Good morning and welcome to the 2024 Interim Results Presentation for PTSB. I'm going to do a short presentation on the strong business performance for the first half of the year, and then our CFO, Nicola O'Brien, will provide more detail with regard to our financial performance. At the end of that, Nicola and I will be happy to take questions. If we just turn to page 4. When it comes to customers and the bank itself, we've delivered a strong performance so far this year. We've supported customers and communities across the country, and we will continue to grow and diversify our business in the second half of the year and beyond. We're proud to have grown our deposit base by over EUR 1 billion year-on-year to EUR 23.6 billion.
Our deposit product portfolio remains attractive in the market, and we've launched recently leading 1-year and 6-month fixed-term products, including an innovative Interest First deposit product, which is really getting traction with customers, and we're seeing continued growth on the deposit side. Deposits are so important to us as a deposit-led lender. We need them to fund growth, and indeed they deepen our connection with our customer base. If we look at our mortgage product and our mortgage market share, you know, we're sitting at a 13.5% share for the year. That's below where our natural mortgage market share is, and it is as a result of the market, indeed the switch market, reducing, and I'll talk about that in a future slide. What we're seeing after making significant and meaningful cuts to our mortgage rates, we reduced our mortgage rate in May by over 1%.
We're seeing a significant increase in our pipeline since that date and with a very attractive mortgage product. And indeed our pipeline is up 60% in the last eight weeks and continues to grow strongly in that sense. Our asset finance business and our business lending area, we've grown that by EUR 180 million of new lending this year. That's three times what we did last year. So it really shows the benefit of the asset finance business and indeed combining that with business lending. And in this space, we are a clear challenger to the two larger lenders in the market, and we're getting traction, which we'll talk about again later in the slides. By the way, for financial performance, we're reporting a profit before tax of EUR 75 million. That's EUR 50 million up on last year when we reported EUR 25 million. Our NIM is 227.
That's slightly lower, two basis points lower, and our net interest income has increased by 4%. Our fee and commission line is in line year on year, but we're seeing significant momentum into the second half of the year, and Nicola will provide more detail on that later on. Our results also have an impairment release of EUR 20 million, representing a cost of risk of 19 basis points. That's as a result of the improvement, a significant improvement in the quality of our book. You know, our NPL ratio is now reduced to 1.7%. That's 1.6% lower year on year. We're now the lowest in Ireland by a country mile, by way of distance to the other two players, and we're below the European average by 20 basis points.
Our total operating expenses, which probably gets some focus, are up 20% year-on-year, but you'll have to look at those in the sense of how we took on Ulster Bank businesses through 2023, and therefore the year-on-year comparison isn't exactly the same. We have a larger business which grew through 2023, and therefore that comparison is not the same. If you look at the later on in the year, we're forecasting a mid-single digit growth in our costs by the end of the year, and Nicola will talk more to how we think about costs and cost management going forward. Our cost income ratio has landed at 73%. We believe that will reduce by the year end, and again, we'll give some guidance on that as we go through the presentation. Our performing loans are EUR 20.7 billion, which is 1% higher year-on-year.
Again, we'll give some color on that later in the presentation. I mentioned our NPL ratio, but that was as a result of the last three NPL loan sales for EUR 348 million, which we executed recently, and that's resulted in, when it closes, a 35 basis point increase in our CET1, which is very positive in that sense. It means that our pro forma CET1 has landed at 14.9%, and we've grown our CET1 by 90 basis points year to date, and underlying organic growth in that is in the space of about 60 basis points. So these are messages that you would not have heard in the past where we're organically growing capital, we're growing profitability, we're diversifying our business, and our loan books are growing in different areas in the sense of how we think about business lending.
I should also mention we were upgraded to investment grade by Fitch in February 2024. That was a very welcome upgrade. I don't know how long, but it's a minimum of 15 years since the bank has had an investment grade, and that had brought more investors into our issuances. It meant that our issuance of a EUR 500 million Green Senior MTN debt issuance in April was four times oversubscribed, and it allowed us to tighten our margin by 190 basis points. So if you think about that margin as we watch our MREL maturities over the next couple of years, you will see our cost of MREL funding reducing because of that investment grade. So really, really important.
It was hard won by the bank, but it's a proof of the state and the quality of our balance sheet at this stage where our average LTV on a mortgage book is around 50%, and we still have significant and growing capital as a bank. Another important milestone today is we're announcing a distribution policy, which is designed to build to a payout ratio of 40% over the medium term. This again is a signal of a very positive, sustainable business that we're growing, and indeed us now looking over the medium term to return funds to shareholders who have stood with us and supported us over many years. Again, it's probably 15-16 years since the bank paid a dividend.
So again, these are significant milestones that are important by way of our move forward and key messages to the external market of our ambition, our position, and where we're going as a bank. We'll touch on the IRB model review later in the presentation, but we're on course to achieve the deadlines that we suggested before, and everything is going well in that sense, but that's more of a 2025 story as we move through. Just the strength of the Irish macroeconomy is very strong. I won't go through every piece of this slide in the sense of some of these numbers are very obvious in that sense. What is important to us is how we think about interest rates and how we think about the mortgage market.
So what we're seeing in the mortgage market is that this year's volume is going to come in, we believe, around EUR 12 billion. That'll be flat year-over-year. It also represents a reduction from 2022 of EUR 14.1 billion, which included a significant amount of switcher activity in that sense. So how do we think about this strategically? We think about it in the sense of we're a bank that's been in the mortgage market for over 200 years. We are also a bank that is very close to first-time buyers. We can see that the first-time buyer share of the market is growing, but really we need to see more supply in the market coming through by way of new housing and second-hand housing in that sense.
We also see house price growth continues to perform at a lower single-digit level, but we need to get that supply going, and we are very much in line with government policy around trying to promote that and support home ownership in the country as we move forward. Just if we look at our performance across our various books, our total customer lending in the first half of the year was EUR 1 billion. Within that, you can see that we have EUR 700 million of mortgage lending.
As I mentioned, that is below where we would like it to be, and we took action in May to address that, and as I mentioned, we will see a stronger, a much stronger pipeline coming through in the second half of the year as we return to our natural level of our share of the market, which is around that 18%-20% level. But what's most importantly on the top left, you can see the diversification in our book. You can see growth in consumer lending. You can see growth in asset finance, and indeed you can see growth in our business lending. And while we're reporting EUR 63 million of lending into the market as at the end of June, if I was telling you today, it'd be over EUR 80 million with a strong pipeline, which again has grown by about 40% versus the start of the year.
So lots of momentum in that side of our business as well. Our mortgage market share has reduced from 23% in the first half of last year to 13%. That 23% was somewhat buoyed up or supported by the switcher market, which has dissipated. So, you know, we have performed well in the switcher market in the past. When it comes back, we will perform even better in that sense, but it has affected our market share, and indeed then the pricing action we've taken to address the volume will come through. On business lending, you can see the various scenarios there. Business lending tends to be the second half of the year when the volume comes through.
We're very confident of a very strong result in the growth and a strong result in business lending, and our asset finance business that we acquired from Ulster Bank, for instance, last month, it did the highest level of commercial leasing that it's ever done, whether under Ulster ownership or our ownership. So we're seeing strong momentum there and strong growth. Just by way of our strategy, you know, we are transforming the bank. It's clear by way of the messages that I'm telling you today. We believe we're differentiated in customer experience. We believe we're a challenger bank against the two larger banks who in some areas of this market have a dominant position, and we're challenging in that sense, particularly as we move into the, strongly move into the business lending space and strongly move into asset finance. You know, we've been developing a strategic vision.
That strategic vision has involved us investing in the bank. So, you know, if you think about this bank for 10 years up until about 2019, 2020, there was no investment in this bank in the sense that we kept, there was some, but it was really just to keep the lights on. The bank itself was, you know, as we know, a 30% NPL ratio and all the challenges around that. Since 2020, we've been investing in the bank. We have a new digital front end. We have a very resilient IT technology platform, which we can scale. We've been investing in our branches by way of our delivery to the market, and also we've been investing in our people, and that investment is delivering a diversified business. It is delivering something that is different. It is delivering something that is challenging and competing in the market.
So in that sense, I always have a saying, the numbers never lie from my point of view. The numbers are telling us we're heading in the right direction. So cost, cost will, as part of that investment, Nicola will talk about, but they have been necessary in order to continue with our ambition, and our ambition here is to become Ireland's best personal and business bank through exceptional customer experience. An exceptional customer experience is about knowing the people you're dealing with, having a connection with the bank, and understanding that we want to support them in what they want to do, and they have that connection. And through that, our purpose is really enlivening that, our purpose and our brand promise, and our purpose is around how we build trust with communities and customers.
In order to build trust with the outside world, we need to build trust in the inside world, and I'll mention later on that our cultural index, our trust index, is 81%, which is 10 points over the average of any bank and the benchmark in that sense. If I think of our brand promise, it's around how we connect good and really cutting-edge technology with people and that human interaction, and we believe that those two items brought together is the secret sauce of our success. Our strategic priorities as a bank, how do we measure this? Well, we think about our secure and resilient foundations, and that's about ensuring that we're investing and maintaining a robust and resilient operating environment that protects customers and colleagues and ensures that we're doing this in an efficient manner.
In that sense, you have to invest to reap the reward of that secure and resilient foundation in that sense, and that's the position we've been in over the last number of years. It's also about having a connected customer experience where we think about customers at the heart of our decision-making, and indeed we deepen those relationships. We know as a bank that the value in our bank is actually in our existing customer base. We can do more with our existing customer base, whether that's in asset finance and lending or whether it's in the full set of retail products that we have on offer, and there's lots of opportunity just in our base alone. It's about sustainable business growth and delivering an efficient return on capital, and you know, we're all aware that today we sit on a pre-crisis level of capital.
So, you know, to give you an example, when we write a new first-time mortgage, the capital allocation we put against that mortgage is over 50%. We have a competitor doing the same thing, and they're applying 25%. So we are making a return based on that challenge, and indeed our IRB models in that sense will rectify that difference just in the sense that we also have the history of how the bank has operated, but in that sense, this is the next frontier by way of how we think about the return we will make on what should be a normalized capital level, not a crisis level capital level, is where we are at this moment.
And lastly, and probably most importantly, it's around cultural evolution, how we think about our culture, how do we think about our reputational standards in banking and indeed in the external market, and I'll mention later on that those indicators again are moving in the right direction. So if I move to the next slide, which is slide 8, I won't go through every stat here. Again, the numbers speak for themselves. You know, 24% of our mortgages were completed online. We will see further growth in that number as we move forward. We have 640,000 digitally active customers. Again, we're seeing growth in that as well. We launched our first Interest First deposit in July, getting great traction in that sense. We also are supporting the First Home Scheme by way of a EUR 67 million investment in that scheme.
Just to mention that scheme for a moment, because it's kind of interesting in the sense that these are for customers who cannot reach the deposit requirements to buy a new home, and in fact, we're seeing great take-up by single people who obviously don't have the benefit of double income in order to get their first home. Again, this is an important social aspect to how we operate as a bank, that buying a home should be for everyone, single people, married people, everyone in that sense, and we believe the First Home Scheme is helping in that respect. We were also the first bank and the first operator in the SBCI Home Energy Upgrade Loan Scheme, that's a EUR 100 million fund. Again, we're seeing fantastic traction from customers in that space. It's a very attractive scheme.
The interest rate is very attractive, and it's also backed by the government, and we're more than happy to be a party to that. If you think about customer experience, our relationship net promoter score is at 20 points. It's up 1 point. Our transactional net promoter score is up 14 points to 47 points. So again, significant movement there. We were the first bank in the world to introduce PTSB Protect, which protects customers in their app from linking into fake websites that can cause fraudulent activity, and we're seeing great uptake from customers in that sense. But just to mention, we were the first in the world to operate that, and we've had plenty of inbound from other banks across Europe interested in how we're doing it.
From a customer point of view, all our ATMs and SSBMs have voice guidance functionality now, which is rolled out nationwide. Again, the only bank in Ireland to operate that. I won't dwell on the awards, but we've got a significant number of awards which continue to note from an external point of view how we're progressing. That's linked to culture. It's linked to delivery. It's linked to performance, but it's really linked to who we are.
So if we think about where we're going by way of building in the ESG agenda, I should mention the most important item in this slide is the appointment of a Chief Sustainability and Corporate Affairs Officer who is now at our ExCo level, who's actually in the room here as well, and Leontia Fannin, who will really drive on our sustainability agenda, which you can see is a busy agenda if we think about it. Our first green issuance of EUR 500 million, I mentioned it already. We've EUR 267 million of green lending, which is nearly 40% of new mortgage lending in the first half of the year. We've the SBCI Growth and Sustainability Loan Scheme, which is around offering low-cost funds and loans to SMEs.
We've a EUR 70 million fund there, and indeed in the second half of the year, we're now moving into a commitment to science-based targets around carbon emission reduction as an organization, and again, you'll see more of that as we move forward. By way of our social support, we are absolutely very proud to be the title sponsor for the Irish Olympic Team and the Irish Paralympic Team. I'll talk about that later on. Social Finance Foundation, which was set up in Ireland in 2009, really to help small bodies and small groups of people in local communities to, you know, fund pitches and different functions and different buildings that they need in the local community, and we've supported that fund over many years now to the tune of EUR 19 million, and we're more than happy to provide more funding as and when it's needed.
I mentioned our cultural index at 81%, well above the standard and the target of 70, and that's been consistent now for a number of years. Our gender and diversity in the board is at 60% female or 58% female to male, and at a senior leadership level, we have a 39% of our senior leadership are represented by females. That has grown by 1% year in year, and we're taking a lot of action internally to move that number towards the 50/50 level and indeed taking lots of action in that sense. Our gender pay gap is 15.9%, well below our competitors in the sense of where we stand.
In some cases, their gender pay gap has actually increased, not reduced, and we will continue to take action to address our gender pay gap, which obviously is linked to the senior leadership positions and indeed linked to how we think about the overall organization, but we're measuring that, and when you measure something, it gets done. That's the reality. At the Business Working Responsibly Mark, we were certified now for the second time in that Mark, and we've joined well over 70 diverse companies in Ireland who work with Business Working Responsibly Mark in order to improve both the environmental aspects and the social aspects of how business operates in Ireland, and indeed we're a proud player of that. In the sustainability space, our ESG risk rating is low.
We have a B CDP rating, and we're abiding and complying with all the TCFD requirements around disclosures, and again, there's a big agenda there of requirements that are coming through, which we are abiding by, and we will indeed use that information to drive our sustainability approach from a business point of view and indeed from a social interaction point of view. So that's a key part, and hence the appointment of Leontia as Chief Sustainability and Corporate Affairs Officer at an executive level in the organization. So I'll just hand you over to Nicola, our CFO, to go through the financial performance, and thank you very much. I'll be back later on. Thank you.
Thank you, Eamonn, and good morning, everyone. I'm delighted to present the bank's 2024 interim financial results. Looking at slide 11 shows that we have had strong financial performance in the first half of 2024. Our reported profit before tax of EUR 75 million is EUR 49 million higher than half year 2023, with overall total operating income increasing by EUR 13 million or 4% year-on-year to EUR 336 million. This increase is driven by higher net interest income from the growth in interest earning assets and the higher interest rate environment, and we're happy to say that our fees and commissions income remains resilient and in line year-on-year. Reporting total operating expenses of EUR 274 million, they've increased by EUR 46 million or 20% when compared to the prior year, but remain in line with management expectations, as Eamonn mentioned earlier.
Underlying the operating expenses, which are before the bank levy and regulatory charges of EUR 245 million, have increased by 20% also as a result of higher resource requirements, cost inflation, and costs associated with the bank's investment in the future. Regulatory charges, as you'll see, are EUR 5 million higher year-on-year. They're made up of two components. The bank levy is recorded in the first half this year. It would have been previously in quarter four. That's EUR 24 million and broadly in line year-on-year with regards to a full year perspective, and that's partially offset by lower funding requirements from the Deposit Guarantee Scheme and from the other regulatory funds. We've recorded a P&L impairment release of EUR 20 million, so reflecting really the strength that's in our underlying asset quality and the positive macroeconomic environment with strong employment, the increase in the house price index.
We've observed that over the first half of the year and still remains on a positive outlook. Our exceptional items of EUR 7 million, they broadly relate to the NPL sale that we did most recently and compares to a EUR 60 million cost in the prior year, which was primarily driven by the charges in relation to the Ulster Bank transaction. So resilient operating income performance is how I'd describe it. If we look at slide 12, the net interest income of EUR 311 million increased by EUR 13 million or 4% year-on-year, and this increase was driven by a higher yield on tracker.
There was probably a 50 basis points increase in H2 2023 that's given us about EUR 3 million additional income in first half 2024, EUR 27 million higher interest income from the Ulster Bank assets, of which EUR 15 million comes from our asset finance business, which, as you know, we acquired in July of 2023, and EUR 46 million from the growth of the performing loan book together with interest rate repricing from our fixed rate mortgage, and then EUR 25 million from increase in treasury assets. That's partially offset by a EUR 48 million higher deposit interest expense, primarily as a result of fixed term deposits.
They increased with the overall yield on interest-bearing deposits increasing from the second half of 2023, September 23, so an increase in the interest-bearing rate for deposits and higher wholesale funding costs of EUR 40 million from larger volumes and the higher cost from the higher interest rate environment. The net interest margin is 227, so it remains resilient, albeit it's 2 basis points lower than prior year. Our total yield on assets is 327. That's up almost 60 basis points year-on-year, and the increase is due to the loan book and treasury assets operating in that higher interest rate environment. Our cost of funds at 107 basis points has increased by 66 basis points year-on-year, and that's equally to do with the higher interest-bearing deposits and wholesale funding.
The bank remains leveraged to the interest rate environment at the 30th of June, assuming a starting ECB refinance rate of 425 and a deposit rate of 375. Every 100 basis points increase would result in a EUR 30 million increase in net interest income, and equally a reduction of 100 basis points would be a decline of EUR 25 million in interest income. These sensitivities should not be considered as a forecast, but they do give an indication of how the bank's interest income remains somewhat leveraged to the interest rate environment. We are pleased, as mentioned, about the net fees and commissions that they remain strong at EUR 23 million, and this is in line with half year 2023, but we have seen a 20% increase in fees and commissions quarter-on-quarter in 2024.
The changes that we've made to the current account fee structure announced earlier in the year begin to materialize now from April of this year. This increasing trajectory is expected to continue through the second half of the year, supporting the overall fee and commission income growth that was expected in 2024. These were the first increases in current account fees applied by the bank since 2019, and in that time, the bank has and will continue to invest significantly in its current account offering and indeed in relation to our everyday banking activity and how we serve our customers in that way. We continue to be the only bank in Ireland that offers rewards for current account customers through our Explore Account, where customers can earn up to EUR 5 per month by using their current account at point of sale or online.
So this, together with the investment the bank has made in the digital everyday banking, is really supporting our customers and giving them value for money. Moving on to the total performing loan book and how we're diversifying that, slide 13 gives us a good picture of the total performing loan book at EUR 20.7 billion at the 30th of June, broadly in line with December 2023, following a slower pace of new lending, but partially offset by a higher level of retention, which is actually a really important point for us in the fact that we're retaining our existing customers. Mortgages now represent 93% of gross performing loans. That's down from 96% at half year 2023, broadly because we're actually growing that business banking area to greater than EUR 1 billion, and that SME and asset finance business now represents circa 5% of total loan book.
So we're working to our strategy there in relation to how we can diversify that overall loan book. We'll continue this momentum in new lending, reflecting capital optimization and our business banking growth ambitions, which are equally outpacing repayments and redemptions. Moving on to the home loan book, our performing home loan mortgage book of EUR 19 billion has reduced marginally when compared to December 2023. Variable rate mortgages are now EUR 3.3 billion. They have increased about 52% year-on-year and now make up 17% share of the performing book, up from 11% at June 2023. As a higher proportion of our customers who are maturing from fixed rates choose to roll to a variable rate product, retaining the option to fix at a time of their choosing.
Fixed rate mortgages are 70% of the total mortgage book, 6% lower year on year, reducing from EUR 14 billion to EUR 13.2 billion, but this still remains the largest cohort of the mortgage book. As we assess the schedule of fixed rate mortgage maturities, the bank will manage the price transformation very carefully, where maturing fixed rate mortgages written in a low interest rate environment will transition to a variable rate or a fixed rate in a higher rate environment. This was managed really well through the first half of 2024, with customers having the option to choose the variable or fixed rates on maturity, and we've experienced very good retention rates with more than 92% of fixed rate maturities choosing to remain with the bank on a new rate. Redemptions are therefore trending below prior year experiences.
50% or EUR 6.7 billion of the fixed rate book will mature by the end of 2026. This repricing onto the higher rates on the bank's loan book will be supportive of our net interest margin over the coming years, even as ECB rates start to reduce. While fixed rate maturities represent a rate increase for customers, they have indeed been stressed at the underwriting level to a 2% level above the chosen rate, and this has proven to safeguard affordability. As Eamonn mentioned earlier, we have announced new fixed rates effective from the 15th of May, which have been widely supportive and are benefiting the mortgage pipeline for the second half of 2024. Tracker mortgages then remain the lower level of our overall mortgage book at EUR 2.5 billion. They've reduced 17% year-on-year and now make up 13% of the bank's home loan performing book.
It's fair to note that the differential between the ECB, MRO, and the deposit rates is set to reduce from 50 basis points to 15 basis points from September 2024, and this will have a circa EUR 2 million adverse impact to our full year 2024 tracker interest income. The average yield on new mortgages is strong. It's increased by 108 basis points year-on-year to 4.33, aided by the automatic pass-through on the ECB rates to tracker mortgages, but equally we'll see the yield on our performing home loan book increasing 36 basis points year-on-year to 3.59. So that's our back book that actually sits on a 3.59 yield. The weighted average loan to value on the home loan mortgage book is 51%, with the new mortgage weighted average loan to value at 73%. Moving to business banking, the bank is pleased with its performance.
The SME and asset finance business in the first half of the year, with the lending in those businesses of EUR 180 million, trebled out of the prior year, with continued momentum for future growth, providing a meaningful alternative for our business customers. The SME performing book remains at EUR 550 million at the half year, unchanged from December 2023 and up from EUR 492 million at the prior half year, and our new SME lending of EUR 63 million, as Eamonn mentioned, has increased 5% year-on-year and we have a strong pipeline which will help us as we go through the second half of the year. The asset finance book and business indeed itself at EUR 501 million is performing very well. We acquired it in July 2023.
The business has shown strong growth in new lending, EUR 117 million in the first half of the year, and that's a 24% increase on new lending from the second half of 2023. Moving on to operating expenses. So managing the cost base in a prudent manner is a key focus for the bank. The impact of inflation is much reduced from the levels experienced over the last two years, with the recent ECB rate cut in June signaling confidence that inflation is indeed coming back under control. So we can see from slide 16 some of the key movements year-on-year. Underlying operating expenses, excluding regulatory charges and bank levy of EUR 245 million, increased by EUR 41 million or 20% year-on-year, and it is in line with management expectations. The bank increased its headcount from 2,836 at June 2023 to a closing 3,240 at June 2024.
That's a 14% increase year-on-year, of which we had some colleagues that actually joined us from the asset finance business, but additional headcount was required in relation to customer facing, customer servicing, and indeed our technology areas as we maintain and expand the service levels for new and existing customers nationwide. This additional headcount, together with increasing cost of wages for our colleagues, has driven a EUR 16 million increase in total payroll costs year-on-year. We continue to invest in important areas such as payments transformation, and indeed that includes SEPA Instant cybersecurity and fraud protection, enhancing our digital data and analytics capability, and our IRB capital models programs. So all very important areas of focus and indeed investment for the bank.
Total depreciation has increased by EUR 7 million year-on-year, EUR 6 million of which is coming through from prior year investments, and there's EUR 1 million-EUR 2 million there coming through from the Ulster Bank transaction and the investment that we've made there on acquiring new businesses. The investment over the last five years has been a key enabler for the bank to operate safely and meet customers, increasing expectations in areas such as digital and technology and the availability that we have now for our customers through our nationwide branch network. Underlying cost income ratio, when you exclude regulatory costs, has increased to 73%, 10 percentage points higher year-on-year, as increases in total operating income are partially offset by a higher cost base.
The bank remains committed to making underlying savings to offset the increased costs associated with investment and is reaffirming its guidance for a mid-single digit percentage increase year-over-year in 2024. As previously mentioned, I think in our last results, our ambition is to reduce the overall operating expenses of the bank to EUR 500 million, including bank levy and regulatory charges in the near term. In order to support this, the bank has established a two-year program of work, which will review the full end-to-end product and service journeys with the aim of delivering efficiencies and effectiveness, together with the full review of support functions, placing the bank in a position of strength as we grow into the future. Our expectation is that we will work to reduce the cost income ratio in the short term. Moving on to our strong asset quality.
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 the higher interest rate environment. The bank recognized EUR 20 million in release in the half year, reflecting the strengthened asset quality and the positive macroeconomic environment. Provision stock decreased by EUR 156 million since year-end 2023, primarily as a result of the most recent NPL sale, with the closing provision stock of EUR 414 million. This includes an EUR 83 million post-model adjustment, which will ensure that the bank remains adequately provided in the event of any future deterioration in asset quality. The total provision coverage is 2%, 60 basis points below full year 2023, and the NPL ratio, as Eamonn mentioned earlier, has reduced by 160 basis points to 1.7%, which we believe is 20 basis points below the European average.
From the strong half year 2024 performance, supported by the positive macroeconomic environment and strong asset quality, the bank is updating its expected cost of risk for full year 2024 to circa minus 10 basis points from a plus 10 basis points previously. Funding and liquidity, very strong. June 2024, total funding reached EUR 26.5 billion, 3% growth year-on-year. Customer deposits account for 89% of that funding at June 2024. Indeed, customer deposits grew 4%, and wholesale funding decreased by 9% due to lower repurchase agreement activity. The deposit franchise continues to perform very strongly, with the bank remaining keenly focused on protecting and growing its customer deposit base. As a result, deposits have continued to grow, 4% growth year-on-year and a 12% growth since half year 2022. 70% of total deposits are covered by the Irish State Deposit Guarantee Scheme.
The bank continued to observe a change in customer behavior as more customers moved funds into interest-bearing deposits from September 2023, when pricing across the market increased. The bank's average maturity of term deposits has increased compared to half year 2023, as the bank has secured longer term funding. Recent prices moves have inverted the curve, with flows now into more shorter term deposits, giving optionality upon the maturity as rates continue to reduce. Interest-bearing accounts now comprise 27% of total customer deposits, up from 18% at half year 2023. Wholesale funding at EUR 2.9 billion is 9% or EUR 0.3 billion lower than the prior year due to lower repurchase agreement volumes, partially offset by the bank's very successful inaugural EUR 500 million senior green debt issuance in April 2024. As Eamonn mentioned, significantly oversubscribed.
I think we had EUR 2.2 billion of demand for a EUR 500 million, so that's really positive for the bank. Three, these issuance contribute to the bank's EUR 4.3 billion of MREL, including CET1 at June 2024. That's up from EUR 4.1 billion at June 2023. Our MREL ratio is 35.2%. Our MREL requirement is 28.6. So we have indeed buffer there, and it's all aided by the fact that we did have that upgrade from Fitch in the first half of this year. Our liquidity coverage ratio has further strengthened, increasing to 232% compared to 220% at December 2023, and our net stable funding ratio at 166% is equally strong and compares to 220% at December 2023. Sorry, I've just called that wrong. It compares to 155% at December 2023. Finally, the bank's loan to deposit ratio has decreased by 3 percentage points since December to 90%.
So moving on to capital, regulatory capital ratios remain comfortably above the regulatory minimum requirements. The pro forma CET1 ratio, when you include the outcome from Glas III , is 14.9%, an increase of 90 basis points from December 2023. Half year operating profits contribute 50 basis points. The Glas NPL sale , the circa 35 basis points, and impairment release, circa 20 basis points. So the bank continues to operate in excess of regulatory requirements, our CET1 requirement at 10.33 and total capital at 15.25. And management CET1 long-term target remains circa 14%. Eamonn mentioned the IRB models. We won't go into that. We're midway through that program of work that we have at the moment, and we're making substantial impact there.
Overall, you'll see our average risk-weighted asset on the book is 41.9%, but as Eamonn mentioned, in relation to new business that we're acquiring, we do have to actually write that at 50% or above. So in summary, I think that the performance has been really strong in the first half. Results are showing a robust business and a financial performance, and we're on a positive outlook. Reflecting on where our performance landed, our profit before tax of EUR 75 million is EUR 50 million higher than prior year, supported by strong operating income from growth in interest-earning assets and the positive ECL release. Cost income ratio of 73%, while 10 percentage points higher year-on-year, is in line with management expectations, and we will be working towards reducing that cost income ratio over our short to medium term.
Cost of risk at minus 19 basis points with an impairment release of EUR 20 million, strong asset quality, favorable macroeconomic environment, and minus 28 basis points cost of risk year on year. As mentioned just now, the capital position is very strong. Underlying ROE of 6% and on track to deliver meaningful returns over the medium term. Full year 2024 is trending in line with expectations. The cost of risk is the only update that we have at the moment, and that's going to be favorable for our full year 2024 outcome, and we're actively managing our capital position. All in all, a very good first half results for PTSB. I'll hand you back to Eamonn now. Thank you.
Thank you, Nicola. I'll just turn to slide 23 just to really summarize the last three slides that we're going to cover here.
So this is about the slides about what we've delivered, what's our strategy, and indeed what are the future catalysts for growth. And we all know you can measure the confidence is normally driven by what someone has delivered, what they've achieved, what a company has delivered in the sense of what they've done. And in that respect, what we've delivered to date is a larger and more active customer base. We have 1.2 million customers, but within that base, 400,000 of those customers are new to the bank in the last three years, whether through acquisition, through the Ulster Bank transaction, or indeed by attracting those customers and reducing inactive customers in that sense. So it's been a significant change underneath the water in the sense of how we think about our active base. If you look at our NPL story, which, to be mentioned, is 1.7%.
The regulated ECB changed the rules on NPLs back in 2017. At that moment, like the other two banks in the market, we all had about EUR 6 billion in NPLs. Obviously, ours was about 30% of our balance sheet. Today, our NPLs are EUR 348 million, of which 50% of those are on a path to recovery or a path to repair. So it's a significant reduction in our NPL story. I won't comment on the other two banks, where they are. That's for someone else to look at. But we've delivered in that sense, and we are at this moment, by way of where our NPL story is, we've no further sales, no further action in that respect. It's about ensuring that we're supporting our existing base and indeed helping 50% of those NPLs to come back into performing status. Naturally, Ulster Bank acquisition has happened.
It's finished, it's closed, delivered, no residual issues, and it's added significantly to our financial performance. It has allowed us significantly to invest and continue to invest in the business, which, as I mentioned earlier, will reap rewards. We're seeing this by way of our resilience. We're seeing it by way of our innovation. We're seeing it by way of how we're delivering for our customers on day-to-day requirements and seeing how we're building a business bank that will compete and is competing strongly in the market. Our dividend blocker was lifted in December 23, 2023. That's a serious and significant vote of confidence from our regulator with regard to how they see us and where we're going. Indeed, the investment community has upgraded us from Moody's and Fitch upgraded us by way of our investment grade.
If we think of our balance sheet and our balance sheet is about our strategy, how we're going to grow the balance sheet, how we're going to grow organic capital. Nicola already mentioned we have a focus on efficiency and how now we can take a business that is larger, more diverse, but now how we can efficientize existing processes and procedures that would have been built up over many years, how we can digitize those, make them more efficient, make them more streamlined. And I have absolute confidence in our ability to do that because we're more agile. We can move faster. We can move more efficiently. We can get things done and completed and delivered much faster than our competitors. And there's evidence of that in what I've just said earlier on. We're improving customer experience. We can see it in our transactional NPS scores.
We can see it in our reputation scores. We can see it in our brand positioning. When we launched our brand last October, we were seeing the improvement in that. We're simplifying our products. We're increasing digitalization. We're increasing robotics. It will require some additional investment, but we're up for that because we can see and we can reap the benefits of that in due course. And then what are the catalysts? Well, the catalysts are around how we grow our deposit franchise. We can see, again, that how we can support the pricing of our assets in the sense of having an appropriate RAROC .
That's absolutely linked to our IRB model review in that sense and how we think about our return on capital, how we can prioritize our cost efficiency, which you can hear that there's a thread through how we're presenting here in the sense of that cost efficiency and our approach and indeed how that will result in our ability to distribute and make distributions over the medium term up to a payout ratio of 40%. So all of these are connected. It's about delivery. It's about strategy. It's about being agile. And it's about having catalysts for growth and catalysts for positioning in that sense. So by way of our medium-term targets, at this moment, we're reaffirming those targets that we would have reported at the year-end, and they're there to be seen by way of return on equity.
They do not assume any change to risk weights under the IRB model review. So as and when they come through, they in themselves will provide a catalyst with regard to how one thinks about the economic capital that's required to run a bank of where we are and how we think about that. You could argue release of capital in due course subject to those IRB models. It will give us extra flexibility of the way we think and how we manage our capital position, either for growth or other aspects of capital management. Lastly, I just want to finish on this slide. We are absolutely privileged and proud to be the title sponsor for the Irish Olympic and Paralympic teams, Team Ireland, in the sense of how they've traveled to Paris. There's 133 athletes who have traveled to Paris. Their largest team ever with Team Ireland this week.
It's also 100 years since Ireland as a country participated in the Olympics, which was in Paris. So it's a really special moment in that sense. It really has given us a unique platform in which to demonstrate our commitment to the communities in which we operate, show our support of the role they play in, indeed support for athletes and their sporting heroes in local communities. And we saw that in real action when we saw Mona the other day and how that has impacted her small community in Sligo of 700 people in her own town. If you look closely at the picture, you'll see the back line there. We probably have five medal winners lined up there at the back, Daniel Wiffen. We've got the two rowers, Rhys McClenaghan, Kellie Harrington, indeed Sarah Lavin coming through as well.
We'll see how she gets on over the next few days, but like us, we're a winning goal as well. And these results are about how we're performing and how we're turning up, not only for our customers, but for wider society. So thank you very much. We'll take questions now, if that's okay.
Good morning. Thank you, Eamonn. Thank you, Nicola, and well done on a very strong set of results. Three questions, if I may. Firstly, around the capital and distribution policy. Thank you for that this morning.
Just the very strong level of capital you have compared back to late last year when the dividend blocker was released, is it still appropriate to think about full year 2025 as the first time frame where we might get a distribution being realized from your balance sheet, from your income statement relative to maybe at the end of this year, I suppose is the first question? Secondly, just on net interest income, Nicola, maybe if you could talk through some of the moving parts in terms of some of the product changes that you've done towards the end of the first half of the year and how those will impact together with maybe prospective rate changes that will come through in the second half of the year, and maybe not just for the end of this year, but maybe into 2025 in terms of how you think about those.
Finally, maybe just around the cost piece. I mean, Eamonn, it's quite evident you talk about efficiency. You talk about the investment that's required. Maybe you could just talk through some of the initiatives that are ongoing in terms of maybe bringing them to life for people. And I guess, is there specific actions that you will need to take then as those investments are bearing fruit to bring the cost down, or is it more that some of that investment is elevated and kind of falls away as those are delivered? Thank you. Okay, so I'll answer the first and third question, if that's okay. Nicola, you can jump on the next. And indeed, you can come and help me as well if I'm struggling. On the dividend side, how you put that forward, Diarmaid, is reasonable.
The reality is we will have a significant regulatory engagement next year with the IRB models. That is an engagement with the regulator around establishing, you could argue, where our settled capital position is required to run this bank. We believe it'll be positive because we are updating our data with more updating models with more recent data. But through that interaction, it would be unlikely that we would be in a position to pay a dividend as we go through that process. But once we get through it, we believe that will free up subject to the normal caveats around interaction with the regulator and seeking their approval. But we believe it'll provide us with more freedom in how to think about distributions. And it is reasonable to think about those in a 2025 with a 2026 payout in that sense. So it is all to be played out.
But I think the important thing about the day is to try and provide clarity, to provide a thought process around how we think about the level to which we could pay over time. And indeed, then we can see now that as time rolls on, 2025 is next year. So time is moving. So it's appropriate that we've been providing clarity in this space coming out of the release of the dividend blocker in 2023. So costs, I've been involved over my own career in many different cost initiatives. They are a feature of how anyone would run a bank or be involved in running a bank in the sense of different ebbs and flows at times around cost efficiency. So it's something personally I'm very comfortable with. This will involve many initiatives. It's well into the double digits of different initiatives, some small, some more material.
To give you an example of one, we think of our end-to-end mortgage sales process and indeed our servicing process. Our servicing process involves fixing rates, rollovers, customers looking for information, top-ups, all of those good things and positive things that you have with a customer. A lot of those practices are somewhat paper-based and not connected. We will do a full root and branch review of our end-to-end mortgage, new mortgage and servicing program. We believe not only will that deliver some savings, but it will also deliver a better engagement and service level for customers in due course.
It will also allow us, if you take it by way of the management of a fixed-rate rollover, that if that is a more digital engagement, it will allow us to retain more customers and indeed give customers a better service in that sense, provide more data, all those extra things. So that's just one example. But there's many, many initiatives which we've identified and which we can now progress. We've got an internal program set up. It's resourced. It will require investment, but that investment will have a fairly quick payoff over the next 1, 2, 3 years. Nicola, if I hand over to you then.
Yeah, certainly. Just on the net interest income, I suppose the way we look at that really is fundamentally our asset yield is strong.
The higher interest rate environment right now reduces, but it actually doesn't reduce to the low interest rate environment that we operated in previously. So net interest margin remains strong. If I look at fixed-rate maturities at the moment, we have about EUR 1.3 billion this year. They're coming off an average 2.70-2.75 rate. And even with the rate reductions that we've had, which, as Eamonn mentioned, were significant in that we reduced mortgage rates by 100 basis points, our customers are still rolling onto a rate that is in a higher interest rate environment, so on average around 3.9%. So we're actually seeing that uplift of 125 basis points that's actually coming through that's supporting that net interest margin. Equally, our treasury assets are actually performing well.
If we look across even when the last time I looked at the three-year Irish sovereign, it's around that 285-290 mark for 2024. It really over the curve and out four years, it doesn't reduce below 275, well, maybe 260 next year, and it starts to rise again. So it means that the earning power for the bank is actually very resilient and strong. And so we expect that our net interest margin will be supported from the lending that we do, diversifying into business lending, which is actually at a very good rate for us and fair for our customers. But equally, that we'll be able to maintain that net interest margin. We do see it growing, but on average, you could say that a 220 margin is probably a good margin for our bank. 220-225 would be a good margin for our bank.
That might tick down a little bit this year based on lower volume and whether or not the ECB makes two more rate reductions or maybe just one. But I think a 225, 230 margin for the bank is actually an appropriate margin, and we can see that going through in the future.
Great. Thank you. We'll open up to the phones. We'll open up to the phones, please. Participants,
to ask a question today, please press star followed by one on your telephone keypad. And to withdraw your question, please press star followed by two. Our first question today comes from Andrew Simpson from Stifel. Your line is now open. Please go ahead.
Good morning, everyone. Congratulations. Two questions for me, please. One on provisions and then one on interest rate sensitivity, please. So on provisions, you still look very well provisioned here.
I'm just wondering how long you can hang on to those post-model adjustments. I realize they're down to EUR 83 million now, but in the context of the annual charge we might expect from yourselves in a normal year, those are still pretty material. So can you hang on to those indefinitely? Is that a discussion with auditors at year-end, or how does that process work, please?
Yeah. Thanks, Andrew.
Secondly, on the interest rate sensitivity.
Yeah, no, go ahead.
Sorry. And the sensitivity guidance on slide 12, it's good news that that's reduced again, so well done. But I'm just wondering what drove that, whether that's just the greater funding and deposit costs or whether you changed something else with regards to the balance sheet, please. Thank you. Perfect.
Thanks, Andrew.
Yeah, just in relation to provisions and indeed that post-model adjustment that we have, you'll see through our models, we are actually, I suppose, through the ECL and through the models, it is driving out a charge on an annual basis. That's expected under IFRS 9. The post-model adjustment, we have a program of work now where we're actually looking at our IFRS 9 models. It's probably an 18-month journey and will actually refresh our IFRS 9 models, and actually we'll be able to get more visibility there. You'll probably see that reduction coming through in relation to the PMA, but there's always an element of post-model adjustment, which is management judgment that you will have to actually cater for. But as we look forward at the moment, the positive outlook in the macroeconomic environment, the underlying asset quality, 70% of our book has been written under macroprudential rules.
It's been a very strong performance over the last number of years. House prices in Ireland are still very strong, and the house prices have increasing. So all of those things factor in to actually say that we're well provided. And I think there's an element of that PMA that will come back over the medium term, but you will see the model driving out a charge as we write our new business. Sensitivity. Oh yeah, on the interest rate sensitivity, purely it is the narrowing of the corridor, the interest rate environment coming down. We're naturally hedged. Our interest rate sensitivity isn't anything in the balance sheet other than today what we are earning from our treasury assets that will actually come back, and equally any impact from the tracker mortgages as ECB rate reductions. But we haven't anything structurally within our balance sheet that would impact that. Wonderful.
Thank you.
Our next question comes from Borja Ramirez from Citi. Your line is now open. Please go ahead.
Hello. Good morning. Thank you for taking my questions. I have two. Firstly, on the NII outlook, I would like to ask if you could kindly provide a bit more detail. So it's understood on the NIM that could be 2.25%, more or less, but just to understand how should I think about second half net interest income for the second half of this year compared to the first half? How do you think about deposit migration? I think you had EUR 0.6 billion of increasing interest bearing deposits in the quarter, slightly higher than the EUR 0.5 billion in Q1. How should we think about that in the second half of the year? And then my second question would be on the capital distribution.
So if I understood well, so it's very good news on the distribution front. It's more likely at this stage that there could be a potential distribution on the back of 2025 earnings distributed in 2026. Would this be correct? Thank you. Thank you for the two questions. I'll take the second one, and then Nicola, you might pick up on the first. Yes, that's right. It's probably more reasonable to think about our distribution in 2026 based on 25 profit. Not in the sense that we don't believe we've adequate capital and we're generating organic capital. That is actually reasonably okay. It's actually more in the sense of how we think about the approval process for such a dividend and the fact that we will be in ongoing engagement with the regulator with regard to our IRB models to 2025.
So that's really the more basic or more actual sense of how we think about the dividend payment. Indeed, once we get to a settled IRB model, it may indeed increase our capacity to think about capital both by way of growth and indeed return of distributions in due course. As I mentioned earlier, the key indicator and the key move forward today is that we are disclosing a distribution policy. We are disclosing clearly our ambition in this area to make distributions. But it is all subject to the normal caveats of regulatory engagement, how we think of our risk profile, indeed how our board thinks about our own positioning, and the availability and opportunity for growth versus distribution. But yeah, I think to come back to the core question, it's reasonable to think about this in 2026 based on 2025 profits.
And just to follow up there on your question on net interest income, Borja, and thank you for that. I suppose overall, when we actually think about H1 versus H2, we do have to consider that we did make interest rate movements in the first half of the year. So when we actually think about the second half of the year, net interest margin will be slightly down. When I'm referencing 220-230, that is that net interest margin as we look forward over the next 24 months that we actually should be operating at that level. There's probably from a deposit cost perspective, we've seen it settle. So we were paying a higher rate going out for three years. We've inverted that curve. Now we're paying 275 for one-year money. That's actually bringing that term back in for us.
So I would say that the deposit cost and funding cost in the first half will almost be the same level in the second half. And actually then we'll make more depending on the interest rate environment, but we'll actually have better margin on our loan book and on our treasury assets as we go through the second half of the year, which will actually support that net interest margin for us as we go forward. Thank you.
That is very clear. One quick follow-up question, if I may, sorry. On the IRB process, just to understand if you could give any indication on the risk density that could be achieved after the IRB review? Unfortunately not. We're working through a process of preparing all the data. It's quite an intricate process.
It has to be prepared, tested, challenged, and indeed submitted in a way that meets the requirements of the EBA. So we're still looking at that submission to the regulator in quarter one, early quarter two next year, and then engaging with the regulator with regard to the level. So I would have no indication of what it would be except it'll be lower. Understood. Thank you very much. As a reminder, to ask a question, it's star followed by one until we draw star followed by two. Our next question comes from Grace Dargan from Barclays. Your line is now open. Please go ahead. Hi, good morning. Thanks very much for taking my questions. I guess I just wanted to come back to the distribution policy as well. I think it's great to see that announced today. I guess maybe to probe a little bit more.
So what would you define as a modest distribution, or how are you thinking about that? And I guess maybe linked to that, the commentary around NPLs and kind of seeing those actions undertaken now, would that not help support an argument for maybe paying a dividend with full year 2024 results, announcing it with full year 2020 results, paying in 2025? And then secondly, how quickly are you thinking about building to the 40% payout? So would that, say, be the first year a lower modest payout and then coming into the second year 40%, or is that a longer timeframe than that? Thank you very much.
Okay. So thank you. I mean, the policy clearly sets out that we will now consider the payment of a dividend every year.
So I wouldn't completely rule out next year, but the reality is there's practicalities around our engagement with the regulator that we also have to take into account and discuss with our board and seek support, indeed, a recommendation that would go to a regulator. So we will consider it at the end of 2024. I wouldn't 100% rule it out, but I believe it's more likely to be in the following year rather than next year. But we will examine it, and indeed, it'll be something we will pick up on at the year-end results as well in that sense. But we do say a build-up to 40% in that respect. We do have to just consider the fact that the IRB models do play a part here. We can't necessarily today forecast for the fact that our IRB models will be adjusted.
We still have to operate a business on the basis of the models we have today. So once we get through that process, it will give us more clarity with regard to the required running level of capital for this bank, and indeed then how we can think about either growing the book, applying capital to growing the book, or indeed growing our business, or indeed distributing it. So we are adopting a cautious approach in that sense. So it's likely the initial one will be lower, and then we would build up. But really, that IRB model review is a critical part of our responsibility to prepare correctly and indeed submit it, but also to get to a settled capital requirement for this bank.
And indeed, it's kind of clear when you look at the numbers, it would be very difficult or challenging for us to make, and to give you this in sort of an open way, it would be challenges for us to make a 40% distribution on the current models. They are just so capital-consuming that it makes it difficult. But the future models will give us much more clarity, and hence we're adopting a build-up to 40 over time with that critical interaction with the regulator being a core part of how we think about balancing both returns to shareholders who have no returns for over 15 years, and indeed how we think about our position in the market as a challenger bank, growing our business lending, growing our asset finance, maintaining and growing our share in mortgages.
These are all key things we also need to achieve as we grow our balance sheet. Hopefully that answers the question.
Perfect. Thank you very much.
Thank you.
We have no further questions in the queue at this time, so I'll hand back over to the management team.
Great. Well, thank you very much, everyone. Thank you. Take care. Thank you.