full year, our own best case is somewhere between 4.8% and 5.5%, and we believe that there are a number of factors which will help support this achievement, like the continued inflows of FDI investments. I mentioned earlier, the recovery in tourism, with inbound flights from overseas increasing almost threefold since the beginning of the year, export activities, and also the government's stimulus packages. So, Vietnam this year will again be one of the fastest growing economies in Southeast Asia. So with that, let's look at our updated guidance for 2023.
It hasn't fundamentally changed since the previous quarter, which is good, I think. It shows that, basically, we are able to predict the behavior of the bank and its performance trajectory. Credit growth, as always, will be in line with the quota that we will receive from the government. At this stage, our quota is 14.1% for full year 2023. Cost of funds should keep decreasing, and the NIM, therefore, should stabilize, and slightly increase from there, particularly in full year 2024. The NII decline year-on-year should be in the single digit and driven by the year-on-year decline in the net interest margin. For fee income, our guidance remains unchanged, therefore, single-digit growth compared to 2023.
For CASA, we expect balances to keep recovering, driven by the various initiatives, including aggressive new-to-bank customer acquisition. But obviously, the ratio will also depend on the dynamics of our term deposits, which we do not really control. For CIR, we will aim to keep it around the mid-thirty level. I think for 2023, we will be below that, and 2024, we will see where we will end up. But as I said, our objective is to continue to invest in order to increase our market share, work on our operational efficiency, and therefore, as long as we remain below 35%, we think we're good.
We expect the NPL to remain under 1.5%, based on the current scenarios we're looking at and based also on the current workout programs. But we recognize at the same time that there are some uncontrollable factors here again, including the impact from the credit bureau. And finally, our credit cost should keep normalizing, and we believe that it will stay below 1% for the medium to short term. Overall, as Jens mentioned, the bank is on a steady course at a level of very satisfactory profitability, despite all the headwinds that we have faced in the beginning of the year, including on the bond, bancassurance, real estate markets.
The decrease in the cost of funds and the improved momentum in the bond and the bancassurance businesses are for us some of the main highlights of this quarter, and it show that the conditions are turning more favorable. As Jens said, we might be at a pivotal point, hopefully, in terms of our overall performance. We are outperforming the market on asset growth, deposit growth, and customer acquisition, and importantly, the challenges we have had to overcome during the past few quarters have helped us build a stronger bank. So the future looks more bright than ever for us. And with that, I will now cover a few special updates. First, special update is another deep dive in our special mention in NPL. I hope you will find this slide helpful.
I think it provides a level of transparency, which you would not necessarily find usually in this market, about how essentially our Bucket 2 and NPL balances develop. So, as I mentioned, our NPL increased in Q3. There is a lag effect of economy and market challenges, and there is also slower recovery than expected in Q rates. Retail NPL is where we have the bulk of the increase in NPL. That's where the NPL formation has been the fastest, and this is basically linked to the still muted real estate market, as well as the credit card portfolio maturation, as I mentioned earlier.
In BB, you will see, also an increase, but, a, a large chunk of this, almost half of this, is driven by one-off of fraud events, which are not linked to the, economic environment. Well, and then for the wholesale bank, the NPL remained, actually close to zero. Now, looking to our forward-looking assessment. So it's good to observe that the, overall, delinquent assets in the third quarter, went down. So... However, it's still, too early to conclude, that we have passed, the bottom of the cycle on credit cost. We're still seeing that some clients are, are facing some, cash flow challenges, and therefore, we include potential adverse events in our stress test scenario.
These stress test scenarios continue to point to a strong balance sheet, a strong capital position, and a strong profit generation capacity. In the current scenario, therefore, we believe that NPL can be managed below 1.5%, and the loan loss coverage ratio should probably potentially progressively normalize to around 100% in the mid to long term. Looking now at CASA, just highlighting here the three main drivers of CASA dynamics. So the first one is obviously macro environment, and more specifically the measures and the steps taken by the regulator. Though until the first quarter, the regulator was more restrictive in terms of how much liquidity it injected into the banking sector, and the result of that on the CASA balances reduced across the whole industry.
From Q2, the authorities, as you know, started to take measures to improve liquidity, they stopped the U.S. dollar purchases, reduced interest rates, and also adopted a number of measures aimed at removing the pressure in the real estate market and bond markets. This translated into an improvement. That's the first pillar of driver on the CASA side, and obviously, little control on it. Second one is the investment cycle. You see here the correlations, calculated for our private and priority customers, so affluent customers. You see that there is a strong, very strong negative correlations with TD rates and a very strong positive correlation with the level of the Vietnam index. This is what we explained, actually in the previous quarters. For a bank like us, where, where...
Which has around 50% market share in the affluent customer base, the investment cycle and the investment decisions, investment behavior of our customers is a very important driver of CASA. And finally, and this is the area which we can't control, it's about main operating account, right? Both expanding the new to bank customer base, as well as driving main operating accounts through providing differentiating online to offline experiencing, providing unmatched digital capabilities, and we come back to that later, as well as supporting our customers with best-in-class services. So here, this gives you an indication in some of the things that we have implemented in order to drive the CASA momentum on the third pillar, main operating accounts. So I mentioned customer base expansion, 2.2 million.
We rolled out a new proposition, as I said, which targets specifically merchants and household business owners, and this helped us acquire 145,000 new to bank customers in that segment, with 89% active rate. We are also working on a new world-class liquidity management proposition aimed at the middle segment corporates, who cannot afford to invest in a full ERP system, but still want to manage their liquidity more actively by pulling together the cash position, anticipating cash flows, optimizing funding, and FX hedging. So we are already rolling out this new proposition with more than 50 entities, and the initial feedback is very good.
And finally, we have, as you know, rolled out a new, customer relationship management platform, leveraging Salesforce, which is a leader in the, in this market. And we are already seeing some very encouraging trend, like the number of interactions per day from our frontline staff increased, by more than 50%, after the implementation of this new platform. Finally, it's a bit of a busy slide, so maybe you can spend a bit of time actually after that, going through it. But it tries to tell you what we are trying to build, actually, through our investment into, digital and data. So what you see at the bottom, of the left-hand side of the slide is this, Adobe, platform, which is a MarTech platform.
It's about essentially collecting a lot of information through all channels about the activity of our customers, what they are buying, what pages they are browsing, how much time even they spend on each page, what kind of links they click on, how frequently they consult their banking app. So all this information is collected and then sent to a data brain, which is being built completely in-house, and where we have actually proprietary reinforcement learning algorithms to analyze the data and then define the next best action. What is the next best action that we can have with each of our customers based on their past behaviors?
And then these actions are pushed to the various channels through either the apps, for this, we use a tool called Personetics, which offers us, gives us the capacity actually to hyper-personalize the presentation of the app, the content of the app. So not two customers will see exactly the same things. The information they will see will be tailored to their purchasing preference and their need as their next need and next action, next best action, as determined by the bank. Or we can also decide to influence the behavior of our sales force. We would put, for example, some advice into our CRM, Salesforce tool for the RM, for example, to call the clients and remind them that they have a TD, which is close to, about to mature.
So this essentially will be quite a differentiating asset in this market. We believe in this market. There are very few banks who will be able to build that and ensure also that these various components work well together. Because you know, you need to be of a certain size, and you cannot also be too big, because otherwise it starts becoming too complex. So we put a lot of emphasis on this at the moment, and the initial-
... In initial results we have obtained in, in the digital area are quite, encouraging, as you can see. I mentioned the increase in the CD Bao Loc holders. It's more than 2.5 between 2021 and 2023 after we started offering this tool, this, on our, on our app. Credit card installment volumes also quadrupled. We have now 55% of our bancassurance policies which are sold online, and every time we sell a product online, then the cost-to-income ratio is around 10%-20%, lower compared to, to the physical channel.
So this hopefully gives you a better understanding of the steps we are taking in order to continue to drive our operating account acquisition, cash accruals, new-to-bank acquisition, and how the investments we have made position us ahead of other banks in Vietnam, and also probably most banks in Southeast Asia. So this concludes my presentation, and the next section will be about Q&A. Thank you.
Thank you, Jens and Alex. Consistent with our last quarter practice with a live audience, we will skip the break and move directly into the Q&A session. The first question will be for Jens. "Could you share your thoughts about fiscal 2024 outlook, and what are the growth drivers for the bank next year?" This is from Tan Pham at Hanwha Life.
So thanks for the question, and again, 2024 should actually look better than 2023. I think there are a couple of things in general for the macroeconomic macroeconomy, which, which should actually work. And so I think we have public investment, and we hopefully have a revival of international tourism, and we still have public and consumption and private consumption, which, which should actually be quite okay. Hopefully, the real estate sector will be coming in. And so again, I think we are looking probably towards around 6% GDP growth scenario, and which should be over and above what we have right now. So it should actually be conducive to the overall banking industry, because banks are nothing else but a proxy of the macroeconomy. So that should actually work.
I think there is an upside scenario, and what happens if suddenly really the world is not going through a recession, and the U.S., and market, and is developing quite well? China comes out, and Europe is not going too deep, and maybe we see a calming down of the conflicts, which are now happening in the Ukraine or, and right now, actually, and unfortunately in Gaza. So there's a couple of uncertainties, but again, domestic consumption should actually and domestic forces should help us to get somewhere to around 6% GDP growth.
I think interest rates will probably still be conducive, and liquidity will be ample, although we believe that in the second half of 2024, we might actually see an uptick again in the interest rates, and as probably such, some of the really, really ample liquidity we have right now in the markets might actually go out. In terms of inflation, should be under control. We are right now running at around 3.8%. Target will probably be set at 4-4.5%, but again, I think it will be pretty much under control. So I think overall macro outlook looks okay. What does it mean for the bank and for the banking sector?
Overall, again, we believe it will actually help, and because if you think about already what we've seen right now and in the last quarter, where we saw that GDP growth was going up, a lot of the products, investment products, bancassurance, and bonds should probably be coming back. And I think people will be a little bit more confident again, so therefore, credit growth should be going up. I think this year will be muted. Next year, probably the government already said they want to see a higher growth, and some numbers fluctuating right now are 15%. So again, all of that should actually help.
But again, we will still probably remain a little bit cautiously optimistic, because what we also need to see how some of the key markets, and especially, in the real estate sector, are developing. And for us, that's quite important. While, again, as Alex already said, we are probably seeing that things are under control. The real uptick also domestically for our segments will come once this completely springs back and really starts developing. That might happen only in the second half of 2024, even if we see already some encouraging signs. But again, overall, 2024 should actually be looking quite okay, and again, we should see growth on NII as well as NFI for next year.
Thanks, and a follow-up from Tan, from Hanwha again, is, "Are you seeing a recovery in the real estate market, and what pace is that recovery? And then, what are the key issues that you see right now?
So again, the markets are coming back, but again, they're coming back probably slowly and slower than expected. If I just take our own numbers, so second quarter was better than first quarter, and the third quarter was better than second quarter. So again, I think we are seeing the uptick, and however, there are certain segments which are probably going better than others. So right now, I think the recovery in the lower grade segments, as well as in secondary markets, are probably stronger than what we're seeing in the luxury segment. And so when it really comes to Class A or high-end, that will probably only come in a little bit later.
However, I think what we're seeing is, and consensus seems to be where we're seeing a gradual improvement, probably starting second quarter, and then really accelerated at the later quarters of 2024. Again, I still think that structurally there is a lot of demand, and supply is still very, very constrained. I don't think that right now financing is an issue anymore. The interest rates are very, very low, and there are two points which still need probably to be cleared. One is confidence, and customer confidence, consumer confidence. As long as, and probably we're not quite sure how GDP will develop, probably some of the SMEs owners, and in the higher-end segments will probably still look first and foremost, how is their business developing?
At the lower end, I think we have workers who will probably see employment bonuses, et cetera. As long as this is still a little bit uncertain, probably people will be holding back and not be as enthusiastic as what we had beforehand. At the same point in time, we still have a real problem on the supply side. I think that's where a lot of the projects probably still need to go through paperwork. Inventories are still very, very high, so that all needs to be cleared. I think that's where the authorities are working on right now. If that is coming through, we get more supply, and we see, to a certain extent, as the sector goes in full swing, that will also actually help GDP growth, so gives overall confidence.
Then again, I think you will also see that people are buying more, and I think you start a virtuous cycle. So therefore, and I think it will be a slow recovery, but we should actually expect some acceleration at the latter part of 2024. Again, assuming that some of these key issues, as I said, consumer confidence as well as administrative clearance, will be tackled.
Thanks, Jens. Similar question for Alex. What do you see in terms of recovery pace for the bond markets?
Yeah, thanks. I think Jens mentioned that the recovery in the real estate market was relatively slow and will probably continue to be a bit slow in total. For the bond market, the pickup in the third quarter has been very significant. Part of that was driven by the issuances from banks, which had to comply with the new requirements and the ratio of short-term funding to medium and long-term loans. Even if you exclude the issuances from the bank, the actual volumes from corporates was multiplied by 3 between the second quarter and the third quarter.
TCBS, our brokerage subsidiary, got a 60% market share on the bond issuances for the first 9 months of the year, excluding banks. If we look now, extrapolate to the full year, then the bond issuance volumes should be broadly similar to 2022, and actually slightly above 2019. However, if you compare to 2020 and 2021, then we will still only be at around 30% or 50% of the volumes achieved during those years, which means that there is still very significant upside. So, I think the key question is what are—what, what is actually the key issue with the current market? So I would say dynamic is very similar to what we're seeing in the, on, on the loan side.
It has to do essentially with customer demand, so issuer demand, given the economic prospects as well as the level of interest rates. And then on top of that, you have one specific factor, which is purely relevant for the bond market and has to do with the notion of qualified investor. So only certain customers can actually buy private placement bonds, and for this, they have to meet certain criteria, for example, on the overall size of their financial assets.
So it's a constraint, and we are working on this constraint, and I would say that the fact that we have a 50% market share in the affluent segment in Vietnam gives us a lot of competitive advantage compared to other banks in order to work our way through these constraints. So to summarize, right? So relatively sharp rebound and continued momentum and potential for further improvement, assuming interest rates stay where they are and assuming the economic recovery continues.
Thanks. The next question is for Jens from Chukwu at VCBS. Could you provide an update on the revised laws on credit institution and the land law that is going to be heard by the National Assembly at the end of the year? What are the key impacts on the banking sector in general, and specifically Techcombank?
Thanks for the question. So on the land law, let's take the latter one first. I think that is still right now very much all under discussion, so it's actually very hard to predict what's coming out of that. And I think the discussions which were happening were indicating that land prices would be going up, which would put pressure on developers because a lot of projects might not be as profitable anymore, and that might have been some implications on future projects, but also on the attractiveness of existing projects. But to be fair, there is so much movement right now, and I don't think that the National Assembly will pass this law in that session because there are a lot of comments coming from different market participants.
So it's a little bit unclear, and I don't think I can really make any good comments. It would probably be a lot of speculation. As I said, we know the basic drivers and causality, so if basically land price is going up, it would reduce the number of projects, it would make existing projects more attractive. But again, how this ultimately really works out, we don't know. On the law for credit institutions, I think it's pretty clear where this will be ending. I think we try to create more clarity, and there should be more transparency, a lot to do with cross-holdings and cross-financing, et cetera. And it also is supposed to clear up contradictions between different laws, so banking laws, enterprise law.
So, in general, it should actually be good because it should make life easier for banks. And it probably also take into consideration some of the realities of how banking is done in this market. So, for example, if you need to work out a collateral, and banks are not allowed to hold real estate assets, so after three years, and when you try to sell an asset and you cannot really monetize it or sell it, after three years, you're getting into trouble. And so if that would be extended, which just speaks to the realities, how long it takes in order to foreclose an assets and sell an asset, it probably gives more breathing space, and it's just more in sync with the real and operating rhythm of banks.
As long as this is happening, and I think that all works well, and again, we welcome every and anything what creates more clarity, more transparency, and it should actually help us because we are already operating very much, according to these guidelines. So again, it should actually help our business.
Thanks. The next question is for Alex from Andrew at Halo Global. What, what loan growth do you expect for this year and next year, and how much of it would be property-related?
Yeah, thanks, Andrew. So far, as I said, we have observed relatively muted demand on our credit side, and this explains why the banking sector as a whole was only up 6.9% year to date in terms of the growth of the credit books. As far as Techcombank is concerned, we grew our credit assets for the bank only by 11.4%. We currently have a credit quota of 14.1%, and we might get a little bit more room in the next round. This is to be seen. But the thing which is clear that whatever credit quota we receive, we will do our very best to use it.
Now, when it comes to 2024, the government said that they expected the credit growth to be in the range of 15% or more. As you know, usually, we get a significantly higher share of the credit quota than the other banks on a proportionate or relative basis. So from that, I'll let you make your own predictions. In terms of how we will allocate our credit quota, so usually it's based on a combination of things. So first, customer demand, clearly, but also the bank's appetite based on concentration as well as risk-adjusted return. In 2023, a lot of the growth in our credit assets came from the corporate bank, and we managed to reduce a bit the share of the real estate assets in our books.
For 2024, our intention is to have around two-thirds of the growth in our credit books coming from the retail bank and one-third coming from the corporate bank, primarily SME customers. So when it comes to the real estate sector in particular, we would like to cap the volume of our loans to the real estate sector in absolute terms, which will also translate into a decrease in terms of the proportion of our overall book. So I hope this gives you an indication of what to expect in terms of growth of lending books, and also exposure to real estate sector.
Thanks, Alex. The next question is for Jens. Could you, could you comment on the trajectory of CASA ratio over the next 12 months as term deposits start to roll off?
And as I, Alex, probably explained in quite some details. Overall, I think, CASA should actually be and the CASA ratio should be coming back to where we used to see it in at Techcombank. And the main reason is that, again, there's a strong correlation about overall macroeconomic factors as well as prices for other investments. So in that case, especially TD, right? TD rates right now are coming down. They're probably down to somewhere COVID levels, where there was ample liquidity in the market, and it becomes less and less relevant to a certain extent if you're keeping it in CASA or you're shifting it into one month's deposit. At the same point in time, bonds become, again, much more attractive, and investments in other asset classes become much more attractive.
In order to do that, you accumulate liquidity, and you move liquidity into certain asset classes. You move it out of certain asset classes. Whenever that happens, mostly it stays actually in CASA and in liquidity. At the same point in time, one of the drivers Alex didn't speak about is actually credit growth. The other one, which has a very, very strong correlation to CASA, is credit growth. Then as credit growth is coming back next year, as the economy is coming back, again, also that will actually drive CASA.
We've seen that right now, if you see, to a certain extent, how these different things are working, you saw that we had a pretty strong recovery in our CASA ratio in the second quarter, compared to the first quarter, and that is actually when you saw first interest rates were coming down, and TD already started to decrease. But the other one was also the VNI was actually going up quite a bit. And now, for the last couple of weeks, months, actually, VNI was under pressure, so therefore, again, people took it out and then started shifting to other asset class, in that case, even at low yields, term deposit.
So again, that also has an effect on CASA because you saw that CASA went up 3%, but TDs went up actually even further. So some of that we cannot kind of influence. However, in general, if the macroeconomic outlook is as what I have described, it should actually help overall CASA. And then it comes down to, are we benefiting more than others from that CASA environment? One is, yes, because we have the higher affluence, so therefore, more people who are investing in other asset classes. But the other one is also all the investments we made in order to become the leading transaction bank, all the investments we did in digital, et cetera.
So if you look actually over the, since the beginning of the year, overall, the system is actually still down -3%, -2% to -3% in terms of CASA compared to the beginning of the year, whereas we are actually up +5%. So there's already a gap of 8% in growth. And again, the more... we will basically continue our investments, the more new customers we're acquiring, the more, the macroeconomy, macroeconomy will actually start, turning, positive, the more we expect that, to widen.
Of course, there's a lot of interest when people are always looking and saying: "Oh, are you still maintaining the 55% CASA ratio?" Very clearly, next year, we want to end the year with a 4 as the first digit on the CASA ratio, and then we, we'll just see how far we can go. But it's, it's very clear that we, we expect actually quite a significant uptick next year in the CASA ratio.
Thanks. The next question is for Alex. Could you quantify how you think NIMs will recover between now and 2024?
Thanks. It's always difficult to predict those things, particularly as we haven't yet finished 2023. What I can say, though, is that so obviously, there are two main components in the net interest margin. The first one, cost of funds, and the second one is asset yields. So starting with cost of funds, as I said, the term deposit rates have potential to go down a bit further by around 20 basis points, maybe until the end of the year. But then they will also - they might also go up a bit in the same proportion next year. So overall, I say not much change to expect probably from term deposits. But then our cost of funds should still go down, right?
So first, we will continue to see a repricing of the term deposits, written earlier in the year when interest rates were higher. Second, as Jens mentioned, we will look to grow our CASA ratio, so therefore, grow the proportion of interest-free funding in our deposit base. And then, finally, we will also look to reduce our the proportion of overseas funding, which has become quite expensive with the current level of U.S dollar rates. So all in all, our cost of funds will go down. On the asset yields, as I mentioned, there's still a lot of pressure in the market, particularly driven by the state-owned banks, which are pricing assets very competitively.
So therefore, the main upside on that front would be for us, if we can manage to exit from the flexible pricing policy scheme. So all in all, I would say you can expect the NIM to be increasing from where it is now, and probably next year it will improve by around 30-40 basis points, with some upside if we can exit from the flexible pricing policy.
Thanks. Next question is also for Alex. And it's from Wynn at VPS. When do you think NPL will peak? And could you also share your assessment for the NPL outlook next year, and which customer group are you most worried about?
Yeah, thanks for this opportunity to talk again about our NPL. So as I said, although the NPL was up in the third quarter, actually the volume of delinquent assets went down at a proportion of our total credit assets, and that is obviously an encouraging trend. For a special mention, in particular, then, the volume of loans which were worked out was higher than the volume of loans resulting from the new formation. And finally, there is also Circular 02, which provides a framework in order to support customers without impacting the NPL. Therefore, at this stage, our base case is for NPL, as I said, to remain below 1.5%, based on all the factors I mentioned previously.
Regarding the question on sector, maybe there is an implicit question behind that in terms of, okay, is a lot of the NPL coming from the real estate sector? So for the wholesale bank, as you know, our NPL is currently around 0%. Therefore, I will just look at the SME customers, business banking customers, and there, actually, the NPL ratio of our real estate customers is around 1.6%, which compares to 2.2% for the business banking segment as a whole. So clearly, real estate is not one sector where we are seeing a higher or experiencing a higher NPL at the moment. I think what is driving our NPL, as I mentioned, is a combination of factor, normal maturation of our credit books, particularly for credit cards.
Some one-off events relating to frauds in business banking, and then also a general increase in delinquency, but more actually in retail customers than in our corporate or business banking segments.
Thanks, Alex. The next question is from Leon at VCBS. Could you share your view on the impact of Circular two? How much debt is currently being restructured under Circular two, and would you expect this to increase or decrease next year?
Yeah. So, thank you very much, Quan, for your question. So at the end of the third quarter, the volume of assets under the Circular two restructuring program or support program, whatever you want to call it, was at VND 1.6 trillion, which is broadly in line with our base case expectation. The way we look at it is that it's quite similar actually to the scheme which was implemented by the government during the Covid period. Our experience is that actually quite a few customers entered into this scheme and then progressively exited it without any residual impact to our balance sheet. Therefore, we expect that the same will happen with this program, Circular two program.
Now, regarding our anticipation for the future, we believe that the volume of assets in Circular two support program will increase. One of the factors is the fact that actually, Circular two will expire in June 2024, and therefore, we anticipate that there will be an increasing number of customers who will try to benefit for the program before it is closed. And then, as I said, the way we think about it is that it's like a kind of sandbox, which allows banks to deal with banks with and debts actually, which are experiencing some cash flow pressure, but are still intrinsically healthy and economically viable. So that's why we believe it's.
We will see some temporary increase in terms of the volume of assets in this scheme, with a very limited residual impact for the profits or for the balance sheet of the bank.
Thanks, Alex. Next question is also for you. Could you share more details about what was in NII in the third quarter?
Yeah. So, actually, a lot of the trading income that we recorded in the third quarter was linked to disposal of government and corporate bonds. Essentially, those are bonds that we bought in the past at a time where yields were higher, and therefore, we were able to sell them at a profit. So it's part of our regular balance sheet management activities, where we look to constantly optimize our exposure to interest rates based on market opportunities, as well as our anticipations in terms of the future movements of interest rates.
Okay. Could you share a more OpEx breakdown for the third quarter as well, and then you expect this run rate to for the fourth quarter and next year?
Yeah. So, I covered already the OpEx ratio in the main presentation, and you can refer to the slide for more details if you want. I think the most important questions is: What do we anticipate from the fourth quarter? And, is the increase that we saw in last three months a trend, what to expect? So basically, as we said, right, the increase this quarter was largely linked to activities around the bank's thirtieth anniversary, including from a branding and marketing perspective. And, when it comes to the fourth quarter, we expect that the overall volume of OpEx will be down, actually, compared to the third quarter.
For 2024, well, as I said, we will continue to invest, so this will drive up amortization and depreciation costs. But overall, we will look to continue to make efficiency gains enabled by our investment in data and digital, and this will help us keep our cost income ratio below 35%.
Thanks, and we have time for one more question for Jens from Thanh at Maybank. TCBS achieved impressive market share gain to 6.8% in the third quarter. What would you see as a target for 2024?
Thanks, Thanh. So it's always hard to predict, but if you see how we managed from 3 to 6.6, close to 7, I would say, why should it not be somewhere between 10%-15%? The reason why I'm saying that is ultimately, as we have said beforehand, we are probably one of the banks with the largest number or largest share of affluent, mass affluent customers, who are mostly the customer segment which are investing in the stock market. So from that perspective, I think we want to be there when our customers are making their decisions, be it bonds, equities, real estate, and... or any other form. So, and for us, it's strategically important to ensure that they're actually banking with us.
We're making it very seamless for them. We're providing, margin financing, and again, we make it very easy to switch between asset classes. So with that, value proposition and also with a lot of technology investments which we have made in order to take full advantage of the recent upgrade of the, Ho Chi Minh City Stock Exchange system, and we actually expect that we can continue on that, growth trajectory, and that's why I'm saying 10%-15% sounds somewhat like a good number, and we would be gunning for it.
Thank you. This concludes the third quarter financial results presentation. The presentation and replay link will be posted on the IR section of the website soon. Please contact the IR team for any additional questions. We look forward to speaking to you again in three months. Okay, that concludes the broadcast as well, and we'd like to invite all the people in the live audience up to the ninth floor for the live Q&A session.