Good morning and welcome to our 2023 Annual Results Presentation. I'm going to give a short presentation on the significant progress the bank has made, and then our Chief Financial Officer, Nicola O'Brien, will provide a more detailed review of our financial performance. After that, Nicola and I will be happy to take your questions. So if we just turn to slide 4, and we can look at our customers, our net loans increased by 10% in 2023, and there's a few key factors that have driven that. Firstly, we've successfully completed the Ulster Bank migration, and that has generated EUR 170 million of additional gross income during the year.
Our mortgage market share has grown by 70 basis points to 19.2%, and mortgages are a core part of our business, and I'm happy to say that we continue to play a significant role in helping customers attain a new home.
We grew our business lending book by 11%, and we achieved our target of EUR 1 billion of business lending in our book by the end of the year. And that is having expanded our service offering to include asset finance following its successful migration in July, but also building a stronger platform by way of our business banking offer. We've also recently launched the new PTSB brand, and this is the first of its kind for us in 20 years in which we're repositioning ourselves as a full-service, customer-focused, personal and business bank. If we just turn to financial performance, we achieved an underlying profit of EUR 166 million, which is up from EUR 45 million the year before or a EUR 121 million increase. And this is showing clear momentum in our business as we return to sustainable profitability.
Our net interest income has increased by 71%, and that's benefited from the interest rate environment, but also the migration of the Ulster Bank assets and strong new lending. Our net interest margin was 232 basis points, and that's 78 basis points higher year-on-year. Net fees and commissions performed well and were strong, and our total recurring operating expenses were up 25%. That might seem like a very large number, and indeed it is, but in the sense of that was what we expected, it reflects the full impact of the Ulster Bank acquisition, and indeed it also reflects an ongoing investment in our business, particularly when we look at our digital channel, we look at our branch channel, and indeed our business banking offering, which has expanded.
Our cost-income ratio was 66%, and that's an 18% reduction or an 18-point reduction year-on-year, so a significant move. You can see that the income-cost jaw has widened significantly as we added more income and additionally more costs, but it widened to reduce our cost-income to 66%. If we move to our balance sheet, our customer deposits have grown by 6% to EUR 23 billion, and 70% of these deposits are insured under the Deposit Guarantee Scheme, so it represents a good spread of deposits and indeed safety in our funding model in that sense. Our performing loan book grew by 9% to EUR 20.9 billion, and as mentioned earlier, that was through strong new lending performance, and indeed the addition of the Ulster Bank migration through 2023.
Our non-performing loan ratio was consistent at 3.3%, so we haven't seen any material increase in our non-performing loans, and they continue to be managed well in that sense. If I just turn to capital, our all-capital ratios remain above the management and regulatory minimum, and we're with a strong Common Equity Tier 1 capital on a fully loaded basis of 14%, and you might recall when we started the journey on the Ulster Bank acquisition, we said that we would land the bank at a 14% CET1 level, and that's what we've done without any surprise, so it's landed as we expected. That 14% level at the end of 2023 is after around a EUR 900 million increase in risk-weighted assets during the year, driven by the lending growth that I mentioned earlier on.
Our total capital on a fully loaded basis has increased or sorry, decreased, apologies, to 19.7%, which is 160 basis points lower than the end of 2022, but also that was expected and indeed is tied into our 14% CET1 ratio as well. A very welcome announcement at the end of the year was the removal of the dividend restriction that was imposed on the bank back in 2016, and that was a positive movement forward and really normalizes our position with regard to how we think about distributions going forward. It also highlights and is a testament to the transformational improvement in the bank's balance sheet over the last number of years, and I see it as a vote of confidence in the bank's ability to generate sustainable returns and indeed develop its business model going forward.
Lastly, we were extremely pleased to receive news last week that Fitch Ratings, the rating agency, had upgraded our holding company rating to investment grade with a stable outlook. Again, these are very, very important moves by way of how we present our bank, how we present our balance sheet, and indeed how we operate in the market around raising debt and debt requirements under MREL.
If I just turn to the macro outlook, there's a lot of information in this. I'll just touch on a few things. We can see GDP growth stabilizing, we believe, in 2024 and 2025 around that 2.5%-3% level. We also see a normalization of inflation. We see a relatively strong labor market moving forward, so nothing of concern there. We see ECB rates moving to 3.25. That's the deposit rate by the end of the year, so that's where we're projecting it.
The mortgage market, we've seen a reduction in 2023 with the switcher market moving downwards, but saying that the first-time buyer market has moved upwards, and that's a trend we expect will continue as first-time buyers are more active in the market, and indeed there's a larger and bigger supply of housing stock as we move forward. Also we can see the house price inflation normalizing in 2024 and 2025 as well. If we just move to how we delivered on lending, what you'll see from this slide is that we now have a diversified balance sheet and a diversified lending base. We lent EUR 2.8 billion of lending into the market.
You'll see that while our mortgage volume had reduced from EUR 2.6 billion- EUR 2.3 billion, we were able to offset that with new business lending, new lending in asset finance, and indeed an increasing customer term loan offer as well. So again, this is showing a lot of diversity in our balance sheet, and it shows we are starting to fire on all cylinders in that respect. If I just bring that down into the various constituent parts, the mortgage market itself reduced by 14%, our volume reduced by 11%, which gave rise to an increase in our market share by 70 basis points to 19.2%, so around that 20% level by way of share, which means we're advancing one in every five mortgages in the country. If we look at personal term lending, it increased by 22% year-on-year.
It's an area where we've been providing some marketing support, and indeed 80% of term lending was fulfilled digitally during the year. On business banking, I think we're probably going against the trend here in that we achieved an 11% increase in business lending to EUR 167 million. We also now have the asset finance business, which for the full year lent EUR 223 million as well. And as I mentioned earlier on, our business book now is over EUR 1 billion, and that has increased significantly over recent years, and Nicola will touch on that later on. If we just turn to our strategy, we have been and we are transforming the bank. We believe we will differentiate by way of customer experience. That's something that's within our DNA as an organization, and through that we will drive sustainable profits.
Now that the dividend restriction has been removed, over time, shareholder return. We've executed a bank strategy that supports the delivery of our purpose, and our purpose is around building trust with customers and with communities, and we will do this by building a sustainable organization that's transparent and fair with customers. Our strategic vision has been developed with our customers at its heart, and in consideration of all stakeholders, that is our colleagues, our shareholders, the regulators, our debt investors, and indeed the broader Irish community where we believe we play an important part. Our ambition is to be Ireland's best personal and business bank, differentiated through exceptional customer experience. For us, best doesn't mean the biggest.
It doesn't mean the most profitable, but what it does mean is being best at what we can do, and indeed for both personal and business customers, and having those customers tell other potential customers, "Go talk to PTSB. Go give them a chance. Do some business with PTSB. They've looked after me well, and I think they'll look after you." How we measure our ambition and how we measure our purpose is across four pillars, across the important part of being a secure and resilient bank that's operating 24/7, that protects customer data, that provides customers with what they need by way of service, and indeed we do that in an efficient and a simple and indeed an increasingly automated way by way of our processes.
It's having a connected customer experience where customers are at the heart of how we decide how we offer our products, how we service them, and indeed to deepen that relationship. As you've seen, you can see, I should say, the clear diversification of our income, and that will continue now over the coming years. We've already ingredients around supporting both personal and business customers, and that will develop.
If we think about sustainability in its broader sense, obviously it's around the ESG and indeed supporting customers in the green transition. It's also about us creating a sustainable business that is profitable, that generates capital, that can support future lending and future support into the Irish economy, and indeed provide a return for investors as well who've placed their faith in us by way of providing us with equity and with debt and funding.
Indeed, most importantly, culturally, from a cultural point of view, managing our culture, ensuring that we keep our reputational standards where they should be, and indeed using our culture and who we are as a key strategic enabler for how we operate our business. Underpinning these strategic priorities are what we would call foundational capabilities. It's how we manage risk. It's how we're risk-aware, how we ensure we're in compliance with regulation, how we invest, and we have been investing heavily in technology and indeed operational resilience, and then how we manage data for the purposes of what we have to do from both a regulatory point of view but also how we support customers in their needs and anticipate and assist our customers in the needs that they have.
These are areas that we are focused on and we're making progress on, and you'll see that over the coming years as well. An important juncture for us this year was the launch of our brand, PTSB, a modernization of our brand, a communication of something different. It's about how we're repositioning PTSB to be a contemporary full-service bank, a bank that's customer-centered, that is connected to every Irish community across the country, where we have great people who are working locally and indeed centrally in our various units but working directly in unison to support personal and business customers. And indeed, we're complementing that with the investment we're making in technology, the investment we've made recently where we launched our new app, and indeed we will see development of that over the coming months and years as well.
So our brand reposition reflects our larger scale, a more diversified bank with customers at the center, and indeed significant growth ambitions to compete in this market and to make progress in that respect. Through this, we've introduced our new brand promise, and our new brand promise is to be altogether more human. In that sense, that's our commitment to putting customer needs at the center of how we plan, how we design, and how we deliver, and to combine, as I mentioned, good technology with good people who support customers. This is also reinforced by our sponsorships, and we're very excited with regard to the journey now to Paris in July and August where we're the title sponsor for the Irish Olympic and Paralympic teams. It's really, again, connected to who we are. It's connected to communities.
It's connected to people and athletes who are doing their best, who are competing, and indeed that's what we want to do. It's not all about winning. That's important, but it's also about competing and ensuring that we have a product offer and a service offer that compete in this market, and we will see, hopefully, the benefits of all the work that the Olympians have put in in July and August of this year. It's looking good, by the way, so we're happy about it. If I look at the next slide, which is around how we think about our customers, we see a growth in our customer base. We're up to 1.3 million customers.
That's a growth of 10% over two years. What's underlying that number is actually more activity. Customers are more active. They're more engaged. They're engaging with the bank.
We're engaging with them, and that is an extremely positive aspect to our business. If we look at the customer loyalty, by way of our focus on loyalty, trust, and our digital enablement, our brand power has increased by 5 points to 13%. Our NPS score is up 10 points. It's doubled in a year. It's 20 points. We would say we're number one in the market in this space, and we're growing. The level of activity by way of contactless payments has increased by 5% to 119 million. It's only a short couple of years ago that I was saying that that number was 60 million, so you can see the significant impact there and growth. Our digital active customers have increased as well, and digital activity in the sense of engaging with our app have increased as well.
As I mentioned earlier, we have a brand new piece of kit by way of our digital front end, which we introduce during the year. Given our size and scale, we are very focused on partnerships and making positive use of partnerships in that sense of sharing success. We introduced the CreditLogic mortgage application process, which is a fully digital process for our customers. In 2023, EUR 290 million of mortgage drawdowns were completed through that digital application process. That's an 80% year-over-year increase, but we'll see that, and we can see it that it's ramping up by way of CreditLogic.
All our colleagues in the organization are using CreditLogic. Our customers like it, and it has the added benefit of taking out a lot of paper and process out of the way in which we interact with customers, so that has been going well.
We also have our partnership with the SBCI with regard to the Future Growth Loan Scheme and the Brexit Impact Scheme. We've lent EUR 82 million across those three schemes in the last three years, but again, there'll be a significant increase there as we look at the green lending and transition agenda for retrofit that's coming this year as well. The First Home Scheme has granted EUR 50 million of drawdowns for eligible first-time buyers since its launch in 2022.
Again, we're a key party to that, and we support it by way of funding. On the right-hand side, you'll see some of the awards we've won by way of innovative banking product, by way of where we are in our community fund and what we're doing there, which is a really, really successful story for us, and indeed our best customer service awards as well, which we're proud of.
If I just turn to the area of sustainability and the area of ESG, again, this is an area where we're showing continued commitment to supporting this area. On the environmental side, EUR 700 million of lending was in the green lending, green mortgage lending. That's a 40% increase year-over-year, and 30% of our total new mortgage lending was above a B3 rating. In fact, we're seeing momentum on that rate as well by way of increasing in 2024. We are committed to setting science-based targets in the second half of this year with regard to the reduction of Scope 1, 2, and 3 emissions, so that's something we will be coming with and announcing in the second half.
We've also increased our focus on climate risk and indeed how we integrate climate risk and the transition to the green economy into how we do our business. As part of that, we've implemented a sustainable supplier charter, which has been recognized in its own right by way of an award where we won the Best Procurement Team Award only recently. Again, that's recognized by way of our standards in this space.
On the social side, as I mentioned, our title sponsorship of the Irish Olympic and Paralympic teams is very important to us and really, as I mentioned, really connected to who we are and how we operate as part of our DNA to be in these communities and supporting Olympians. As I say, we're really looking forward to July. Our cultural index score is 81%. That's 11% above the target.
Again, very, very strong. We provided nearly EUR 20 million funding to Social Finance Ireland over recent years, and that's a partnership that we've renewed. Indeed, I've met the CEO of the Social Finance Foundation, and we have a very good connection in regard to how we can support them. 58% of our board are female by way of our gender diversity, and their gender pay gap, while it's still at a level which is really unacceptable, at 15.9%, it has reduced year-on-year. We've seen other parties where their gender pay gap has increased. Ours has reduced, and indeed, we have a focus on moving that forward over the coming years, and we have made progress, but we need to make more. If we look at governance, we have a board-approved sustainability strategy.
It's across four pillars, which the green transition is one of those pillars, but it's also about supporting small business. We can see that in growth in our balance sheet. It's also about our cultural evolution, but it's also about how we support communities. Part of our brand strategy is clearly about supporting communities with regard to access to physical branches but also ensuring that we've access to digital channels as well. We have a low ESG risk rating, which is externally measured by Sustainalytics. Again, that's a very positive piece of information. We've issued the Task Force on Climate-Related Financial Disclosures, and you'll see in our financial statements a significant level of disclosure in this space, which, again, has increased over recent years, and this year is an important year for landing a lot of that information.
Of course, as I mentioned, as we set our science-based targets in the second half of the year, it'll really be measuring against where we are today as we move forward. Sustainability is more and more part of what we do. We think of it in a broad sense. We think of it in the sense of also financial sustainability and how we are as an organization. And with that, I'm going to hand over to Nicola O'Brien, our Chief Financial Officer, and she'll go through the financial performance. Thank you.
Thank you, Eamonn Crowley, and good morning, everyone. I'm delighted to present the bank's 2023 annual financial results. Slide 12 shows the strong financial performance the bank has had in 2023.
Our underlying profit of EUR 166 million has increased EUR 121 million, largely driven by a higher total operating income and impairment relief partially offset by higher operating expenses. Our reported profit before tax of EUR 79 million is EUR 188 million lower than 2022, primarily due to the negative goodwill of EUR 267 million associated with the Ulster Bank transaction that was recognized in exceptional items in 2022. Overall, total operating income has increased by 63% to EUR 668 million. This increase is supported by a growing loan book through acquisitions and new business and the higher interest rate environment. We remain positive by the extent of the opportunity that we see in the Irish retail banking market and in our ability to continue to grow.
Reported total operating expenses of EUR 504 million have increased by 28% when compared to the prior year, reflecting the impacts of the acquisition, the higher inflationary environment, together with the EUR 9 million once-off non-recurring fee for the Deposit Guarantee Scheme, while also continuing to invest in the business for the future. Excluding the once-off DGS fee, the bank's underlying operating expenses of EUR 495 million have increased by 25% year- on- year, which is in line with previous guidance. We've recorded a P&L impairment release of EUR 2 million as the macroeconomic environment remains strong and asset quality remains robust. Exceptional items show a cost of EUR 87 million versus EUR 222 million gain in the prior year as the Ulster Bank transaction was recognized last year.
Full year 2023 exceptional items are largely driven by the costs associated with the Ulster Bank transaction, which, as you'll know, we completed in full in July of this year of 2023, and the day one expected credit loss we had to take this year in relation to the associated acquired assets. Moving to slide 13, net interest income of EUR 620 million increased by 71% year-on-year. The increase was driven by higher yield on tracker mortgage assets as the ECB continued to rise in 2023. Interest income on the migrated assets from Ulster Bank. It's worth noting that gross interest income from these assets is EUR 170 million, with the bank recognizing a EUR 25 million fair value unwind in the 2023 year.
Income from the acquired mortgage assets, which came across in November of 2022, were included in last year's accounts, so therefore we're reporting a net increase of EUR 125 million from those acquired assets. The bank also recognized net organic growth of the existing PTSB performing loan book together with interest rate repricing on lending and treasury assets, and our overall income was partially offset by higher wholesale funding costs. The exit net interest margin of 232 increased 78 basis points from 154 last year to 232 this year.
The total yield on assets is 291, reporting a 120 basis points increase year-over-year. This increase in total asset yield is due to a higher yield on both the loan book and treasury assets in a higher interest rate environment. Cost of funds were 63 basis points and increased 45 basis points year-over-year.
The bank does remain leveraged to the interest rate environment. At the 31st of December 2023, assuming a starting ECB refinance rate of 4.5 and a deposit rate of 4, every 25 basis points increase or decrease results in a EUR 10 million impact on net interest income. These sensitivities should not be considered as a forecast for future performance, but they do give an indication of how the bank's interest income remains leveraged to the interest rate environment. We're also pleased to report the positive performance in net fees and commissions, which remains strong at EUR 42 million, benefiting from the significant growth in our customer base over the last two years together with an increasing and more active customer base. The trajectory on fees and commissions income is positive.
It's worth noting that in January, we announced an increase to our current account fee from EUR 6- EUR 8 per month. This is a flat fee per month to our customers, which will come into effect from April of this year. The bank offers rewards to our current account customers through our Explore Current Account, where customers can earn up to EUR 5 per month by using their current account at point of sale either online or in person. This, together with the investment the bank has made in the digital everyday banking services for customers, keeps the bank very competitive and gives our customers value in everyday banking. We've successfully grown our growth performing loans by 50% since 2021 and 10% year-on-year to EUR 20.9 billion with the successful completion of the Ulster Bank migrations and organic growth.
Mortgages now represent 94% of our growth performing loans, down from 97% despite having grown EUR 6.2 billion over the same period. This comes from delivering on our ambition to grow the business banking book to EUR 1 billion in 2023, which we have achieved, making further progress in diversifying the overall loan book. We will continue this momentum in new lending, reflecting capital optimization and our business banking growth ambitions, which are outpacing repayments and redemptions. Looking at the total performing home loan mortgage book, this has grown by 50% since 2021. Fixed rate mortgages have increased by 11% year-on-year from EUR 12.6 billion- EUR 14 billion. This is the bank's largest cohort of mortgages, accounting for 73% of the total performing home loan book.
As we assess the schedule of fixed rate maturities, the bank will manage the price transformation where maturing fixed rate mortgages written in a lower interest rate environment will transition to either a variable rate or a fixed rate in a higher rate environment. We've had a good experience of this through 2023, with customers having options to choose variable or fixed rates on maturity and with a very good performance on redemptions through the year, trending below prior year experiences. 36% or EUR 4 billion of the fixed rate mortgage book will mature in the next two years. This repricing onto higher rates of the largest segment of the bank's loan book will be supportive to our net interest margin over the coming years, even as the ECB starts to reduce.
While this does represent a rate increase for customers, our customers have been stressed at the underwriting stage to a rate of at least 2% higher than their chosen rate, which has proven to safeguard affordability. Fixed rate products accounted for 94% of new mortgage lending in full year 2023. However, this reduced to 75% towards the end of the year and into the start of this year as the customers began to opt for variable rates. Tracker mortgages have reduced by 20% year-on-year from EUR 3.5 billion to EUR 2.7 billion and now make up 14% of the bank's home loan performing book, down from 19% at December 2022.
Variable rate mortgages are the smallest cohort of the performing home loan book, have increased by 26% year-over-year as some customers maturing from fixed rates opted for the variable rate for the first time in a number of years. The bank has announced an increase to its variable rates by a blended 51 basis points at the end of 2023, which was implemented in January this year. Variable rates are now more closely aligned to the lower terms of fixed rates. The average yield on new mortgages has increased by 117 basis points year-over-year to 3.73%. Aided by the automatic pass-through of ECB rate rises to tracker mortgage customers, together with the repricing and inclusion of the Ulster Bank assets, the yield on the performing home loan book has increased by 77 basis points to 3.69%.
The weighted average loan to value on the home loan mortgage book is at 51%, with the new mortgage weighted loan to value at 69%, and these have improved year-on-year. Also to note, 66% of the bank's performing home loan book has been written since 2015 under macroprudential rules. The bank has delivered on its EUR 1 billion ambition for business banking in 2023, with continued momentum for future growth through providing a meaningful alternative for business customers. 2023 marked a huge step in our diversification journey as we launched PTSB Asset Finance and welcomed 18,000 customers nationwide. At December 2023, the asset finance book totaled EUR 500 million.
This business has shown strong growth in new lending over the last few years, increasing by 16% from 2021 to EUR 220 million in 2023. The SME performing book has increased by EUR 240 million- EUR 550 million at December 2023.
This growth is inclusive of the acquisition of circa EUR 160 million micro-SME book from Ulster Bank plus net organic growth. SME secured mortgages account for 75% of the bank's new lending in 2023. Managing the cost base in a prudent manner is a key focus for the bank. We're now a larger bank, and we've seen a material change in the banking landscape in Ireland over the last two years. Two banks exited the market. Customers sought new banking relationships, and we acquired new businesses while continuing to grow. Inflation continues to have an impact, having reached record levels following the reopening of the economy after the pandemic and the energy crisis as a result of the war in the Ukraine. However, most recent data points to an easing of inflation, which is on a more positive outlook.
We can see from the underlying operating cost walk some of the key movements year-over-year. The bank increased its headcount from 2,488 at December 2022 to 3,206 at December 2023, a 29% increase year-over-year, of which 330 colleagues joined from Ulster Bank, 308 full-time equivalents. The additional headcount, primarily in customer-facing through customer servicing areas, ensured we maintained service levels for new and existing customers nationwide while we executed the safe delivery of the large-scale transaction. This additional headcount, together with the increasing cost of wages and cost of living supports to our colleagues, has driven a EUR 50 million increase in total payroll costs year-over-year. As part of the Ulster Bank transaction, the bank chose a service provider to service the mortgage assets acquired from Ulster Bank. This incurred an additional EUR 12 million year-over-year.
We continue to invest in important areas such as technology and cybersecurity. In 2023, we've migrated to a dual-location data center, which gives us a safe and secure infrastructure in running the technology of the bank, and we have also further invested in our cybersecurity. As Eamonn mentioned earlier, the bank refreshed its brand promise for the first time in over 20 years, which will further support the bank in driving long-term success. We have experienced a positive response to this modern and contemporary brand, which has already helped increase our brand power measurement.
When we take brand and sponsorship investments for the bank, we see EUR 10 million additional year-on-year expenditure. As previously guided, total depreciation has increased by EUR 15 million, EUR 10 million of which is coming through from prior year investments and an additional EUR 5 million from the investment required in the acquisition of new businesses.
The investment over the last four years has been a critical enabler for the bank to operate safely and meet customers' increasing expectations in areas such as digital and technology and availability through our nationwide branch network. These strategic investments include further rollouts in our digital banking program, maintaining our operational cyber resilience and allowing us to enhance servicing of a larger customer base with their everyday banking needs in a more direct and efficient way. The underlying cost-income ratio, when you exclude regulatory costs, has reduced to 66%, 18 percentage points lower year-on-year as increases in operating income offset higher cost base. The bank is focusing on further improving operational efficiencies through prudent cost management, with the ambition to operate with the cost of EUR 500 million in the medium term while we continue to invest in the bank.
The 2024 outlook does expect a mid-single digit increase year-on-year as we continue to manage the impacts of inflation, business growth, and required investment while we work to optimize the cost base for the future. Our expectation is to work the cost-income ratio down to circa 60% in the medium term. Underlying asset quality remains good, and the loan book has withstood the challenges faced by an elevated inflation rate, which now appears to be easing, and a higher interest rate environment. The bank has recognized a P&L impairment release of EUR 2 million for the year. The bank also reports a EUR 13 million impairment charged directly from capital in line with NPL calendar provision guidelines. Provision stock increased by EUR 49 million since year-end 2022, with closing provision stock of EUR 570 million.
This includes a EUR 135 million post-model adjustment, which will ensure that the bank is adequately provided in the event of any deterioration in asset quality. The total provision coverage of 2.6% and NPL ratio of 3.3% are both in line with December 2022. Subject to the prevailing macroeconomic environment, the bank expects a cost of risk of circa 10 basis points in 2024. At December 2023, total funding reached EUR 25.2 billion, 8% growth year-on-year. Customer deposits accounted for 91% of funding at December 2023. Total customer deposits grew 6% year-on-year, while wholesale funding grew 38%, driven by the MREL issuances of EUR 1.1 billion in the first half of 2023. As a deposit-led lender, the bank is keenly focused on protecting and growing its customer deposit base. The deposit franchise is performing strongly, having grown 20% since 2021.
Current account balances have increased by EUR 400 million, or 4%, since December 2022, and retail deposits, excluding current accounts, increased by EUR 800 million, or 7%, across the same period. 70% of total customer deposits are guaranteed by the Irish state. The bank observed a change in the behavior in quarter four as more customers moved funding into interest-bearing deposit accounts, which have benefited from the 7 interest rate increases applied by the bank since the ECB started increasing interest rates in 2022. These interest-bearing accounts now comprise 23% of total customer deposits, up from 18% at December 2022. Wholesale funding at EUR 2.2 billion is 38% higher than prior year, mainly driven by MREL issuances of EUR 1.1 billion. The bank successfully completed 2 benchmark issuances in the first half of 2023, EUR 650 million in April 2023 and a further EUR 500 million in June 2023.
These issuances contributed to the bank's EUR 3.8 billion of MREL eligible funding, including CET1, at December 2023. The bank's MREL ratio of 32.9% is above both management and regulatory requirements. The MREL target for 1 January 2024 has been set at 28.15%. Most recently, as Eamonn mentioned earlier, the ratings agency Fitch Ratings has upgraded Permanent TSB PLC's long-term rating to BBB, up from BBB-, and Permanent TSB Group Holdings PLC's long-term rating to BBB-, up from BBB+. The upgrade means that Fitch Ratings's Permanent TSB Group Holdings PLC rating has now returned to investment grade and will assist with greater market access for future debt issuances. The liquidity coverage ratio, net stable funding ratio, and loan-to-deposit ratio are all in a good position. Our regulatory capital ratios remain comfortable above the regulatory minimum requirements.
CET1 ratio on a fully loaded basis is 14%, a reduction of 120 basis points from December 2022, largely driven by the Ulster Bank mortgage and SME assets, the day-one ECL of Ulster Bank assets, net loan book growth, AT1 distributions, partially offset by operating profits. The bank continues to operate in excess of regulatory requirements, which CET1 9.83% and total capital of 14.75%. Management CET1 target on a fully loaded basis remains at 14%. The bank has commenced a fuller review of the mortgage credit risk model. PTSB models were built back in 2017 when non-performing loans were at a peak level. The profile of the portfolio has substantially improved, and the models will be updated to capture a more reflective view of the improved credit risk of the current and future PTSB portfolio in line with required regulatory expectations.
It's the bank's view that the current risk model needs to be updated to better reflect the credit quality of the current and future mortgage portfolio. This is an important project for PTSB and one that we expect an outcome towards the end of 2025. To summarize, the bank has had a strong year, with results showing a robust business and financial performance with a positive outlook.
Reflecting on where performance landed when compared to expectation, new mortgage lending of EUR 2.3 billion in line with expectation, mortgage market share of 19%, up 70 basis points year-over-year, total business banking of EUR 1 billion in line with expectation, strong income performance delivering EUR 170 million gross income from the newly acquired mortgage assets and other SME assets from Ulster Bank. Cost-income ratio reduced to 66% as the operating income grows and the bank maintains cost discipline while continuing to invest.
Favorable macroeconomic environment and robust asset quality delivering a minus 1 basis point cost of risk. The capital position remains strong, with a CET1 on a fully loaded basis of 14%. Underlying profit before tax, EUR 166 million, shows the positive uplift from our acquired assets and our own growth organically in the marketplace, together with the changed interest rate environment. Our underlying ROE has increased to 6%. We actively manage our capital position, and having assessed a range of scenarios, the CET1 ratio will remain well above the bank's minimum regulatory requirements. In summary, we have reshaped the balance sheet, acquired businesses with sustainable earning power, and are building the business for the future. I'll hand you back to Eamonn now to talk you through in more detail the outlook for 2024 and the medium term. Thank you.
Great. Thanks, Nicola. So I just want to cover a couple of slides here around our strategy and, indeed, our outlook as well. So if we take this from left to right, you'll see that we've delivered a lot in the last 4 years by way of bringing, as Nicola closed off, bringing the balance sheet to a safe position. I'd argue we've one of the safest balance sheets in Europe. If you look at our leverage ratio, it's over 7%. An equivalent UK mortgage lender would be something around 4%. So on any measure, we have an extremely safe balance sheet.
The other thing to mention here is that we've no CRE exposure whatsoever, so it's not an area of concern for us at this moment in any sense because we don't have exposure, where I know that's an area of concern elsewhere.
But to come back to the balance sheet, NPL ratio of 3.3%, real improvement in quality of earnings in that sense, very high-performing assets with an increasing yield, as Nicola has mentioned, and in good quality. The Ulster Bank acquisition has been absolutely transformational for the balance sheet. You can see it in the numbers, and it really provides us with an additional base to move on from. We've been investing in digital resilience and innovation. I mentioned our app. Nicola mentioned our investment in cyber.
This is really important to us, and we will see the results from all of this investment as we move forward, which we will see will yield both an efficiency in our cost base but also it will yield additional income in the top line. And as mentioned, the dividend restriction was lifted, again, in external endorsement of where we are.
We have a strategy in place to drive further growth. If you stand back from it, our strategy and business positioning has changed unbelievably by going from five banks to three banks. We are now a clear challenger to our two larger competitors, and we are making headway. You can see it in our business banking story. You can see it in asset finance. Indeed, we can see it in our personal business as well, and that will continue.
But as part of that, we will continue to focus on being efficient and effective. Nicola has outlined our direction by way of our cost base, which is under our control. We still have a cost base in the region of EUR 500 million. That has increased, but we see it as a reasonable level for the bank as we move forward and we drive top-line income.
Our customer experience will continue to improve. We continue to invest in that space, and we will see that as a differentiating factor as we move forward. Indeed, our ability to leverage our data and deepen customer relationships is a clear area of focus. If I think of the key catalyst that'll drive this on, it's about protecting and growing our deposit franchise. It's the oxygen that we need in order to grow our balance sheet and to support lending growth. Again, you'll see more developments in that. We will maintain appropriate pricing, and we will focus on margin over volume in the sense of protecting our margin and not just getting volume at any cost. Again, the differentiating factor here is how we deal and connect with customers.
Coming back to the business side, we are faster to a yes by way of a yes decision, which means we're faster to cash, and we're closer to customers in what we've built by way of our business banking offering. So again, we believe that is something that will really pay dividends first going forward by way of increased income. And by way of our capital, Nicola has outlined where we are by way of our IRB models. It's clearly on us now to prepare the IRB models in line with the required regulatory requirements and, indeed, submit them.
But we are on a defined road to have those models ready and submitted. And indeed, given the fact that nearly 70% of our balance sheet has been created under macroprudential rules, our LTV on our book is around 50%. Again, an enormous transformation in the last five years.
That would have been up around 100% 5 years ago, 6 years ago. So an enormous transformation by way of safety. Our level of delinquency on the book is extremely low, and indeed, the book is performing extremely well and is sound in that sense. We would believe that our risk weights should adjust to reflect that performance. And indeed, that's something we are working on and are responsible for by way of our control of that process over the coming months of 2024. If we just look at our outlook for 2024, it's about our organic capital generation. There was a time when we couldn't say that with a lot of surety and that we now have a profitable business. We now have secure income. We now have a cost base that we can manage. We have invested in our business. A lot of that investment has done.
We have some more to do, but it's at an incremental level, not at a fundamental level in that sense. So that's generating capital. We will have a positive ROE. We've made significant progress this year by way of our ROE. And indeed, our dividend policy will be announced in the second half or distribution policy, I should say, will be announced in the second half of the year. By way of our income, we project our NIM to be at 225. Probably unlike some of our competitors, we see our total income be broadly in line year-on-year.
Our level of sensitivity to the interest rate reductions is we have some sensitivity, but it's not material in that sense. So we see total income broadly in line where it is. So loan growth together with margin management will assist us in how we manage that income.
Our operating expenses in 2025 will increase by a mid-single digit, and then we see over time through a focus and a management of our cost base that that will be coming down in around the EUR 500 million level over the next couple of years. A cost income ratio which will increase slightly on the back of that, but again, showing a very solid level of cost income that we can work with, again, over coming years as a target to reduce. Our asset quality, which I've touched on already, we're seeing a cost of risk of 10 basis points.
The reality is the cost of risk this year was zero. In fact, we had a release, as you rightly saw. And indeed, we don't see any stress in our book, nor are we exposed to areas of stress. So again, that is something that is in good shape.
So that's the outlook for 2024. And if we just move on to the medium-term targets, we would have announced targets in previous results to 2025. What we're seeing is those targets are probably pushed out a year out to 2026. We see a NIM coming in at 230 rather than we had projected 250. We see our cost income ratio around 60%. We see our cost of risk below 30 basis points. We see an ROE in the region of 10%.
We see an EPS of EUR 0.30 per share. And that's in a situation where our CET1 target is over 14% on a fully loaded basis. This medium-term guidance doesn't assume any change to IRB rates because, naturally, as we've said, we have to go through a process where we prepare a submission of models, and then we see what the outcome is.
But we are saying that within this period of guidance that we would expect to have an outcome with regard to that project and that review and, indeed, an outcome with regard to what our risk weights for our book should be going forward given the experience given the exposure we have in the book and, indeed, the experience of that book over the last number of years, which has been very positive. So I'd like to thank you for listening to me, myself, and Nicola. We're more than happy now to take some questions. So thank you very much.
Good morning, Eamonn and good morning, Nicola. Diarmaid Sheridan from Davy. Thank you for the presentation and taking my questions, a couple if I may. Firstly, on income trajectory, maybe specifically thinking about net interest income, if we could think about the moving parts in both 2024 but also out to 2026 in terms of what you expect to see maybe around loan and deposit growth, but also the repricing of both of those, please.
Secondly, on cost trajectory, just thinking about the timing and the initiatives to get down to the EUR 500 million, how should we think about those and any potential costs that you may need to incur to achieve that as well as part of that? And finally, on risk-weighted assets, and I appreciate there's a process that you're kind of currently going through. There will be a submission during 2025.
Maybe just to try and help us think about it from a quantitative perspective, one of your peers yesterday talked about going through a risk-weighted asset rebuild on their credit mortgage. Is a level similar to where they are? Is that something that we should think about as being maybe reasonable in terms of when we do get results at a point in 2025? Thank you.
So Nicola, do you want to pick up on the first question?
Yeah. I'll take the income evolution. So our ambition is to we're at 2.3% net interest margin now. That's our ambition going forward, is actually to try and maintain that 2.3. How will we do it and grow it further? When you look out to full year 2026, we see the bank actually lending into the market EUR 4 billion or thereabouts of new lending to the market. That'll be a mix across mortgages and other business. You've seen the growth that we're actually starting to make within our business banking, and we have strong pipelines there, and we've put in the infrastructure to be able to do that. So that's one of the areas for us, is to actually lend into the marketplace.
You might see that the trajectory might not be straight line, and we'll definitely be looking at mortgages, consumer finance, and SME and asset finance in their own rights. We'll definitely be looking at margin with regards to that, so selling at the right price and optimizing our capital. We're a deposit-led lender. That's really important. Foremost for us will be deposits. Actually, as such, that has allowed us to actually keep our cost of funds down. We have a lot of our MREL issuances are done. We will be a benchmark issuer most years.
Actually, that was a strategic decision that we made this year to actually bring our last year to bring Fitch into the conversations with us because actually, even on the marketplace today, we would have operated maybe or maybe operating at 50 or 60 basis points above or 100 basis points above our peers, but we would have operated previously at 200 basis points. So that's actually important for us. So managing that overall cost of funds, growing our asset base in the right way, and maximizing where we can in relation to our own treasury assets and the yields on those.
I'll just take your second and third question then. So on costs, we are presenting a mid-single digit increase in costs. We have ongoing discussions with regard to pay negotiations. They haven't come to an end yet, so I can't necessarily comment on those. But within our cost base, we have some one-off aspects which won't reoccur. And part of also our headcount base, you'll see it in our financial statements, 11% of our headcount, which we've increased significantly in the last year, really to support customers but also to support that transition of the Ulster Bank business and settle it down. You can see that 11% of our headcount is non-permanent. It's a flexible workforce as well. So we have some optionality in how we think about that.
If we go back to a period before the Ulster deal, we were very, very well attuned in, you could argue, a much more challenging time in managing both investing in the business and managing our cost base. That hasn't left us. That is still within our DNA. It's about ensuring that the investments and the support and the costs we're incurring and how we're structured internally as well is there efficiency we can bring through. I don't see anything material by way of big announcement in this space. It's just an act of management of our cost base. To come back to this, I see a bigger focus on our top line, a much more significant focus on how we generate more income, how we generate income from our position in the market.
It has fundamentally changed in the sense of even if you take our brand and what we're positioning by way of our brand as being a modern bank, a contemporary bank that is competing in the market, there's resonance in that brand. We're seeing it already. It's then about attracting customers to PTSB through that. So I wouldn't underestimate our ability to perform well on the top line as well by way of income in a situation where rates are coming down, accepting that, and realigning. On models, I'm not going to comment on what other people are doing in models. We have our own work to do by way of putting forward our credentials with regard to the performance of our book in recent years. There's still 30% of our book that was written pre-crisis.
We can't deny the fact that as a bank and because of decisions made by people who were sitting in my seat 16 or 18 years ago, the bank incurred significant losses on its mortgage book by overlending just in advance of the crisis in a market that was overly competitive at that stage, you could argue. So we can't deny that, and that has to be also reflected as part of our history. So it is on us to prepare our models, to submit them, and then to interact with the regulator under the rules that are designed in order to get to an outcome.
And I wouldn't want to predict it. I would sense that it should be lower because the performance of our book. But we will let that play out in the sense of where we are. Yeah. So thank you.
Have we any questions from outside the room?
If you join us on the telephone, please press star followed by the number one if you'd like to ask a question. Ensure your device is unmuted locally when it's your turn to speak. Our first question comes from Andrew Stimpson of Keefe, Bruyette & Woods. Please go ahead. Your line is open.
Morning, everyone. Two questions. I suspect there's a bit of repetition here. One on net interest income and then another one on the risk weights. On the net interest income, I guess it's a timing question more than anything. It sounds like you still see the absolute net interest income revenues greater in the outer years, but it feels like a kind of not-yet comment given the guidance. I was just wondering if you could talk about the timing of when you'd expect to see the net interest income improve from the second-half 2023 level. If you're guiding 2024 flat on 2023, that implies a slowdown on the second-half run rate despite the larger average balance sheet and the other things you mentioned like repricing of the variable book, etc.
Wondering if that's worse in the first half than improving in the second half of 2024 or whether the improvement is delayed entirely into 2025. Then secondly, on the risk weights, my gut feel tells me you won't be able to answer this, but any idea on where the risk weights could drop to and then connected to that, would it just be the mortgage model that you'd expect to reduce, or do you think some of the other books would reduce as well and then do all those reviews happen at the same time, or could the timing of different models come at different times through 2025? Please. Thank you.
I'll take the income. Yeah. Hi, Andrew. Thanks for that. Just on the income and I suppose on the 2024 position, we have the ambition to do a similar type of lending that we actually have done this year into the market next year. We also have the benefit, I suppose, of almost EUR 4 billion of fixed-rate maturities coming through that actually probably average somewhere around 2.7% today, and they will reprice.
And even in the lower end of mortgages today, you would actually have around a 4% rate that would be offered to customers in the marketplace. So that gives us that income uplift equally. From an operating income perspective, our fees and commissions will increase. That's another element that'll actually grow our total operating income. So while I say it won't be linear, we will actually be facing into a reducing interest rate environment.
We anticipate that that's coming from mid-year down. So actually, we'll have some pluses that'll actually come into our income numbers, and we'll have some minuses. And that'll actually help us to actually maintain that overall level as we go forward. It'll be a different position then as we go through 2025. We see the opportunity to actually lend more. We'll equally have more repricing from our fixed-rate maturities. And so that's the sequence of events that it will grow to where we get to full year 2026, and we'll actually have almost EUR 4 billion of new lending into the marketplace across our product.
And then underlying that is managing that cost of funds, making sure that we're actually paying on interest-bearing assets, our deposits, to customers because it's important for us to actually gain those deposits, but equally managing that cost of funds so that we can actually have that top-line income.
Just on your question on models, obviously, I can't answer to the extent of what it would reduce to. But I think it's fair to say that for the three banks operating in the market, writing a mortgage under the Macroprudential rules since 2015 is something that would be very similar. It appears that its performance of those mortgages are extremely similar in that sense. And therefore, the history on that book would be quite similar. I think the differentiating factor for us is the fact that we still have mortgages on our book that were written pre-crisis and had a higher loss rate and a probability for default. And obviously, we can't deny that for the purposes of how we think about our modeling. So there is a difference in the market between what risk weights are on mortgages.
And as I say, it is on us now to update our models, submit them, and interact with the regulator to see if we can highlight based on absolute performance that the risk weights that we carry at this moment should be realigned to the performance of the more recent book but not forgetting the fact that we had a higher loss history in the earlier book. So unfortunately, I can't give you a number. And as I say, it's up to us to justify based on data and information what that should be and interact accordingly then with the regulator.
Okay. Fair enough. Thank you.
Thank you.
Our next question comes from John Cronin of Goodbody. Please go ahead.
Morning, Bill. Thanks for the call. A couple of questions on my side. Morning to market share . It looks like Q4 was below 15% in terms of share of our originations. Talk about what's going on there. Understand the bank's rather progressive through 2023 on pricing. What's your lending appetite now? Can you talk to us about how that interplays with the relatively high risk weights on your new flow relative to the other banks and how we should expect to think about that evolving over the short and medium term, which I appreciate as contingent on pricing behavior of other players in the market? And then secondly, look, I'm really struggling here on this 2026 ROE guidance of circa 10%. Can you talk to us about what underlying PBT you're expecting to achieve there?
Because on these numbers, I'm not quite getting to. I'm quite a bit off the 10% mark, actually. And maybe some help in terms of volumes as well, both on the asset and liability side. Thanks.
Okay. So just obviously, on the mortgage market, I mentioned earlier on, we are focused on margin over volume. We can see particularly the growth of other players in the market in the second half of the year who are primarily playing on price at this moment. And John, if I looked back a couple of years ago, this type of situation would be detrimental to a business. But actually, what you've seen is our level of lending this year is the same in 2023, is the exact same by way of volume of 2022. So we're seeing a better mix in our lending. We're seeing a better mix of high-margin business. And we will place our capital in areas where we make a better margin.
If that means we have to pull back somewhat on mortgage volume because other players want to play price in the sense of where they are, we will do that. Hence, you'll have seen that in the second half of last year where our volume of mortgages has been lower based on the outcome. Saying that, we will manage margin over volume. Indeed, we will still be a player in the mortgage market, but we're not going to do it at any price. At some stage, I think other players will have to pull back based on their current volume trajectory from where they are and the price levels are at. That's for them to decide. We're ready to pick up that pace at the right price.
We're also ready to lend into the business sector, into the asset finance sector, and lead in consumer lending where we actually make a better margin. On the ROE target, Nicola, you might just pick up on that aspect.
Yeah. I mean, from our projections at the moment, John, getting to that 10%, when I think about net interest margin, we're looking at that 230 or above. That's that growth trajectory that we're on. Our yield on assets will be above 3.5% as we actually go out and can maintain that throughout the next number of years. Our cost of funds will be low. We won't actually be above 125 cost of funds. It will be below that. And then our impairment numbers, we believe that given the trajectory that the Irish market has, the economy that we're actually operating in, given the robustness of our asset quality through a pandemic, through a cost-of-living crisis, high-interest-rate environment, we believe that that's actually strong for going forward. And we're prudently provisioned as it stands today for anything that could come as a headwind against us.
Overall, I mean, when we get to 2025, our balance sheet, our position on our balance sheet, I would imagine is that we will get to more than a EUR 30 billion balance sheet in 2025, and we'll have a greater than EUR 30 billion balance sheet in 2026.
And just to add, John, as well, I mean, if you look at our performance over the last decade, and indeed, you could argue over the last six years, what we said we would deliver, we've delivered. It has tended to focus on deleveraging, acquisition, different aspects of how we have got to this position here today. And our clear focus now is on return on equity, in generating return for shareholders. And we're heretofore where we were focused on other aspects of our activity.
This is where the clear aspect is now, which is how we're generating top-line, how we're managing our cost base, which is in our control, how we're interacting then by way of our risk weights, which isn't part of this plan, but you'd expect by 2026 to be through the IRB model review in the sense of reaching an updated model.
We'll see where the risk weights will end in that sense. So we'll be through that. There's clear momentum in our business, and our strategic and business positioning here has changed phenomenally by way of we are a clear alternative to the top two banks, and we are competing in that sense. We're not going to do it at any price. We're going to manage our margin. We'll manage our volume. We'll keep ourselves tidy, but we'll drive the business on with an absolute focus now on return on equity and profitability in that sense, which we wouldn't, as I said, have that space in the past. Now we do.
Can I just come back on the first one? I mean, to put it slightly differently, would you be writing more business if your risk weights were on par with AIB and Bank of Ireland?
Well, I could answer the question in a slightly different way. We have to, based on risk weights, apply more capital to the same mortgage that Bank of Ireland or AIB write. The reason for that is because of our historic performance. The reason for our historic performance is because of decisions that were made now almost 20 years ago around how Permanent TSB at that stage should position itself in the mortgage market. So it is clear that we have to both manage our capital allocation and indeed manage our margin coming off that capital allocation.
And we have optionality now. We can decide, "Well, we don't have to concentrate fully on mortgages. We can lend into the business space. We can lend in asset finance. We can do more personal term business at higher margin." We wouldn't have that optionality before.
But there's no doubt the numbers will tell you we have to, in effect, make a better return than others because we're applying more capital to the same mortgage under Macroprudential Rules. And hence, it's on us to prove that it should be lower and to ensure through the project we're now well in advance on that it has sufficient data and evidence to prove that under the requirements that are set out in Europe.
Our next question comes from Robert Noble of Deutsche Bank.
Questions. That's just one more follow-up on the risk density issue. Is the front-book lending risk densities the same as the back-book, or is it not? Give me an idea of what we're currently lending at in terms of risk densities. And then secondly, just on the green mortgages, what's the spread difference between a green mortgage and a regular mortgage at the moment, given it's 30% of your flow? And is there any returns difference or capital consumption difference that you see? Thanks.
Okay. So the straight answer is there's no differentiation on the risk weight allocation across our book. It's the same allocation across the mortgage book. So any new mortgage we make is at a risk weight density. That averages at 40%. But an actual first-time buyer mortgage would have a higher risk weight density than 40%. That's the average for the book because obviously, the book is maturing over time. So there's no differentiation. That's the first question. On the margin on the green mortgage, Nicola, do you want to pick that up?
For green mortgages, we offer somewhere between 50 and 70 basis points of a reduction from our standard rates if they are a 3-year or a 5-year. But actually, to Eamonn's point, there's no differentiation on the risk-weighted assets in that regard. So it is actually, I suppose, what we're doing to support our customers in relation to their own transition to a more sustainable lifestyle in their home choice and so that we're benefiting them from that perspective.
Actually, this is an area of interest because how the ECB will evolve the differentiation between a green and a brown asset over time and either maybe penalize banks for not having more green assets from a capital point of view, it really depends. It's an area of ongoing discussion. There isn't clarity on either a benefit for green lending or indeed an additional capital charge if you have an exposure to brown assets in the sense of non-green exposure, if you understand. That's how I'd answer that question. Thank you.
How do you manage the flow then? That's quite a wide spread between a brown mortgage and a green mortgage. You've done 30% lending. Are you going to move the price to maintain it at 30%, or how does it work?
Well, that's what we have done. I suppose if you look at the market rates that are out there, some with our competitors as well, you'll price per LTV band. You'll price per a standard mortgage or a green mortgage. The competition is in the 5-year space. And actually, we have a lot of our customers are interested in that 3- and 5-year space. But that's the only product that's out there in the marketplace today around the green mortgage. And that is that it is a discount from your standard mortgage. And I suppose as we think about product proposition and things like that as we go forward, and I'm sure our peers will be the same, we will be looking at a completely different set probably of sustainable-type products for our customers for the future.
All right. Thank you very much.
Thank you.
The next question comes from Borja Ramirez of Citigroup. Please go ahead.
Thank you for taking my questions. I have two. Firstly, on NII, I would like to ask if you could please remind me in your balance sheet what the assets and liabilities are at floating interest rate or H2 floating. And linked to this, where do you see the deposit beta going forward for the cost of deposit? And then my second question would be, it's great to see the potential dividend announcement in the second half of 2024. I would like to ask if you would consider also share buybacks, or would you only be allowed to start with a dividend and then potentially execute a share buyback after that, or is there no other limit? Thank you.
So I'll take if you don't, I'll take the second question first, and then Nicola will pick up on your first question. So I suppose we want to call it a distribution policy in order to show that we have some optionality there. And that's something we will come with by way of the policy at the end of the year in the second half of the year, I should say, by way of our distribution policy, which will encompass all methods of returning funds to shareholders and paying out funds in that case. So I would not rule out share buybacks in that sense. And then we'll have to see how that develops over the coming years based on our level of profitability, our capital position, indeed, all the moving parts. But it is a welcome move.
Indeed, as I say, I wouldn't rule out the ability to do share buybacks as part of that distribution policy, particularly as we look at our current price and where it is. Coming back to a point I made earlier on, from my perspective, our price actually doesn't reflect where we are as a business. It doesn't reflect our strategic positioning. It definitely doesn't reflect where we are as a balance sheet by way of the level of safety. We would obviously be looking at that as optionality as and when the time would come because we personally and I personally believe there's more value in the stock from where it is today.
And just in relation to the question on floating, Borja, I don't have the floating treasury assets that we would have. But I do have the mortgage book is actually split. 27% is variable. So that would be the biggest portion of our assets. 13% is variable, and 14% is on tracker rates at the moment. And I suppose if you do look at one of the slides that we have there, our interest rate sensitivity on a 25 basis point move is EUR 10 million on a plus or a minus. But I can actually follow up. I'll ask Denis to actually follow up with you to actually give you what our treasury floating rate assets would be.
Thank you. Sorry, I would like to ask, if possible, could you kindly provide more details, if possible, on the cost of deposits that you would expect for the following years, please?
Yeah. Sorry about that. So we don't actually talk about bases and things like that. We look at our overall cost of funds. And I suppose that's where we would have said that that will remain low. And it'll remain below a 125 overall cost of funds basis as we go forward across the medium term.
Indeed, we should think about cost of funds in the sense of where our ratings are now, our investment-grade ratings, where traditionally, we would have had to pay an extra margin for the purposes of not having investment grade. Indeed, that investment grade also prevented some investors buying our debt. That has now relieved itself by way of that investment grade. So we should, again, by way of evolution of our funding cost for MREL, see a reduction in that over time, depending on where market rates are. But again, it's a positive input to how we think about the cost of funding our balance sheet over the next number of years and a very welcome and, again, personally, I'd say, deserved rating in that sense, given our positioning and the safety of our balance sheet in that regard. So thank you.
Thank you.
Our final question comes from Guillaume Tiberghien of Exane BNP Paribas. Please go ahead.
Hi. Good morning, Guillaume Tiberghien from Exane BNP Paribas. Yeah, I just want to see if you can give any color on the trajectory on the NPL that you have. Obviously, I appreciate it was pre-Ulster Bank acquisition, and certainly, the percentage number were a bit higher. But historically, you could articulate what you expect to have a natural cure, if I can say that, of a part of the volume. So any trajectory or comment would be great on that front. Also, I was just also wondering, you made the point that 5 to 3 banks is a big change, and you're the challenger, and you get better quality of earnings. How does that, in terms of the lower quality of lower asset quality, I suppose, in the Irish market, do you see new players popping up, and maybe non-financial ones or non-banking, I should say?
And how do you think about the potential challenge that they can represent to your business? And maybe one last comment just to clarify. I see a bit of unsecured lending, but for the moment, you don't have any credit card business, right? And I'm not even sure if you want to take that route. So that would be just one clarification. Thanks.
Great. I'll take the second two questions. And Nicola, you might pick up on the NPL one. So on your first question, yeah, so what we've seen, obviously, with the increase in interest rates, that deposit-led lenders have some advantage by way of funding cost in the market, particularly in the mortgage market. We did see intermediaries or sorry, non-banks entering that market when rates were low. They did take some market share. But in fact, we defended that, and we were able to grow our market share at that time. Will we see other players coming in? It's arguable that the mortgage market in Ireland should grow over the coming years because there will be an increased supply of housing. Indeed, we have a demographic profile that supports the acquisition of housing.
And indeed, I would expect that mortgage market over the next 5, 10 years to continue to grow on an annual basis. And it will continue to be a lead product for us, I want to reemphasize, at the right margin in that sense as regards to how we ensure that we get the right return on capital. But we will continue to be a player in that market, and we will enjoy the growth in that market. So new players coming in wouldn't necessarily challenge us in that sense. And indeed, it's about how we think about the overall market and its growth. On consumer lending, we do actually have a credit card book. We do have active credit card holders. And we do have a balance on our credit card book.
It's not at a level that, for the purposes of how we round to billions, is something that we highlight to any great extent. But it is a book that has been growing over recent times at a modest level. And indeed, as we increase our customer base and they become more active, we are seeing more penetration on credit cards and some increase in the balance. So we do have that business in the background as we speak. Nicola, just on the NPLs?
Yeah. Just on NPLs. We've EUR 700 million of NPLs. They haven't moved year on year. There's EUR 300 million there that will most likely cure themselves. And over the last number of years, we've seen that level of curing. And it takes probably 12-18 months to actually see that EUR 300 million cure. There's a EUR 400 million book there of the NPLs that have been around for some time. EUR 100 million of them is definitely deep, deeper years. They're greater than five years and longer. And so there's optionality there in relation to what we've done in the past. We have done some significant loan sales. We're very familiar with how that operates. But there's no doubt that we actually can see the cures that are actually coming through. And we have probably EUR 300 million of that.
So a EUR 400 million book would be where we would assess the deeper years and the more sticky NPLs.
Thank you.
We have no further questions on the phone line. So I'll turn the call back to the management team.
Thank you very much.
Thanks very much.
Thanks, everybody.
Thank you.
Take care. Thank you.