Good afternoon, and welcome to Techcombank's fourth quarter and full year 2023 financial results presentation. As this event is being broadcast live, we ask those of you in the live audience to please put your mobile devices on silent. Jens Lottner, CEO, will begin with opening remarks, and Alex Macaire, CFO, will share more details of the financial results and business updates, followed by a questions and answers session. Jens and Alex will present in English with live Vietnamese translation available via separate link. As usual, there will be another call in Vietnamese tomorrow for retail investors. Today's presentation and Q&A will last about 90 minutes. With that, I'll turn it over to Jens to begin the presentation.
So good afternoon, everyone. Probably a little bit of a belated Happy New Year, and thanks for joining. What we are doing today, as usual, we will actually go through the fourth quarter, but also probably take a look at the overall year in 2023. And then, Alex will go into a little bit more detail about the overall, and about the overall results. So, let me just go probably straight into the summary of what we have seen. And, I think ultimately, probably 2023 has played out very much like what we envisioned. And I recall that people were asking us when we gave the guidance, because it might have been a little bit different than what other banks had guided.
But it was pretty clear that this would be a relatively difficult year. And while at the same one time, we were actually confident that a lot
of the intrinsics of our business model were holding up, and I think that's exactly what we are actually seeing. So first one, on the TOI, we are pretty much flat in year-on-year, although we clearly have seen improvement in the fourth quarter, where we are actually up at around 18% year-on-year. So, a lot of NII expanded, but also NFI expanded.
While we are still seeing only first signs of recovery on the investment banking and bancassurance side, at the same point in time, we clearly see that some of our other fee engines are actually working very well. And that's why TOI was actually still coming in pretty flat. And that despite the fact that we actually, as we had said during the entire year 2023, did some flexible pricing policy, which shifted some of our revenues into coming quarters. And PBT stands at around VND 23 trillion, VND 22.9 trillion to be exact. We had guided at the AGM 2022, so we're a little bit ahead of that.
Again, mostly driven out of very robust NFI income, while also operating costs were under control. Risk costs were a little bit higher, but again, as planned—or as expected at this point in time in the business cycle. Return on assets still at 2.4%, and probably amongst the highest in the industry. And ROE, somewhat lower, but again, that also has to do with the fact that we are running a much higher CAR ratio than a lot of the industry peers. CASA, we had talked about it, that we worked quite a bit in order to make sure that these numbers were getting up again, because that is one of our key areas of competitive advantage, low cost of funds.
So we've seen the uptick, and so we're getting close to 40%, and it's the third quarter in a row where actually these numbers are going up. I think we had some extraordinary effects at the last quarter because of some corporate banking deposits. But what you're also seeing is that actually retail deposits continue to grow, and I think that's just the impact or the consequence of a lot of activities we had described over the last couple of analyst presentations. And again, I think probably we will go a little bit deeper into that either during Alex's presentation or during the Q&A. NPLs are at a very comfortable level for us, 1.2. That's roughly what we guided.
We said it would be going up, but already we see, it's coming down from the third quarter. Which just probably talks about some of the recovery overall in the market, but also because we manage actually the NPLs also quite straightforward. And if we see also that some of the loans are actually non-recoverable, we will also do the write-offs consequently. CAR stands at 14.4%, a little bit lower than what we had beforehand. Some of that is actually just due to the fact that we had a massive still increase of credit, and especially in the last quarter.
So, as we start retaining earnings, we will actually see that this number gets back into the kind of comfortable 14%-15% range, which we're envisioning. But again, we will probably also talk about this a little bit more in the context of Alex's presentation. So overall, I think the year was as expected, and I think we are seeing and we are pretty much aligned with what we've seen in terms of the robustness of our business model. And as we will also see, and as we guide for 2024, you will also see that we believe that these business models continue to thrive, and therefore, that we believe actually 2024 will look stronger than 2023.
With that having said, let me hand it over to Alex, so that he can give us a little bit more of the details.
... Alex?
Thanks, Jens, and good afternoon, everyone. So we'll have a look first at the macroeconomic environment. So full-year GDP stood at 5.0%, which is within the range we estimated. The growth in the fourth quarter only was 6.7%, which compares to 5.5% recorded in the third quarter. So the economy is clearly gaining momentum. Manufacturing PMI, on the other hand, has declined slightly and remained below 50%, at 48.2%. Overall demands, I think, is clearly remaining subdued, as the rise in input costs is weighing on industries' margins. Firms, however, are still optimistic about 2024, and they are maintaining their production capacity in anticipation of recovery in market conditions.
Exports also showed constant improvements throughout the year. If you look at the last quarter of 2023, then actually they went up 8.8% over the prior year. And finally, FDI disbursements are also holding up well and with a continuous progression through the year. In short, we are still in lower part of the business cycle, but we are slowly making our way up. On the monetary side, we now have the final results for the course of the sector in 2023. Credit expansion finally stood at 13.7%, which represents a very significant acceleration compared to the end of the third quarter, when the growth recorded at that point was only +7% year to date.
It was also the first time in five years that the growth of deposits actually closely matched that of credit, so the consequence is that liquidity in the Banking sector remains ample. As a result of that, the cash ratio in the banking system continued to improve, getting now close to 20%, which is actually still a little bit below the level at the start of the year. Interest rates also continued to decline across the board, whether we're looking at government yields, term deposits, or interbank rates. Focusing on term deposits, as you can see, the decrease for the full year was around 300 basis points between the start and the end of the year, so that's quite drastic in terms of interest rates volatility.
On the asset side, the banks have scrambled clearly to use up on their full credit quota in the last weeks of the year, and as a result of that, there has been intense competition on asset pricing, which, as we will see, has exerted pressure and will exert pressure on net interest margin. I would like also to quickly touch on two pieces of legislation which were enacted by the National Assembly on the eighteenth of January. The first one is the revision of the Law on Credit Institutions. It introduces lower caps on the single borrower limit, as well as maximum share ownership that individual investors can have in the capital of banking institutions. So the aim, I think, is clear.
It's to enhance the stability of the banking system, preventing conflicts of interest and also concentration in banking books. For some aspects of the rule, particularly for collateral handling, we will need to wait for further guidance to be published by the SBV in order to assess the impact on us. Finally, customer data protection rules have also been strengthened and are now more or less at par with the standards found in more developed advanced economies. The second significant update is the revision on the Land Law. So here, again, it's aims to support the real estate market by providing a framework for public authorities to grant project licenses.
The key point is that land prices will have to be set in accordance with market principles, and therefore, we expect that this will have an inflationary impact on the price of land, which, in a way, gives also a premium to the projects which like ours have already started and have a clear legal status. So let's look now at the financial highlights in a bit more detail. In short, as Jens said, the bank continued to accumulate momentum throughout the year, and particularly during the fourth quarter. Our Q4 TOI went up by 6% quarter-on-quarter and 17% year-on-year. This allowed us to reach VND 22.9 trillion PBT, which is close to VND 1 trillion ahead of the target we communicated to the general assembly of shareholders.
Fees, in particular, have been progressing steadily, so they grew by 14% quarter-on-quarter and by +8% for the full year. I think it is quite a commendable outcome when you take into account the intensity of the headwinds that we have faced throughout 2023 in our banking and bond markets in particular. NII also stopped its decline this quarter, reducing the year-on-year variance to -8.6% for the full year. Our net interest margin stood at 3.9% for the full year, but at 4.2% if you look at the fourth quarter in isolation, and it's now stabilized.
On credit risk, Jens mentioned it, our NPL was down this quarter to 1.2%, and actually, if you take bonds into account, then the true underlying NPL ratio was 1.1%. We saw strong improvements as well on our CASA ratio, which was back to nearly 40% with seasonal factors, but also with very real strong underlying momentum. Overall, the bank performed, in a nutshell, better than our expectations for Q4. The NIM is stabilized, CASA fee business on a good trajectory, and we are starting the year with a much larger balance sheet. We therefore believe that 2024 will be a lot more exciting than 2023.
Looking quickly one more time at our PBT, we generated a PBT of VND 5.9 trillion in Q4, which compares to VND 5.8 trillion for the third quarter. As I mentioned, NII and NFI were both on an upward trend. We generated VND 3.1 trillion in NFI, which is the highest quarter on record in the history of Techcombank. Despite the usual seasonality, our OpEx went down quarter-on-quarter, and if I look at the whole of 2023, then our expenses were broadly flat, which reflects our rigorous cost control. Provision expenses went up a bit this quarter, and we will go through that in a bit more detail later. However, our special mention loans continued to decrease, reflecting slower risk emergence.
This slide shows the components of our NII in a bit more details. Our balance sheet expanded significantly this quarter, with loans and bonds increasing by +7% quarter-on-quarter. Customer deposits grew even more by +11% quarter-on-quarter, which shows impressive momentum, I believe. In addition to this, we were able to grow our balances of exchangeable certificates of deposits, which we call CD Bao Loc, by +43% quarter-on-quarter. Those certificates of deposits, if you remember, we talked about that, in the last presentation, are primarily held by retail customers and are therefore very similar to term deposits.
Although they have a maturity of three years, the customers can trade them directly on the mobile app, which means then they can cash in the certificates of deposits at any point in time. It is therefore a very powerful instrument because it provides returns and a lot of flexibility to customers, and at the same time, it gives us competitive long-term funding. Our customer funds continued to decrease significantly this quarter by 50 basis points quarter-on-quarter, and at the same time, our asset yields softened as well, reducing by 40 basis points quarter-on-quarter. In this context, our last 12 months NIM reduced at a much slower pace, and the fact that the NIM still went down a bit this quarter is partly a consequence of the large volume of assets that...
the large volume of deposits that we put on the balance sheet in anticipation of the accelerated asset course. But we will go back to our guidance on NIM a bit later. We will now look at lending balances. So at a consolidated level, our credit balances increased +7% quarter-on-quarter. I mentioned that, but also 22% year-on-year, which positions us among the leaders in the market. We were pleased to see our retail and SME lending growing again quite meaningfully this quarter by +5% and +10% respectively quarter-on-quarter. As in previous quarter, there was also a substantial contribution from our Wholesale Banking books. A clear reason was the timing of the credit quota granted by the Central Bank of Vietnam.
We received essentially VND 23 trillion of additional credit quota on the 30th of November, and we had limited time to deploy it. Therefore, we put the priority on the bigger ticket size, and Wholesale Banking offered us an opportunity for fast deployment. But the chart on the right-hand side of this slide shows that a lot of the new assets written were relatively short term, which mean that we will have the opportunity in the coming months to redeploy these assets into our sectors of priority. As you know, we changed our organization from the 1st of January. We merged the Business Banking and Wholesale Banking division into a new entity called Corporate and Institutional Banking Group. So this integration essentially will enhance our capacity to develop a sector-based strategy and to grow in the value chains and sectors that we prioritize.
In parallel, we moved emerging SME and micro SME customers to the Retail Bank, which will allow us to fully leverage the synergies in terms of network as well as digital capabilities. And one last comment on the average credit yield, you see that it started going down a bit this quarter, right? From 9.7% to 9.4%. So this reflects the reality of the rates that we are seeing in the market at the moment, and the intense competition between banks. This is another slide on credit exposures. So like other banks, we continue to see strong demand from Recom customers across our wholesale as well as Business Banking divisions.
In this context, the growth of our RECOM books in 2023 reflect, primarily the funding needs of the projects, in our portfolio, given their maturity stage. All these projects, as you know, have clear legal titles and robust economic value, which means that the construction is therefore progressing, and therefore, we need to continue to extend funding to these projects. But overall, the RECOM sector represented 70% of our corporate exposures at the end of 2023, which compares to 73% at the end of 2022. As I mentioned earlier, we were pleased to see our retail loans increasing by 5% quarter-on-quarter. So this allows me also to say, to have a few comments about the real estate sector.
We saw essentially robust demand for mortgages, particularly secondary mortgages, in the second half of the year. The market for residential properties continued to warm up quite significantly in the fourth quarter, particularly in the two areas of Hanoi and Ho Chi Minh, where we have most of our credit exposures. The prices for primary properties were supported by a historically low level of new units supplied and a high absorption rate of close to 100%, if not more. So we are seeing a similar pattern as well on the secondary market, with prices stabilizing in Ho Chi Minh City and continuing to increase steadily in Hanoi.
So I think essentially, investors acknowledge that the low interest rates that we are seeing now will not last forever, and they probably make the same assessment as we do, that there is a structural imbalance in this market between supply and demand, which means prices are going to continue be supported by this gap between supply and demand. So in the, investors, in a nutshell, are coming back to the market, and we are seeing also a lot of interest from overseas investors, with major M&A deals closed in recent months. Overall, transaction volumes for apartments were up 60% in the second half of the year versus the first half in Hanoi and Ho Chi Minh, and therefore, for us, the market is poised for further momentum in 2024. Now, a quick focus on deposits.
As you know, the key highlight this quarter is the accelerated expansion of our CASA balances, up 32%, quarter-on-quarter. As a result, we were able to get back to 40%, CASA ratio. There are several drivers behind this performance. The abundant liquidity in the banking system clearly played a role, as well as the usual seasonality, and Jens alluded to that, particularly for corporates, as they look to finish the year with a strong and liquid balance sheet. But beyond that, we are also seeing strong fundamental momentum. For corporate customers, beyond the temporary seasonality, it seems that our value chain approach allowed us to capture an increasing share of the cash flows in their ecosystems, and this is essentially good news.
For retail customers, the CASA grew by 15% during the quarter, so we saw returning liquidity and the investment flows growing again very meaningfully across all asset classes, from equities to bonds to real estate. We made a lot of improvements as well this quarter on our apps and features, as well as interface, and this allowed our digital banking transactions to increase by 50% between the first quarter of the year and the last quarter of the year. Finally, we acquired 2.6 million new customers during the year, and they contributed around VND 7 trillion to the growth in CASA. So with lower rates, a growing share of CASA, our average deposit rate quite logically went down by a further 60 basis points this quarter. Let's look now at our fee income.
Here also, we are seeing a steady and encouraging trend across the year, with 14% growth quarter-on-quarter. For retail customers, this growth reached actually +30% for Private and Priority customers, and even +38% for our Inspire customers. So this is really impressive momentum. We are increasingly seeing the benefits of the investments made in our customer engagement platforms. If I take the example of Private and Priority customers, then our newly deployed customer relationship management systems allowed us to proactively reach out to customers in a timely and effective manner, and then discuss with them about the rebalancing of their investment portfolio.
For the other segments, where engagement relies more on the digital app, then we have also been able to accumulate more insights on our customers and target our offerings more effectively, resulting in a significant increase in the number of customers qualifying for our branded tiers, Priority and Inspire, and also a significant uptick in the volume of transactions, particularly for cards. Another highlight, obviously, the continued improvement of our bancassurance business. We finished number one in the bancassurance market for four consecutive months in 2023. For corporate customers, we continued to see impressive traction. I think the numbers speak for themselves in trade-related services, reflecting again here, the investment that we made in our Global Transaction Services platform.
Overall, Techcombank continues to drive more fee income than any other bank in Vietnam, whatever the size, which also explains why our return on asset is also leading the industry. Turning now to OpEx. So we put a lot of focus in 2023 on cost control, and I believe the results speak for themselves. Staff costs incurred in run the bank activities were kept broadly flat year-on-year. Premises and equipment costs went down by 6%, while marketing costs decreased even more by 29%, driven by efficiency improvements as well as lower activity in market-intensive activities, marketing-intensive businesses like Banca. Meanwhile, depreciation and amortization expenses continued to increase as the bank maintains a high level of investment in data and digital technologies.
Overall, despite a very competitive compensation policy, staff costs represent now less than 50% of the bank's cost base, reflecting the increased efficiency gains enabled by the investments made in our data and digital platforms. Let's look now at asset quality. First, a key highlight, I guess, is the fact that our NPL went down this quarter in terms of overall balances as well as percentage of our credit exposures, with a ratio of 1.19% at 31st of December 2023. Special mention loans, also called Bucket 2, decreased even more by 25% quarter-on-quarter, and the ratio of special mention and non-performing loan was at its lowest level since the end of 2022. Our coverage ratio has improved and is now slightly above 100%.
One comment on this as well, VAS rules, so Vietnam Accounting Standards, as you know, are quite prescriptive in terms of the amount of provisions that we can book, and therefore, the current level of the ratio is primarily a consequence of the high proportion of secured loans in our portfolio, which means that the amount of provisions we need to hold against non-performing loans is also quite low. Finally, provisions expenses increased a bit this quarter by VND 0.6 trillion, which can seem a bit counterintuitive. But if you look more closely, then you can see that the increase is partly driven by the growth in our credit books and the fact that we had therefore to increase our general provision.
But then, our specific provisions also went up a bit, and this was largely driven, as a matter of fact, by a few one-offs, and we will look at this now. So these slides provide more details on the quarter-on-quarter variance in our credit costs and in our NPL and special mention balances. As you can see, the increase in specific provisions was largely driven by proactive provisioning, particularly in the respect of collateral recognition, but also implementation of Circular 02. With regard to special mention loans in Bucket 2, then the total of upgraded and collected assets was broadly equal to the new Bucket 2 formation, which suggests actually a stabilization of delinquency rates. Most of the new delinquency was driven by our SME books and by the growth and maturation of our credit card portfolios.
Finally, our NPL balances went down, driven by upgrades, write-off, as well as collections. Like in the previous quarter, I'm also providing some additional insights into the health of our credit books. As you can see, the position remains strong across the board. LTV is comfortably below 60%. The percentage of receivable over total credit assets is stable, and then, as we have a bit more assets in the shorter duration, you can see that the 8%-10% CII Bucket expanded a bit this quarter. Last but not least, capital and liquidity. So our CAR, C apital Adequacy Ratio remains extremely strong at 14.4%. It went slightly down this quarter, the consequence of the large volume of new assets booked in the very last weeks of the year.
As I said, we essentially booked VND 22 trillion, close to actually VND 23 trillion of assets over the span of four weeks. So these additional assets generated immediate, RWAs, but because they have been on the balance sheet only for a few days in 2023, they did not have time to generate return earnings. This is why, essentially, our Capital Adequacy Ratio, went down a bit to 14.4%. On liquidity, the structure of our funding remains strong and continued to improve further this quarter. Proportion of non-customer funding in our total funding went down to 26.8% on the back of impressive growth in our deposits. Our ratio of short-term funding to medium long-term loans also improved to 26.4%, which is, very significantly below the regulatory limit of 30%.
So as you will have seen in our press release yesterday, the management will recommend to the board, and then to the General Meeting of Shareholders, the payment of a cash dividend in respect of 2023, targeting 1,500 VND per share. This decision reflects our conviction that the bank has reached a level of resilience and profitability where it can start to pay dividends without slowing down its growth. It is the beginning of a new, and we believe, exciting chapter for Techcombank and its shareholders. Finally, a glimpse into how our performance compares with its peers. As I mentioned in previous calls, the disruptions in the bonds and banking market in particular have been extremely penalizing for Techcombank, given our business model.
In this context, it's quite encouraging to see that the bank is again pulling ahead of its peers, particularly for metrics like CASA ratio, cost of funds, or percentage of trouble assets. Okay, so with that, we will turn now to the forward-looking guidance. In our base case scenario, as you can see here, we believe that the GDP growth of Vietnam could reach around 6% in 2024, compared to 5% in 2023. The clear rationale is that the same factors which have allowed Vietnam's economy to accelerate in the last part of 2023 will continue to provide support throughout the year.
These factors are mainly the continued inflows of FDI disbursements, which are relatively predictable because they are a function of the commitments made in the past, the recovery in tourism and exports, as foreign importers need to build up their stock again, the low level of interest rates, and finally, the impact of expansionary fiscal policies with extended VAT cuts, new salary policies, and fiscal stimulus. Obviously, this scenario assumes that there is no further deterioration in the geopolitical environment, and that the crisis in Ukraine and Middle East, in particular, do not escalate further. As we start a new year, we thought we should also touch briefly on our business priorities for 2024. The direction remains largely unchanged. What will change is that we will look to significantly dial up the pace of deployment.
Our number priority, which is CASA, we will look to ride on the momentum built in the last six months with new and exciting offerings, Auto- Earning, an innovative auto-sweeping mechanism to help customers maximize the return on their deposits. T-Pay, our payment ecosystem, that we will look to continue to build out, and a lead-of-class collection proposition for merchants, allowing us to continue to expand our market share in this strategic segment. Second key priority, the diversification of our credit portfolios. We will push ahead with Spark Credit, our digital platform for unsecured lending origination. In order to accelerate our expansion outside of RECOM, we will roll out new integrated offerings, combining supply chain financing and dynamic discounting to optimize liquidity within an integrated value chain. And finally, we will focus our effort on winning main operating accounts at scale.
We will launch a compelling loyalty and reward program, new and exclusive wealth solutions, a unique cash and liquidity management proposition for corporate customers, an integrated CVP for business owners with omnibus credit lines. It's a lot. We believe that it will be an exciting year for the retail and corporate customers of Techcombank. With that, let's look at our updated guidance for 2024. As usual, credit growth will be in line with the credit quota received from SBV, and we will believe that we will continue to receive a disproportionately higher share of the credit quota. Cost of funds should keep decreasing, and NIM should improve, although the improvement that I mentioned will be moderate due to the impact of the intense pricing competition that we are seeing among banks. In this context, we expect NII to grow again double-digit in 2024.
Same for NFI, double-digit growth, as most of the shocks on the bond and banking markets have already been absorbed, and we are starting the year with a lot of positive momentum. For CASA ratio, we will look first to preserve the high mark reached at the end of 2023, but then we will look to also grow again, keeping inside the 50% target that we have for the end of 2025. For cost-to-income ratio, we will aim to continue to manage the bank towards the same level as today, between 30% and 35% cost-to-income ratio. Same for NPL, which at the end of 2024, should remain in the same ballpark as today. And finally, our credit cost should go down a bit compared to 2023, at least in terms of percentage of TOI. So-...
With that, we believe that the bank is in a much stronger position, as you understand, at the start of this year. Even if small speed bumps are always possible, our troubled assets are under control. CASA ratio is back to 40%. Bond and banking market disruptions have already been absorbed, and the environment is now mostly supportive, with the exception maybe from the asset pricing competition. Therefore, as long as the economy remains on this trajectory, we believe we have a robust path toward achieving double-digit growth in TOI and PBT in 2024. So if you add on top of that, the prospect of first-time cash dividend payment and new and innovative propositions, then we believe that there is a lot to be excited about in 2024, for the customers and for the shareholders of Techcombank alike.
Thank you, and with that, we will hand it over now to presenters, Minh Do, for the Q&A session.
Thanks, Alex and Jens. We will now go directly into the Q&A session. The first question is for Jens on CASA. Techcombank regained its position as the number one CASA ratio again in the fourth quarter, despite prior concerns from analysts and investors. What were the key drivers that you attribute to this rapid recovery? And, you know, what did we miss?
So thanks for the question. And I think that... And in last session, I basically said we would be looking forward to getting somewhere back to the 40. And I know that people looked a little bit like it and said, "Well, let's see." So I think we really need to separate out probably a little bit the retail and the corporate side. And I think the corporate side, there were clearly some one-off effects which we had at the end of the year. And some of that probably we will see kind of every year going forward, as the value chain basically starts kind of putting more liquidity into the books, just in order to make sure that they're also getting ready for the year-end and showing the right balance sheet structure, et cetera.
But you see also that, compared to what we had in the fourth quarter 2022, compared to the fourth quarter 2023, we saw an uptick. And again, I think just because we had a couple of better offerings. But I would still say, and you will probably see that number going down again in quarter one, quarter two. However, the retail side looks very, very differently, right? Because this is a continuous, an upswing, and we will, and we expect actually that to continue. So what did we do on that side? I think it's pretty much like what we described before, and that we said we will put more customers into the bank.
We acquire more customers, but then also we will start creating more offerings to really become the primary banking relationship, make it just very convenient to use our app, and seeing good offerings in terms of, liquidity management. Also, if you want to invest into other asset classes, we, get relatively good offerings to, merchants who started, banking with us. So I think a lot of the transaction-based offerings, were what we, we said we would do and, and basically what we did. So therefore, we've seen a massive uptick of, customers using us as their main transaction bank, and that has immediate implications to, the CASA balances. So, that will continue. We will actually continue to build on that. At the same point in time, also, what we said, we have...
CASA is, by definition, the amount of current accounts divided by term deposits. As we took a lot of term deposits at the beginning of last year, and as the liquidity became very tight, we right now grow a lot of other financing classes, so CD Bao Loc or CASA, et cetera, which also means we are not so dependent on term deposits anymore. The amount of money which gets kind of also shifted out of term deposits into other financing instruments is also helping on the CASA side. From that perspective, there's a little bit of kind of calculation, but ultimately, the real underpinning and element is more customers using more of our services, using it as the main transaction bank, and using some of the innovative offerings. That will continue to be our key hallmark.
So we increased roughly, on the retail side from the low in quarter one, which was VND 74 trillion, now at VND 97 trillion, so that's roughly VND 23 trillion. And we actually hope that, this number, this year, in terms of growth, would actually be higher, than what we've seen, in last year, which was already giving us some headwinds. So overall, again, I think we are pretty clear, and that's what the guidance is. We should actually get, to even higher numbers, at the end of, next year-- of this year.
Thanks, Jens. Next question is also for you. Recently, the U.S. CPI numbers were higher than expected, and analysts expect that the Fed may keep interest rates high for a while, versus previously expecting a cut in Q1. Could you comment on what you think the impact is on Vietnam, the VND-USD exchange rates, and TCB's own business?
... So again, I think indeed, and suddenly there was a little bit of the spike in the U.S. and CPI again. I think probably that will come down a little bit, and I think there was very strong GDP growth in the US. I think that's probably moderating a little bit. And because of that, and I think also, and there were then the estimate that if inflation was so high that it would actually be kept up, then it was going down again. Then people thought, "Okay, let's maybe they're relenting a little bit." Because of this volatility right now, I think the central bank is taking a more moderate course, Fed.
They're basically just saying, "Let's maybe do three rate cuts instead of six anticipated rate cuts," so that might be half of it. We need to see how the overall economy is developing, because there's still a lot of uncertainty about the global economy. I still think that, China is probably still struggling, and Europe is not really so okay. I think in U.S., we're strong, but maybe moderating again a little bit. We have conflicts in Ukraine still going on. We have the Middle East conflict. Because of that, there are a lot of turmoils, and we need to see what the oil price is doing. Already, people expect that shipping containers, for example, from Vietnam to Europe or the U.S., actually might be going up per container by $1,000-$2,000.
And so all of that is reflecting on world's GDP growth. So you see in the chart here, we have 2.9%. I think the first estimates are out where we are at 2.7%, and people might even see it lower. So from that perspective, I would say, assume that, maybe the inflationary tendency will not be as high in the U.S., and maybe that, again, overall slowdown of the economy is still getting a little bit pronounced. I would say we will probably see the three rate cuts anyway, but maybe there's a fourth or a fifth, right? So if that is the case, then, I think the rate differential between the US dollar and the dong will not be as pronounced as what we have right now.
Right now, I think the rate differential is substantial, which leads to the appreciation of the dollar against the dong. So that's why you see right now, maybe in the black market already, some numbers are floating around 25,000. Again, if that would really be the case, then we might see maybe some implications here to raise interest rates again in order to level this going forward. Our expectation is interest rates in the U.S. are coming down a little bit. Interest rates in at the end of this year will probably going up a little bit, and for the Vietnamese economy. On average, we are still lower than VND 23 trillion in 2024, but again, I think we'll probably see an uptick again.
So if that's the case, then hopefully there will not be too much upward pressure on the US dollar, and that means we can still actually maintain the current policy of monetary policy as well as fiscal policy, which would be potentially a little bit more difficult otherwise, if this rate differential increases, and we have continuous appreciation pressure on the US dollar. So from that perspective, again, I think we can probably deal with three to four. So three interest rate cuts we should see, might be better for us, but I think if it becomes too slow, then we might actually see that suddenly also in Vietnam, liquidity might get a little bit tighter.
But again, let's just be very clear, we are running at a relatively low historical interest rate, in a low historical interest rate scenario. So even if it goes up by a little bit, I don't think it will change fundamentally the economic or macroeconomic conditions in Vietnam for 2024.
Next question is for Alex: What is your outlook for the real estate market? And if you only expect the real estate market to recover in the second half, would there be a risk that B2 and NPL might increase in the first two quarters of the year?
Yeah. Thank you for the question, and I recognize that it's a very important topic for all of us. So, as I mentioned, the real estate market showed the clear signs of warming up throughout 2023. If we look at volumes, then transaction volume actually increased by 60% between the first half and the second half of the year in the two markets of Hanoi and Ho Chi Minh, where we have most of our exposures. Reports show that the transaction prices have stabilized in Ho Chi Minh City and are on a continued uptrend in Hanoi. And there is a lot also of interest from foreign buyers with recent M&A deals closed on the basis of relatively high valuations.
Going forward, we believe that there are several factors which will continue to support this momentum. The supply of new units, first, is at a 10-year low, actually, and has never been so low in the last 10 years.
... and the absorption rate is also very high, around 100% or more. And going forward, the prices for new developments is likely to increase because of the new Land Law, but also because of the inflation on input costs. Which means that there is a premium for the projects like the ones we have in our portfolio, where the legal status is clear and where most of the development costs have already been incurred. So all this gives us reasons to be optimistic about the performance of our credit books, and this is also why we expect that the NPL at the end of the year should be probably in the same ballpark as now. Obviously, in the process or throughout the year, temporary fluctuations are always possible.
For example, if we have to reschedule the cash flows on an existing loan. That said, first, we do not expect many of these situations to happen in 2024. And even if they do happen, then as in 2022, when we had to reschedule one of our corporate exposures, we expect that the impact will be temporary, because after three months' probation, the debt would go back to normal. And then, thanks to Circular 02 on restructuring, there will not be any significant impact or if not any impact at all, actually, on our credit provisions. So this, I would say, gives you the basis for our guidance on Bucket 2 and the NPL for 2024.
Thanks, Alex. The next question is on the bond market. There were many changes affecting the bond market last year, both regulatory and market-related. Could you recap what you saw in 2023, and what are your expectations in 2024 for this market and TCBS, especially in terms of underwriting and distribution?
Yeah. Thank you. So the short story about the bond market in 2023 is that of a steady and continuous recovery throughout the year. So first, we have seen the market for primary bond issuance reopening again, thanks to Decree 08 in particular, which suspended some of the most stringent aspects of Decree 65 on bond offering and trading. If I look at the overall bond issuance volume in 2023, it was actually up 20% for the full year compared to 2022. And even if I exclude bank-related issuances, then the overall market was still roughly flat compared to 2022.
Now, if I look at primary bond distribution and, focusing on Techcombank, then, what we have seen is that the volumes distributed have gone one way, up, through the year. We started the year in January with, volumes in primary bond distribution of around VND 0.8 trillion, and then we ended the year in December at VND 6.7 trillion, per month. For 2024, we do not expect any fundamental change in the, operational environment for the bond business. Interest rates will continue to stay at historically low levels, even if they increase a bit. And therefore, we expect that customers, as their term deposits, mature, will continue to shift their money toward, bond, and equity and real estate, thereby, driving continued recovery of the bond market.
And then the second part of your question was about TCBS. What I would say is that the crisis we've been through has allowed customers to understand a bit more the importance of working with a securities company that they can trust. And for everything I see, TCBS has been a major beneficiary of this aha moment. If I look at bond issuance advisory, then essentially, they increased the amount of business by 139% year-on-year, and they achieved a 51% market share in 2023. On equities, they continue to grow their market share, getting now close to 8%, which means that the 10% target, which many believed was not realistic, is now within reach.
What I would say is that, in a nutshell, the outlook is good, and TCBS is poised to outperform the other players in the market on the back of the strong rebound of the customer interest for its products.
Thanks, Alex. Next question is for Jens. What do you think the impact will be on the bank from the Revised Law on Credit Institution that was passed last week? Specifically, could you address the expiration of Circular 42 regarding handling of bad debts, impact from lower individual and group maximum ownership, and any other changes that you think investors should be aware of?
Yeah. So, and thanks for the question. Again, I think the law is kind of fresh off the press. I think in terms of
... there are probably two intents, right? And of this, new law. So first one is really just making sure that we stabilize, the banking system, and I think that's very much geared towards, ownership structures and how do we make sure that an SPV and the relevant authorities can intervene if something happens, like in the case, of SCB. And I think all of these, are clearly helping to actually make the whole system more stable. So, I think, from my perspective, what it means, with our bank, again, we have already a relatively strict, governance for any kind of related shareholding activities and, if they're related shareholder transactions. So, we just think it's, it's very good. It's actually helping create more transparency.
And, given the fact that at the same point in time, there's not a kind of forced sell-down of existing shareholders, at least what we understand. So we expect anyway, a relatively still stable shareholding and then going forward, and if somebody basically goes and divests, and we create a more diversified shareholding structure, that would be good anyway. And in terms of foreign ownership, I think nothing has changed, because in any case, any foreign ownership transaction would still be if it's meaningful, it would be or needs to be approved by the relevant authorities. So from that perspective, and I think, and every single transaction probably is a one-off transaction anyway, and therefore, it's still actually not really affected. So I think that's on governance.
Governance of the industry, I think, good, makes it more transparent and gives more clarity, transparency. And so I think that's all good. And on the bad debt, again, I think it's clear what this is good for, making sure that and also customer rights are protected. And what I think we need to really understand exactly how this will ultimately kind of enacted and what the guidance is, because it might also be that... and if you're saying is, I find it harder right now, in the case of an insolvency or in the case of you want to take recourse to the collateral, if that now becomes longer, takes more time, et cetera, we need to see what that means.
I mean, some banks might just be getting a little bit more reluctant to lend, and it could be that, the criteria for really extending credit, might be even a little bit tighter because we really want to say, "I cannot so easily take recourse on the collateral, so I really check even more, is the ability of the customer there to pay back the obligations?" So we need to really understand on how that ultimately will work out, and so that we're also making sure there is not a certain moral hazard, where customers might just say, "Well, okay, it's very hard for banks to repossess, so maybe I will not pay back my loan," which we've seen in some other markets.
So I think on that one, and I think the intent is clear, so let's see, and that's, and how that will ultimately really be worked through and, and how market participants, will react. The last one is on data collection. Again, I think it just clarified that, of course, banks also need to, comply with, Personal Data Protection Laws, et cetera, which again, is for us, no problem at all, because we already, changed, everything, and, and we are in, in a lot of compliance with all of these, regulations and did this already for a long period of time. So I think that is not, any big change. So therefore, I would say no change on the data side.
I think a step forward, clearly on governance, and we need to probably understand a little bit more what that means on the bad debt and collection and bad debt handling side, in order to understand what the real impact is on the behaviors of market participants.
Thanks. And, and follow up on the real estate law changes, what are your-- what's your view on the main impacts of the, of the Revised Land Law that was passed last week, and the impact on your largest customers and your own book?
Again, I think same here, right? Probably some things are a little bit clearer than others. The intent of the law, again, is very clear. We're trying to get to a better and stricter regulation so that actually there is more clarity, which should accelerate, to a certain extent, an approval of transactions, and therefore should speed up and unlock the market and just get a faster process in place to really get to land usage. However, we still need to understand exactly some terms in the law, and especially when it comes to tax calculation on market prices and all of that, how this will ultimately work through, and will it really speed up?
What is very clear is that at this point in time, everyone who has a land bank and everyone who has real estate, and probably, will see their prices increasing. Because if we really get to a market price which might reflect closer market realities, you will see that actually these prices are going up. And also, as prices for taxes, et cetera, might be going up, everyone who has already an acquired land bank and legally clear rights will probably see the value of their projects improving. So from that perspective, again, we have just looked selfishly at us, and a lot of our developers are rather in their construction phase, and they have all the legal titles, and they have calculated on the basis of an old Tax and Land Law on old prices.
So I think it should actually be beneficial for them, especially as Alex mentioned, in a period of short supply. It will probably just get even more investors thinking, "Should I basically start right now buying something? I don't know exactly what the implication of the next one will be." So I think existing projects will be kind of see some favorable impact on the current law. And on the new ones, as I said, I will see what's happening. I think we see already that some developers are handing back projects because they believe it's not doable anymore, or it's not making economic sense. So maybe we're seeing actually first a slowdown in a couple of the projects, and because on the current regulation might not be so attractive anymore.
But again, I think, and from what we are seeing, is there's still so much demand, and, as we also said, we want to diversify away. I don't think that we will see any major impact on our book, and I think we can easily live with these changes in the Land Law. It might actually really be a positive impact in the short term.
Thanks, Jens. The next question is for Alex. Could you share your expectations on, on the NIM progression for 2024 fiscal year?
Thank you, and I recognize this is a very legitimate question, which is why I already provided some insights in my earlier presentation. Overall, we thought that our cost of fund advantage was coming back in 2023, so the differential between our cost of funds and the median of the industry was around 80-90 basis points in the first half, and then in the third quarter, it increased to 140 basis points. I don't have the figures yet for the fourth quarter, but I expect that this trend will continue, given the fact that our own cost of funds decreased by around 50 basis points during the last three months of the year. At the same time, I mentioned it, we saw a lot of pressure and some...
On asset pricing and some very low pricing from some of our competitors. This will help with the recovery of the Vietnamese economy, and therefore, this should also translate into a positive tailwind in certain areas of our balance sheet and P&L, like NPL and like credit provisions. But then, if you look at the net interest margin in isolation, this mean that the potential for significant improvement of the net interest margin in 2024 is probably limited. I would say it is in the low teens, if you want, in terms of basis points.
This is, of course, assuming no change in terms of flexible pricing policy, and in those terms, when we gave you the guidance earlier, it was on a relatively conservative scenario, where we assume that we are not able to roll back our flexible pricing policy, and therefore, we are not able to claw back some of the interest rates concessions made in the last few months. So that's what I can say for the net interest margin, probably now stabilized, bottomed out.
We will go up from there with some fluctuations, maybe, from quarter to quarter, and at the end of 2024, we should be with a NIM which is higher than the one we have now, in the proportion of a few tenths of basis points, but nothing very massive, given the intense competition we are seeing on asset pricing at the moment.
Next question is also for Alex. In the outlook part of the presentation, you suggested that NPL will stay here, which is higher than even during the COVID period. Can you explain why that might be the case when these might be better years coming forward?
Yeah. Thank you. A fair, fair question. All right. I think, if, if you take a step back, then actually what you can see that we are making our way out of a period of very significant and systemic increase in the cost of risk. To put things in perspective, the SBV, according to the reports published by SBV, then the average cost of risk in the Banking sector increased from around 2% in the last quarter of 2022 to 4.9% at the end of September 2023, right? And that's actually for the NPL ratio. So we therefore need, I believe, to remain cautious in our forecast. The bank's asset quality, as you have seen, is clearly within our risk appetite.
It's actually a bit better than what we anticipated, and it's also in line with the full year 2023 projections that we could make on the basis of the special mention and NPL in our book. Thank you. We have shared a lot of data with you today and in our financial statements, which will allow you to make your own projections for our cost of risk. Despite increases in 2023, TCB's NPL is among the lowest in the industry, and if you look at the sum of the NPL and special mention, then it is also among the most the highest performing banks in the sector.
For 2024, we maintain our guidance on that the NPL should remain in the same ballpark as now, with the possibility, as I mentioned, of temporary fluctuations with very limited impacts to the P&L.
Thanks. Next question's also for Alex. Overall, the market saw relatively weak credit demand in most of 2023, and yet Techcombank still grew its full 19% of the credit growth given it by the SBV. Which sectors and which customer segments drove this?
Yeah. Thanks. So I mentioned that already during the presentation. So, at a high level, a lot of the credit growth in 2023 was driven by corporate customers, and then this was true, I would say, in the first three quarters of the year and was also true in the last quarter. But at the same time, we were pleased to see traction in other parts of our credit books. So as I mentioned, retail customers' credit was up 5% quarter-on-quarter, and SME credit was up 10% quarter-on-quarter. If you look at our corporate exposures, then we saw encouraging diversification.
FMCG grew 15% quarter-on-quarter, utilities grew 56% year-on-year, and other sectors like leisure, travel, auto was up 123% year-on-year. For 2024, we maintain our strategic stance, which is to keep diversifying our credit portfolio while managing our risk allocation in a way which maximizes the risk-adjusted return on capital. This means that we would not abstain from temporarily growing in the RECOM sector if we see opportunity for good return at relatively low risk components. However, our medium-term direction remains unchanged, which is to grow in other sectors and reduce the proportion of RECOM sector in our overall credit portfolios.
Okay, thanks, Alex. Next question's also for you. Your CAR dropped below your target of 15% in the fourth quarter. Could you help us understand the reason for that, and what is the expectation for the rest of 2024 and beyond?
Yeah. Thank you. So, in the last few years, I think, Techcombank has stood out in the market as being the bank with the highest Capital Adequacy Ratio, at least among peers. In 2023, as you know, our Capital Adequacy Ratio in December went down a bit to 14.4%, but I hope, I believe, I explained the drivers during the presentation. It's largely due to the sheer volume of new assets that we booked over the span of a few weeks, if not a few days, at the very end of the year. We were granted VND 23 trillion of additional credit quota on the thirtieth of November, and therefore, we only had four weeks to deploy them.
So which means that at the end of December 2023, we had to book RWAs against these additional assets without having the benefit of generating income from these assets. So that's why, essentially, the denominator of the Capital Adequacy Ratio went up quite a bit, and the numerator remained broadly unchanged. So how do we interpret that? At 14.4%, it's still comfortably above our risk appetite and also very significantly above the regulatory limit in Vietnam. If you look at our peers, they are operating at around 12% Capital Adequacy Ratio.
Being also one of the few banks in Vietnam which are able to compute capital adequacy on the basis of an Internal Rating-Based Approach, we are also able to assess that if we were to adopt Basel III, and if we were allowed to report our Capital Adequacy Ratio according to Basel III, then actually the level of our core equity Tier 1 would be around 17%-18%, which, as a matter of fact, is pretty much very close to the international gold standards. So this probably gives you a bit more explanation as to why we are extremely comfortable with the level of our Capital Adequacy Ratio. For 2024, we expect that it will continue to stay in a range of 14%-15%, despite the impact of the first-time payment of a cash dividend.
Thanks. Next question is for Jens. Could you share any more insights on the mortgage lending business in the fourth quarter? And is the resumption of sequential growth that we saw indicative of a pickup trend that you expect to continue this year?
Thanks for the question. Ultimately, on the mortgage side, and what you saw is there was a shift from on primary mortgage to on secondary mortgage. We grew actually our secondary mortgage book quite a bit. I think primary mortgage is still very much restricted to what Alex described, which is very limited supply. Therefore, with the limited supply, there's only so much on what you can hand out in primary mortgage. However, it's very clear that people are still looking for making investments in real estate. If it's good real estate in the right areas and with the right legal titles, you see actually a lot of demand as expected. Therefore, we actually shifted and financed more on the secondary mortgage side.
And again, I think we know the customers very well. We basically do our KYC. So as we started shifting this over, and usually you have a little bit higher risk cost on the secondary mortgage, but therefore also usually the margins are a little bit higher. And so we will probably continue to look into that, and however, we also expect that the primary mortgage market will be coming back. And I think, as I said, a lot of our customers and the big developers will release their projects and very clear legal titles and meeting or facing off to a very, very high demand for good quality assets. So, and that's why also the guidance which Alex gave us, we will continue on the diversification onto the retail side.
We will probably see, again, a growth in primary mortgage and secondary mortgage, but potentially secondary mortgage also in 2024, a little bit higher than the ones which we've seen in the years beforehand. And primary mortgage will depend a little bit on how these projects are actually developing. But again, I think what is good for us, we basically are not just depending on some developers, but we actually have this as an overall asset class, independent of developers, which also allows us actually to grow our balance sheet and independent of how the primary market is developing.
Thanks. Next question is also for Jens. You saw a strong pickup in APE in the banker business in the second half of 2023. How would you characterize the performance of this business versus your expectations, and how should we think about the impacts of Circular 67 and Decree 46 on banker activities for Techcombank going forward?
So I think that's a very good question. Overall, I think, if you would ask probably the bankers, 12 months out, would they have expected that development on the bancassurance market? The answer would clearly have been no, right?
Mm-hmm.
I think the overall banking market is probably down 40-45%. Therefore, as this all developed in the first half, I think different banks, everyone grappled a little bit with the issues. I think we already, since the beginning of the year, actually for a longer period of time, we're already... we're very clear that what we want to do is need-based selling. And so if a customer, we believe actually customers need that product, and our penetration is actually very, very low overall in the country. And usually, you need insurance if you are not so well off, because you need to protect against these unforeseen events. If you're relatively wealthy, you don't need it. So therefore, there should be a big market for this, and we also believe that is what we should advise to our customers.
So we created a lot of tools, a lot of processes for that advice, and we also made sure that our RMs, Relationship Managers, are really advising against the needs of our customers. And hence, I think that paid off, because as a lot of other models, and banks were faced off a little bit with probably approaches which were either only attached to lending or a little bit more push sales, and or saying, "This is actually like, investment alternative," we really focus very much on: What does it do to you? Why should it be in your portfolio? What can you do with that product? And that is what brought us up to, the leading insurer, bank insurer in September, October, November as the number one.
So on that basis, I think we, we are very confident and, and we continue to, basically develop this, business. Again, it's lower than what we had expected, but ultimately, if you take, only kind of core advice, if you take it away from, all the, policies which were sold, maybe in, in conjunction with loans and all of this, actually, we probably did better than in the years before, and despite the market being down -45%. So from that perspective, I think we're still, again, from a secular trend, very excited about this market. I think there's a lot of upside. I don't see how it can go any further down from here, because I think the market probably, has developed as, as bad as it could.
The regulation should give some more confidence to customers that banks are doing the right things, and the demands and the requirements are very much in line with what we are doing anyway. So again, I think it's not changing or impacting in any shape or form our business model. So we will just continue to do what we're doing. And then given the fact, as I said, that we were already number one, we just expect, as the market turns, that we will participate from this rising tide. And therefore, when Alex guided for better results in 2024, and we also clearly believe that banking will be one of the areas which should do better than what we've seen in 2023.
... Thanks. The next question is for Alex. Please share more details on the impact of Circular 02. How much debt is currently being restructured under Circular 02, and do you expect this to increase or decrease this year? And what would be the implications for provision expenses?
Yeah, thank you, Clear. So I will try to be relatively concise, concise in my answer. So first, regarding the amount of balances under Circular 02, so at the end of the third quarter, we had a total of VND 1.6 trillion of assets covered under Circular 02. And at the end of December, this amount increased only a bit to VND 1.8 trillion, which is around 0.2%-0.3% of our books, relatively marginal. When we look ahead, then we need to keep in mind that the Circular 02 is only going to apply until the thirtieth of June, right?
We do not think that the end of this program will dramatically impact us, because we believe that most of the situations we are working on with our customers at the moment will be worked out before the thirtieth of June. And then, until the thirtieth of June, as I mentioned, there is always possible that we see a temporary increases in the amount of our Bucket 2 or NPL assets, if we need to reschedule interest on an existing loan. However, this will be, again, temporary and will be smoothened out, hopefully before the end of the year, which is the basis for the guidance that we communicated earlier.
Thanks. The next question is for Jens. The market and the media seems to receive positively the announcement of a cash dividend after 10 years of a self-imposed reinvestment period. Does this mean that you're comfortable with the capital position of the bank to fund growth, while also continuing to pay dividends each year?
So yeah, I think, as expected, probably this thing made a little bit the headlines. So, and let me again be also clear what we're doing, what we're intending to do. Because I think one thing we, and as a bank, really really try to do very hard is to provide concrete guidance, and so that, and people can actually take the right decisions, and, and we're not trying to be too bullish or too bearish. And, and again, I think in ten or in kind of the same like what we did this year, where we're very clear at the beginning what we would do and what we would not do, and I think maybe some of that right now, how it's presented in the press might be a little bit misleading. So let me be very clear.
So first one is, and we knew that we were looking at our capital and strategy after the ten-year moratorium of not paying dividends and was coming to an end last year. And, of course, it's always easier to basically saying, "We're not paying dividend," to, "What exactly will we do going forward?" And, and independent of any, and if you don't know exactly what will be the circumstances 10 years and going forward. So the parameters have not changed. The parameters are still, we want to maintain at least a 20% growth trajectory and top line, which also means balance sheet growth, at least. And if we expect that is roughly what is granted by the central bank. And again, and last year, our RWA basically grew roughly at this level.
This year, it was-- and last year, it was 22%, 22, 2022, a little bit lower. But again, we still plan for a 20% growth trajectory, and we still plan for and around 14%-15% CAR ratio. And whatever is in that, whatever we can do, if that leads to too much capital, to too much capital inefficiency, then we would do indeed, and kind of dividend and measures, capital measures.
So, and with that in mind, with some of the information which, Alex gave, we basically said, "Okay, we believe we can actually initiate a dividend policy," because we believe from the earnings potential we have, from, the balance sheet position we have, from the capital position we see, and what regulatory changes we can probably anticipate, we can maintain a 20% trajectory at a 15%, 14%-15% CAR ratio. And therefore, we would start looking into that dividend policy. And again, I think what we're proposing is initiating this policy with, what you have read in the press. However, it's very clear that it's a board prerogative to formulate what exactly is the 10-year strategy. And, again, I think that is what we will be putting, towards the AGM and what the board, will distribute.
Again, we will see, are they saying it's 20%, 15%, how they are thinking about it? Because, again, they want to be clear that they want to formulate something which is sustainable, and sustainable really means what we can promise for a long term in a market which still is a high-growth market, where there might be M&A opportunities, et cetera, which from time to time might even necessitate that you're actually on probably raise capital, et cetera, et cetera. So that's why I think right now, the ones which we have outlined right now and what we have described is probably a path, right? Which around this, and we might be able to sustain, but how exactly the AGM and the board will articulate that next policy is really up to them.
And again, what is important is the parameter I described, as well as giving something to shareholders which gives them decision certainty for not just one year and or for three months in order to make a short-term deal, but a 5-10-year investment horizon, because that's what we are mostly interested in. So therefore, and what you read in the press is exactly what we said. We start with a 20% roughly looking at 20% of the profit looking roughly into a 4%-5% yield. But again, and that is what we will propose for 2024. And then at the AGM, which is in April, and there will be further details given by the board what will be proposed to the shareholders.
And so I just want to make sure that we are really keeping this together and that we're having the right context and understanding of that policy. But again, it is meant holistic, sustainable dividend policy, but the exact description you will see over the next couple of months.
Thanks. We have time for one more question. This is for Jens. TCBS had a very good 2023, despite initial concerns over its leading position in the bond market, where there were headwinds last year. Given its value contribution to the bank, could you help us understand how you will position TCBS in the bank's overall strategy, perhaps beyond its bond business?
So again, I think we said we want to be one of the leading wealth managers, if not the leading wealth management bank in the country. And if you already look into all the asset classes and the amount of customer relationships we have in the affluent segment, in the mass affluent segment, I think it's fair to say that we are probably the largest wealth manager. TCBS, and we also said this, that coming out of the crisis, we probably will see a separation between who really is providing sustainable, good advice and where are maybe some players who might find it a bit harder to create sustainable value propositions. So for us, TCBS, for certain product areas, bonds, equities, is a key enabler of that strategy, and I think they've done very, very well.
And what we're seeing right now is, as some are going out of the bond market, we actually see that our market share in primary bond issuance and but also in holding bonds, dealing bonds, is actually increasing, and that's exactly what we expected to happen. Now, if we think about wealth management, it is really from mortgages to bonds, to equities, to more hybrid instruments. And we're very clear that TCBS will actually lead the market in creating some of these capabilities. And for us, we really don't care if a customer comes in because they want a credit card or because they want to open up a transaction account, they want to have a mortgage, or they're opening up an equity account. We really want to make sure that we're dealing with them in full.
Therefore, TCBS is an integral part of our value proposition, and they've done very, very well. Their market share right now on the equity side is probably around 80%, and some of the primary bond issuance this year is probably 55%. They have just passed around their first 1 million benchmark in terms of customers and customer accounts. Again, I think they will start complementing the other elements of the bank in terms of value proposition on the wealth side, and really make sure that we actually have this as holistic as it can get. Because of that, they are probably the most profitable securities company right now in the market, and if we would just basically take their valuation on a stand-alone basis, you will probably already see how much value they have created.
But given the fact that it's only part of the overall value of that business, because a lot of the other ones are sitting with the bank, you see actually the value potential of really pushing that wealth management business. So they are leading very much the capital market side. They're leading very much on kind of advisory tools and portfolio management, and also on the technology side. The bank will then use very much on mortgages, on deposit products, bancassurance, and together, we will reinforce that wealth management proposition. But therefore, we're actually very, very happy with what they've done last year, and I think the development is exactly what we thought we would see, which is separation and, and flight to quality. That is what we're having right now.
Therefore, again, coming back to what Alex presented, IB is on the recovery, but we should see an even stronger performance in 2024, same like in Banka.
Thank you, Jens and Alex. This concludes the 2023 fourth quarter and full year 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.