Dear friends, this is Hakan here, the CEO of Akbank. Thank you all for joining us today to hear about our 2022 performance, and also 2023 and beyond guidance. I hope you are all well. Today, as usual, I have with me Türker, our CFO, Ebru and Gülçe, from our IR department. Before leaving the floor to Ebru, who will share the details of our full year results, I'd like to say a few words about the operating environment, and also about our stellar performance. The world economy recently has started to show some positive signals on both inflation and economic activity. Is still struggling with elevated inflation and adverse repercussions of the war. According to many international institutions, the global economy is expected to slow down this year.
More importantly, economic activity in developed countries, including our main export markets, is projected to be more subdued. In this challenging global environment, the policy design implemented by Turkish authorities is putting a strong emphasis on economic growth and employment through negative real rates and targeted credit policies, which stimulated domestic demand and economic activity. In the second half of last year, the economy started to lose momentum, mainly due to the slowdown in major trading partners and deceleration in exports. In the more near term, we have started to see signs of a revival in domestic demand and economic activity on back of credit growth and recent fiscal measures. We expect domestic economic growth to slow down from around 5% in 2022 to around 3%-3.5% this year.
Regarding the inflation, it peaked in October at 86% and came down to 64% at year end. Looking forward, annual inflation is expected to decline further, not only due to strong base effect, but also thanks to the stable exchange rate and moderating import cost pressures. As a result, we expect inflation to ease towards 30% by year end. Current account deficit has been increasing, we expect an improvement in underlying trend this year. Despite the slowdown in economic activity of our main trade partners, which is a potential danger for our exports, we expect tourism revenues to exceed last year's records and reach $50 billion dollar levels. Also, we forecast to have an improvement in energy imports due to lower oil and natural gas prices, resulting in an approximately 3.5% current account deficit.
As you know, we have elections in the first half of this year. Elections in every country usually come with some uncertainty in markets. Given the hands-on macro-prudential management of authorities and both the corporate and banking sector's resilience with significant buffers, the Turkish economy has the capacity to successfully manage this period. When we look at the banking sector, despite a very challenging year, the banks did quite well. Turkish lira loans were up by 77% for the sector. TL business banking loans was the main contributor with 88% growth, while consumer loans were up by 39%. FX loans continued to decline down by -16% for the sector, with ongoing deleveraging of the corporates. Following BRSA regulations and CBRT macro-prudential measures, sector-wide NIM has started to narrow down recently.
We are currently experiencing a decrease in our TL spreads due to an increase in TL deposit rates, while our lending rates, lending yields are almost capped as banks are trying to keep the fixed rate bond purchases imposed by the regulation at minimum levels. CBRT emphasizes the importance of liberalization strategy, and may continue to implement further macro-prudential measures if and where necessary. That being said, banks are well positioned. Banks remain healthy and resilient with solid capital buffers and liquidity. For long-term success though, the following will be the differentiating factors for banks. Relative and higher capital levels, low cost base and efficiency, level of sophistication in digitization and advanced analytics, ability to attract and keep new clients through digital, talent, quality and attraction, ability to focus on future while strong, struggling with the daily challenges, and last but not the least, agile management.
Here, I'm extremely proud to say that Akbank ticks all these boxes. I see an enormous and outstanding potential for Akbank looking forward. Moving on to our Bank in more detail. We ended the year on a very strong note with exceptional growth in earnings year-over-year. Our net income was up fivefold to TRY 60 billion. A record high and historical income, even when adjusted for currency. Also our pre-provision income tripled to almost TRY 90 billion. Our swap adjusted CPI linker excluded net interest income was up by 144%. While our fee income excelled by 96%, indicating a very solid core business growth. As a result, we ended the year ahead of our guidance at 54.7% ROE and 6%-6.2% ROA.
Despite the growth and market share gains due to high internal capital generation, our leverage still remained at a low level of 7.5 x, indicating further growth potential. Our robust performance was driven by, first, very strong organic growth, where every business line contributed significantly. Our customer-centric holistic organization structure implemented at the beginning of last year. Our advanced analytical and digital capabilities, along with our state-of-art infrastructure, resulted in a record 2.3 million net customer growth in 2022. I repeat, last year, we have achieved 2.3 million customer gains in net after attrition. I am extremely delighted to say that we have achieved an outstanding momentum in retail banking. Retail banking will continue to be a strategic focus area for us. We will not stop here and continue to invest, innovate and grow.
The importance of our investments, and especially investing through cycles, has been even more noticeable over the last two years. Secondly, we excellently positioned Akbank with our outstanding agile balance sheet management for further strong financial results in the coming years. We are for sure one of the best positioned banks in this environment. We are leveraging our robust capital, highest among peers, solid liquidity, low leverage, highest level of efficiency, low operating cost base. Third, but not the least, while managing the daily challenges are consistent, forward-looking and initiative-taking management style. Our years of investments in our people, culture, mindsets and our customer-centric organization, as well as our dedication to clients, puts us in a position of strength. I'm proud to say that today Akbank is the most ready Bank to smoothly wave through any challenge and generate long-term stakeholder value in an ever-changing world.
I'd like to express my sincere gratitude to all our people for rising to challenges, thinking outside the box, innovating, executing, raising the bars, supporting our customers, and being a source of strength. I also would like to thank all our stakeholders for their consistent trust and confidence in us. On that note, I'd like to leave the floor to Ebru. After the presentation, I'd be more than happy to answer your questions.
Thank you, Hakan Bey. Starting with the balance sheet. First of all, our TL loans. Our TL loans were up by around 78% year-on-year, beating our full year guidance of around 50%. As shared in several occasions, the Bank's motivation in the SME and consumer banking continued at full pace throughout the year. This motivation has resulted in a successful 200 bps year-on-year market share gain among private banks in the SME segment, reaching a cumulative 215 bps market share gain over the last two years. In the consumer loans during the same period, we have gained 220 bps market share among private banks. Maturity mismatch remained in focus. Thanks to our advanced analytics and excellence in AI-based loan decision systems, the PD of the portfolio remained at low levels while growing.
For this year, we expect to grow around 40% in TL loans, which will once again be driven by healthy market share gains in the consumer and SME segments. Our 360-degree customer-oriented holistic organization structure, as well as competitive products and advanced digital solutions, will continue to be supportive factors. On the FX loan side, demand remained muted throughout last year. Our net FX loans were down by around 9% to $10.7 billion, which is in line with our shrinkage guidance. This year, given our already deleveraged FX loan book, we may observe a single-digit growth in our FX loans. As for our securities, our treasury's proactive positioning in CPI linkers helped to mitigate the negative impact of inflation during last year.
Our CPI linker portfolio stands at TRY 117 billion, with its real yield remaining unchanged since second quarter of this year, last year, at 1.4%. Our CPI linker portfolio equates to 76% of our equity. As for the newly implemented regulations, we proactively purchased a sizable portion of fixed-rate bonds for CBRT pledge at much higher levels during June and July, around 19%. The total size of the fixed-rate bonds for CBRT pledge is around 2% of our assets. Going forward, we aim to keep it around this level. I would also like to add that our Eurobond portfolio is fully hedged against Fed rate hikes. All of these underline our prudent ALM management.
Coming to this year, along with our solid customer base revenue growth, CPI linkers will continue to be a supportive for net interest income. On the funding side, we maintain our focus on well-diversified and disciplined funding mix. Deposits continue to be our main source of funding with 63% share in total liabilities. Our TL deposits were up by a solid 144%, resulting in an eye-catching 35 percentage point improvement in our TL LDR to 106%. Thanks to our sound customer franchise and our success in gaining net customers of 2.3 million, our market share in TL savings deposits among private banks increased. We added 130 bps market share in widespread savings deposits and 60 bps in demand deposits last year.
Worth to mention that our sticky low-cost TL time deposits and zero cost demand deposits were also up by an outstanding 165% and 118% year-on-year, respectively. On the regulatory side, I'd like to underline that the TL share in total deposits is close to 60% for both consumer and business banking. We feel comfortable in meeting the 60% ahead of the regulatory deadline on February 24th. Moving on to the P&L in more detail. Our prudent and proactive asset liability management, benign funding costs throughout last year, as well as our strategic and timely positioning in CPI linkers, have all contributed to our almost 5 percentage point year-on-year NIM improvement to 8.25, beating our full year guidance of around 7%. Our fourth quarter NIM stands at 11.12.
Going forward, our solid customer deposit franchise, agile asset- liability management, and proactive CPI linker positioning will continue to be supportive for NIM evolution this year. In that respect, as an indicator of responsible growth with maturity mismatch in focus, around 80% of our TL loan book will either reprice or mature by the end of this year. We expect our swap-adjusted NIM to be between 4%-5% for 2023. As for October-to-October inflation, our assumption is at 30%, while every 1% additional CPI will have around TRY 800 million net income, 7 basis points NIIB, and 41.5 basis points ROE impact according to expected average equity. As mentioned earlier, we reached a record in net active customer growth of 2.3 million. 40% of our new-to-bank customers were acquired via digital onboarding, underlining the strength of our digital capabilities.
Salary and pension customers almost doubled, enabling us to penetrate into demand deposits and the daily cash flows of our customers. We leveraged our digital onboarding capabilities and also revamped our value propositions holistically for youth customers between the age of 18 and 26, leading for this segment to increase 1.5 x year-on-year. It's important to point out that our active product portfolio, which is a function of active customer base and average cross-sell per customer, has also increased by 30% year-on-year, reaching all-time high. This solidifies our customer base revenue generation for the coming periods. Our digital strategy rests on four strategic pillars. Strong customer growth with fully digital new customer acquisition for both consumer and SME. Mobile-first experience with innovative applications such as Cüzdan, while also expanding mobile products and services in Akbank Mobile.
Open banking capabilities and enhancing sales and marketing capabilities within our digital channels by leveraging AI and advanced analytics. I wanted to share a bit more detail regarding one of the innovative applications our Bank launched last year. Through our digitalization roadmap, the bank-agnostic digital wallet application, Cüzdan, allows customers to add all their debit and credit cards, so in effect, merging all of the customer's payment instruments into their mobile phone. In addition to this, it is also possible to pay with current account balances and different loan facilities. This app will continue to extend the payment experience in line with growing e-commerce and digital payment needs. The success of our digital strategy, which is based on our customer's journey, is shown in the numbers.
We reached 8.7 million digital customers while also increasing the traffic as the monthly average mobile login frequency is also at all-time high. Our active digital customer visits our mobile application more than once a day. Most importantly, mobile active customers conducting financial transactions increased by 14 percentage points over the last two years, supporting sustainable fee income. As you can see on this slide, our customer growth has been reflected to our fee income. We further excelled our outstanding fee performance across the board, reaching TRY 11.888 billion, almost doubling year-on-year. Reasons behind this accomplishment can be summarized as customer-oriented solutions leading to customer acquisition, product innovation and diversity, increased transactions, pricing due to either currency or inflation, and the success of our digital channels. All businesses have positively contributed to the revenue base, indicating the sustainability of our fee generation.
We therefore guide for around 60% growth in our fee income for this year. Challenges, obviously, remain on the OpEx side due to both high global inflationary pressures as well as pass-through of weaker currency. The main increase in OpEx last year was related with customer acquisition on back of marketing expenses, which we see as an investment for future growth. HR expenses had an impact on our OpEx. Our relatively low cost base versus all of our peers gives the Bank significant competitive advantage and more flexibility. With our solid revenue generation, our cost-to-income remains best in class at 19%. This level is obviously not sustainable in the long term, cost discipline will remain in focus. For this year, we got for low 30 cost-to-income with an improvement on a year-on-year increase in OpEx.
Moving on to asset quality, our loan portfolio continued to perform well throughout last year. There was almost no net new inflow into Stage 2 when excluded for currency impact. As you know, foreign currency provisions are hedged. Therefore, Stage 2 loans declined to 6.6% of gross loans, down by 3 percentage points year-on-year. As for Stage 3, the inflows were broad-based and collection performance also remained robust. We completed this year with 2.8% NPL ratio versus our guidance of below 4%. Coming to 2023, given our prudent risk approach and excellence in loan decision systems, we believe there will be a material increase in NPL inflows. Therefore, we expect our NPL ratio to remain below 3%. Our cost of credit evolution underlines our proactive positioning as well as our healthy loan- portfolio composition.
We ended the year at 54 bps net cost of credit, excluding currency impacts, underlining our strong risk discipline through the cycle, well below our full year guidance of around 100 bps excluding currency. Including currency, which we are hedged against, our net cost of credit will be at 81 bps. On top of two model updates in first quarter and second quarter, we had another model update in fourth quarter, yielding a total of 24 bps impact for the year, almost half of our full year cost of credits. Despite our solid loan growth as well as improved collateral values, our coverage ratios have significantly increased year-on-year. For Stage 1, our coverage ratio is at 0.7, which was at 0.5 at the end of the year.
For Stage 2 and Stage 3 loans, our coverage ratios have increased by respectively 230 and 240 basis points year-on-year to 16.4 and 67.6%. Adjusted for the TRY 1.4 billion write-off in the fourth quarter, our Stage 3 coverage would be at 70%, indicating a significant 470 basis points increase year-on-year. Moving on to this year, we believe our robust provision build and solid collateral values will limit the need for additional provisions. We again expect our net cost of credit, excluding currency impact, to be around 100 basis points. Record high profitability has also reflected onto capital position as our internal capital generation added around 900 basis points for the year to our total capital.
Our total capital is up by almost 360 bps year-on-year to 20.8%. Please note that this improvement was despite the temporary risk weight increases applied to some loan types as per BRSA announcement. Adjusted for these risk weight increases, our capital would have been 170 bps higher at an outstanding 22.8%. I would also like to underline the eye-catching 480 bps year-on-year improvements in our Tier 1 and Core Equity Tier 1 ratios at 17.7%. Our sound capital buffers serve as shield against unprecedented challenges, volatility, and also creates significant ammunition for sustainable profitable growth. Before leaving the floor to Hakan Bey, I'd like to also give some details regarding our ESG performance.
To start off, we are well on track for our long-term sustainable finance goals on both sides of the balance sheet. As of year-end, we have provided 60 billion sustainable finance, totaling our support to TRY 87 billion over the last two years. On the liability side, our ESG themed funding AUM reached TRY 2.7 billion with 62,000 investors. We have also continued our pioneering ESG linked funding transaction with 75% of our wholesale funding facilities last year being sustainability-linked. This year, we will also continue to integrate ESG into all aspects of our offerings to support our customers in the transition to a more sustainable economy in line with our decarbonization ambition. Our customers are at the front and center of our sustainability vision. Enhancing financial health and inclusion is one of our key priorities.
Last year, we continued to empower our SMEs, both through financial and non-financial support. Akbank's Transformation Academy, for example, reached 11,000 SMEs providing trainings to prepare them for the future. As we have done so during last year, we will continue to take steps both for our people and our communities for a more diverse, socially and economically inclusive future. Last year, we also had a key milestone in our fight against climate change. We committed to become a net- zero Bank by 2050 and started to enhance our data capabilities for measuring Scope 3 emissions. This was an important year in terms of managing climate-related risks.
We introduced our enhanced environmental and social risk framework, which includes changes such as increased portfolio coverage, sector-based environmental and social risk scoring, expanded exclusion criteria, updated policies for material sectors and issues, and revised risk identification and mounting procedures. You may find all these details on our website. This year, we'll be launching our decarbonization roadmap for our portfolio and operations with interim targets to reach net- zero by 2050. We will also enhance our capabilities to limit our Scope 1 and Scope 2 emissions by expanding environmental energy management certifications to more branches. Our transparent and proactive approach in non-financial disclosure continues to improve our ESG ratings. In addition to double upgrade received by Refinitiv for our ESG score to A, we have also enhanced our CDP scores. Being a sustainable Bank is an important component of our long-term ambition.
On this slide, you may find a summary of our solid 2022 performance. I don't wanna go through every line, one by one, but I can say that we ended the year, as Hakan Bey mentioned, on a very strong note, and the momentum continues across all business lines. Throughout the presentation, I have already shared this year's guidance in detail, actually, so I don't want to repeat one by one again. But as a result of all the guidance that I've shared, we expect to achieve around 30% ROE for the full year. And now I'd like to leave the floor to Hakan Bey to share his thoughts on our 2023 guidance and beyond strategy.
Thank you, Ebru. 2023 is a particularly important year both for Turkey and Akbank. We will be celebrating the centenary of the Republic, as well as the 75th anniversary of Akbank. These are both very important milestones. Despite some challenges in the sector, I believe we are excellently positioned as we begin this important year to deliver for our clients and shareholders. Along with very strong corporate, commercial, and private banking, our strategic focus remains in consumer and SME with responsible growth. Prudent management of capital throughout the years gives us significant competitive advantage for growth and resilience. We will not only take advantage of our advanced analytics and digital capabilities, but also continue with disruptive new products and services to further accelerate customer acquisition and activity. I would also like to underline that ESG remains at the center of our Bank strategy.
As most of you recall, we had shared our ESG strategy at the beginning of 2021, becoming the first deposit Bank in Turkey to set long-term sustainable finance goals on both sides of the balance sheets. I'm happy that we have taken bank-wide important steps in achieving these commitments in the last two years. While growing, we will continue to mitigate our environmental footprint and increase our positive impact. As I mentioned at the beginning of the call, we will not stop here. There is a lot of dynamism, motivation at the Bank at every level. Over the next three years, we aim to increase our net active customers 50% and our digital active customers 60%. In other words, putting another 5 million customers in net, at least 5 million customers in net on top of what we have today.
On top of last two years, market share gains of 220 basis in consumer, 215 basis in SME among private banks. We target to gain further 300 basis market share in each over the next three years. While setting those aspirational targets, I fully rely on my top quality executive team, our ambition and coherence in our common goals, the exceptional talent at every level, and infrastructure that we have built over many years. You all know Akbank very well. We will always be responsible while growing. Do not expect us to grow at all costs. It will be a profitable and sustainable growth. No doubt, we have all the advanced analytical and talent capabilities to deliver these aspirations.
Our growth will continue to be funded with customer deposits, where we aim to gain further 300 basis market share in both TL demand and widespread consumer time deposits. Our customer growth, especially with digital customer cross-sell, being 2 x of non-digital, will contribute significantly to our fee base, leading to a fee to OpEx ratio above 80% within the next three years. While achieving these targets, we will leverage and maintain our number one positioning in capital as well as best-in-class efficiency. As a result of our responsible growth, our ambition is to remain highest among peers in ROA and to achieve top performance and ROE while having the highest level of capital for future growth. Ebru, maybe again, I turn the floor to you.
Thank you. Thank you, Hakan Bey. This concludes our presentation, and now we're moving on to the Q&A session. Please either raise your hand or you may type your question in the Q&A box. For the those of you who are joining us by telephone, please send your questions via email to investor.relations@akbank.com. The first question comes from Alan Webborn. Hello, Alan, please go ahead.
Hi, thank you. Thank you, Ebru. Thanks for the presentation and kicking off the guidance, ran for this year. A question, I guess, to Hakan Bey in terms of the... You know, this is a very special year, with a sort of, you know, a challenge at some point in May, and probably a degree of uncertainty as to what happens after that. In putting your guidance together for this year, how have you viewed the sort of the macro environment? You know, 40% loan growth is still, you know, is quite a high level. Clearly you've, you know, got some view of what your margin's gonna look like over the whole year.
Could you just talk us through a little bit how you're positioning yourselves in the run-up to the election, given the fact that you've got all of these regulatory constraints that are constraining your ability to grow, and how you see how you see things afterwards in terms of getting to these full year targets, which, you know, clearly are, you know, not as high as you've achieved in 2022, but I think we all, we all understand that. Just to give us something of a context in terms of how you got to this 23 guidance would be really helpful.
Yes. Alan, thank you very much. I think this is a very important question. Between now and until June timeframe, actually, there is more clarity. We can predict more or less the macro environment. After June, of course, the election results actually will probably play a big role for the remaining parts. Of course, we have to make an assumption. When you look at our actually rate assumptions, actually, we are forecasting 30% inflation, 30% interest rate for CPI linkers, 9% for the policy rate, and 3.5% growth for the economy. One can ask this question.
If, you know, things do change actually after June timeframe, and there's a different environment for interest rates. I mean, of course, this is not possible for us to, you know, predict. What we are trying to do as a Bank, we are trying to actually minimize our maturity mismatches. We have been trying to do this over the last actually couple of years. When you look at our loan growth, especially in recent months, there is more growth on the consumer side, where the rates are relatively, let me say, acceptable, so towards like, you know, 30%, high 20s and so on. Still we are making margin on that, okay? Of course, there are limitations on the actually commercial side.
Banks are having difficulty in creating margins. We are actually also, we would like to protect our, of course, NIM. Therefore, we try to maintain our profitability through trying to become the main Bank actually of those customers where we are lending. That is what we are trying to do. When you look at the full year, we are projecting a 4.7% NIM. I think this is possible despite all the restrictions on loan yields and so on. I think there is a possibility. I mean, this is a very likely scenario, even if there is a rate hike after actually June timeframe. The reason I'm telling you this, because there is so much actually, so caps on our lending rates.
Even if there's a rate increase, because as my friends, as Ebru already has shared with you, deposit costs have already actually has been rising. Even if there is an interest rate hike in the country, the adjustment on the loans would be, I would imagine, much more than the adjustments on the deposit side. Therefore, the banks on the NIM side can have some room, looking forward, to improve their NIMs. Therefore, no matter what happens after the elections, whether we have the same, you know, monetary policy, even if there's a change, I think we would be able to manage this. 4.7% NIM, I think in both actually options, I think that is something we can achieve.
This maturity mismatch management is something which is very critical. That's what we have been trying to do. Demand deposit increases, you know, funding mixes. These are all the things that we have been focusing on, significantly. We have been actually achieving extremely good results, having, you know, great market share gains. I think that will be contributing to our NIM.
In essence, you wouldn't disagree with the idea that even with a rate hike post the elections that your margins could actually improve in the second half of the year?
Yeah
Given the fact of where market pricing is today. Do you think that's achievable?
Well, what I am trying to say, this 4.7%, even if that is the case, for the full year, that is something that we can achieve. Maybe for a quarter or so, there might be some additional pressure on the NIM, but eventually, I think it will be better because the loan rates will be, you know, higher than what we have today.
All right. Okay, super. Just one other question on the fee growth. I mean, 60% is a good level. Is the market allowing you to keep putting through, you know, fee income increases? You know, we're in a more constrained corporate environment. Just to give a bit more understanding of where, you know, where you got the 60% from.
First of all, this outstanding customer acquisition, that is a great source for us to improve our fee generation. I mean 2.3 million in net, I think this is an outstanding figure. And I think the Bank has a lot of momentum with all the digital capabilities and so on. Therefore, this year, we will continue to acquire customers. This will be actually contributing significantly to our fees. What I'm very, also very happy about, Ebru mentioned that in the presentation. We are not only growing our number of customers, but what I'm happy actually, we are also increasing the cross-sell ratio of the Bank. To be frank with you, I have been in retail banking for so many years.
I have almost spent half of my life in retail banking. I think this is something extremely difficult to achieve. You can earn customers, but you cannot actually typically increase your cross-sell during the same period. This is what our friends actually at retail banking have achieved last year. This is something very difficult to do. Therefore, this additional cross-selling improvement in cross-selling together with the additional customer acquisition, customer activation, I think will give us this 60% increase. It's not only limited to Corporate, Commercial and so on, but throughout the Bank. I'm aware of the fact that there are lots of restrictions, caps, competition and so on, but the Bank has a lot of, you know, momentum in those areas. Consumer, SME, other areas and where there is a lot of contribution from advanced analytics and digital.
Okay. Super. It's gonna be a very interesting year, so, it'll be fun. Thank you very much.
Thank you.
Thank you. Thank you, Alan. Thank you for your question. Now the next question comes from Simona Pedrini. Simona, please go ask your question. Simona, you may unmute yourself and ask your question. I guess, the next question comes from Konstantin Rozantsev from JP Morgan. Hi, Konstantin. You may ask your question. You may.
Oh, yes. Hello. Thanks for the presentation, for taking my questions. Thank you. I had three questions that I wanted to ask. The first one, could you please comment on the trends in the deposit rates in the market? The Turkish lira deposit rates and USD deposit rates. How do you see this progressing in the coming weeks and months? Within, you know, Turkish lira deposits, if you could strip the FX-protected scheme and the conventional Turkish lira deposits. The second question that I wanted to ask is about the loan quality.
If, if rates get hiked, you know, at some point later after the elections, and, if Turkey enters into some kind of a period of slow growth, for a number of years, next to zero growth over a number of years, how sensitive do you see your loan quality over, say, like three-five-year period of time in this condition? And the last question, please, reiterate your expectations about the call of the Bank's subordinated bonds, in April this year. Thanks a lot.
About the rates. As you know, we have a regulation now where we have to convert our deposits more towards local currency. There are certain deadlines for this. If you don't do this, then we have to actually purchase some fixed rate bonds, which we all are trying to actually avoid. As a result of this, the deposit rates in the country has been rising actually, especially during the last couple of days, couple of weeks. As of last week, Central Bank actually also removed the cap on this new deposit scheme. When you look at the ongoing rates, there are of course differences between the banks, and there are also differences whether you have a big deposit or, you know, small deposits or r ates do range a lot.
I have to tell you this, but anywhere between 15%-high 20s%, you can observe actually in the system as of today. But I would imagine that there is this February 24th, which is the deadline for that, additional, you know, bond purchases. I would imagine that between now and then, this actually competition in deposit-taking will continue. After that, there might be some more actually, how should I say, normalization in the system. In average, I can say today, the time deposit cost is around, I would imagine, for the system, around 20%. For FX deposits, it's just the opposite. Interest rates in a global environment have been increasing.
When you look at the system in Turkey, since we are trying to convert our FX deposits into TL, the FX deposit rates in the country have been coming down. Banks actually, for a dollar account, again, it depends on the, you know, size of the deposit, it depends on the Bank. What I can say, it is very typical for a Bank to pay something like, you know, half a percent or 1%, maybe 1.5% for a dollar deposit. When there is some pressure on our NIM on the TL side of the balance sheet because of the rising deposit rates, it's just the opposite on the FX side. That is what we are experiencing on the deposit side.
The loans, the loan quality, I'm not only referring to my own institution. As you know, Akbank is a very cautious Bank. We do this, you know, risk management and, you know, loan quality side. This is part of our actual DNA for many years. For the system, I think the evolution will be quite healthy, even if there is an increase in the interest rates, even if we have relatively low growth in the coming months. I think our clients and the clients in the system actually have the capability of actually digesting this. The reason is the corporates, commercial customers, even SMEs, they have been actually quite profitable. They had this access to lending at very affordable rates.
Assuming that they have good business, good products, good services, they have been able to adjust their prices in line with the inflation, but getting their loans from the banking system at a very low rates. They have been actually accumulating a lot of buffer in the past. I think the companies, whether it is big or small, I think have these buffers. Looking forward, I'm not really worried at all, even if there's a rate hike or a relatively low growth in the system. Of course, there might be some exceptions, but systematically, I feel actually very comfortable for the whole system. This subordinated loan that we have, I think that was your last question.
Last year, if we had a similar, you know, situation, and Akbank called that Tier 2 loan. Our goal is to do the same this year, and that will be in April. But as you know, of course, we have to get a permission from our regulators. Last time we had the permission and we repaid the loan, recalled the loan. Again, we will apply and see what will happen. Türker , would you like to add anything? Did I
Yeah. Hakan. Yes. Maybe on the asset quality side, actually, you have explained very detailed. Also not to forget Konstantin , this Konstantin , we always preserve our cautious stand, you know. Therefore, actually, as Ebru has mentioned, also this year, despite the improvement trends actually in the asset quality in the system, we have continued to book further provisions and as a result of which actually our provisioning ratios have increased actually. Also for the NPL portfolio, actually the value appreciation of the assets actually, which are our collaterals, actually there was a significant value appreciation. It didn't really lead us to make some provision reversals. Actually, quite the opposite actually. As I said, we wanted to stay on the safe side, so we increased the provision buffers further. We will actually preserve this practice in the future as well.
Yes. Türker , I realized that I also forgot to mention this FX loans. That again, for the system of course for Akbank as well, there has been a big deleveraging on the FX loan side. When you look at the corporate and commercial customers of banks, they have been actually reducing their FX exposure significantly. Year after year, FX loans have been decreasing in the system. That is also a big plus for the healthiness of the system. When you look at the FX loans today in the system, they are mostly exporters or some actually other companies with long-term investments, you know, in the country. Therefore there is also less risk. Some of these FX PF loans, for example, there is this government, actually protection and so on. That is also a very positive development for the banking system in Turkey.
Just to thank you very much for these details. It's extremely useful. Thank you. That's it from my side.
Thank you, Konstantin , for the question. Thank you. The next question comes from Mehmet Sevim from JP Morgan. Mehmet, you may unmute yourself.
Yes, good evening. Thanks so much, everyone for the presentation. I have three questions please. First of all, Hakan, you earlier mentioned that you're readying your balance sheet for all eventualities later in the year, including a change in the interest rate environment post the elections if that happens. You also mentioned, you know, the decreasing maturity mismatch, for example. Maybe beyond this maturity mismatch between loans and deposits, could you also elaborate on how your balance sheet would react should there be a sudden and abrupt change in the interest rate environment? Specifically, would you see any risks arising from the regulatory, framework and the interference that we saw recently, including the securities book and the recent bond purchases?
My second question would be on the revival in FX loan growth that we saw in the fourth quarter, also in your guidance, you're showing that, just a slight one, after the big deleveraging we saw in the first half. Where is that coming from? Is this just a normalization in the trends, or is there actually, you know, some specific reasons for that? My last question, if I may, on slide 25, you're showing that you target a fee to cost ratio of 80% plus in 2025. I just wanted to make sure that this isn't a typo or anything because it's an astonishing figure if it's a net fee to cost figure. If so, given you're currently at 58%, and a very efficient cost base, where will the improvements come from? Also, of course, how would the yearly development be until 2025? Thanks so much.
Thank you very much, Mehmet, Mehmet Bey. First, about these, you know, bond exposures. Yes, there is this regulation in the system, but as I said earlier, we are trying to refrain from purchasing these bonds as much as possible. So far I think we were able to do this given the size of the Bank. If you look at the size of Akbank and the amount of actually fixed bonds that we have purchased until today, approximately it's like, you know, 2% actually of the total balances. That is something I think is very digestible looking forward. Apart from that-I mean, the Bank has been extremely careful with maturity mismatch management. I understand your question.
What I'm trying to say, it is given the size of the Bank, it is something relatively small as of today. It is digestible. Let me also answer your third question and then leave the second one to Türker , if you like. Türker , if that is okay with you. The fee side, yes, we are around now 58%, but I am relying a lot actually on the digital capabilities of the Bank and also actually the already existing efficiency of our institution. I mentioned about this 2.3 million customers that we have increased in net this year. Mehmet, we have done that with the minimum of number of people among the peers and also with the minimum number of branches among the peers.
I think that is a very clear sign of efficiency and the level of sophistication on the digital front. We have done all those investments. We have been actually investing something like $250 million, sometimes $150 million. Something like $150 million-$250 million year after year over the last almost 10 years. We were the first Bank to adopt this mobile first strategy. We are more into more sophisticated bank- agnostic models and so on, open banking and so on. Therefore, I actually rely a lot because we can put a scale on top of what we have already invested.
We don't have to open new branches and, you know, employ thousands of, you know, people and recruit more people and so on to cater those additional more than 5 million customers, you know, in our portfolio. This digital capabilities, I think, will give us this opportunity. If you also examine our figures, a digital client versus a traditional client, when you look at the fee generation, the cross-sell ratios and so on the digital, it is twice as much as a regular customer, compared to a regular customer. Therefore, this is a journey. This is an aspiration. I understand and I know that this is something very challenging. This is something very challenging. 80%. It is something very challenging.
I think our goal with my friends is to move in that direction. You will see us traveling in that direction, probably, with a linear, let's say, progression year after year. I think there will be some improvement in that ratio in the Bank.
Hakan Bey. Yeah. Maybe I can elaborate on the second question with regards to FX loan growth. Hi, Mehmet Bey. Actually, you know, this FX loan growth was quite muted in the last few years, and we've seen this continuous shrinkage. Actually now we have come to a very relatively low base, like, $10.7 billion USD levels. Yes, in our guidance, we shared actually a limited growth of low single digit actually when you if you would translate, it would just mean maybe a few hundred million dollars. We expect this growth much more to be happening in the second half of the year.
Because we hear from our corporate customers that they are delaying some of their investment decisions to the second half of the year, which may actually increase this demands actually for FX loans. Again, to repeat, actually, even though we expect a growth, it will be actually limited in nominal terms.
That's super. Thanks very much.
You're welcome.
Thank you, Mehmet, for your questions. The next question comes from Bilgehan Yazici. Bilgehan, you may ask your question. Please unmute yourself.
Thank you very much. Hakan Bey, my question is related to Juzdan and Tosla. Ebru specifically highlighted the importance of Juzdan. However, I couldn't understand the differences between two products. I mean, between Juzdan and Tosla. Are these independently managed fintech companies or just another product or service of the Bank? If these companies were set up as subsidiaries of the parent company, what kind of value are you targeting to create out of these fintech investments? Thank you.
Thank you, Bilgehan Bey. That's also a great question. These two are actually totally different. Juzdan is a very visionary product. The reason I'm telling you this, our approach to banking is very different than what we used to have before. What we are trying to convert our Bank into actually is like a platform. This Juzdan, when you look at inside Juzdan, it is actually unique in a sense in Turkey, and it is the first bank- agnostic product. Juzdan is not only for Akbank products. When you look at Juzdan, you see Wings cards, you see Axess cards, and you also see the cards of all other banks. It is like a platform. It is bank- agnostic. Therefore, our vision from now on is to create those platforms.
This is also in line with the open banking actually vision that was creating outside Türkiye, you know, several years ago. That has also come to Türkiye as well, especially with the new regulation change about a month ago. This, like, at the beginning of this call, earnings call, you have seen our advertisement. This is the new trend. Therefore, we have lots of expectations out of Juzdan as a platform. Okay? So this Juzdan today is inside the Bank-
Mm-hmm.
We can easily spin this off.
Mm-hmm.
Create value. There is a possibility there. Tosla on the other side is a different company. It is like a fintech company outside the Bank. We have a different CEO, a different management. Again, we are having a similar approach. Actually, this is a [Agrotech] company, so Tosla is one of those products. I know that the my friends there also have the vision of putting some other products into their portfolio, again, with this bank- agnostic vision. It doesn't really have to be actually Akbank's products or their own products. Now they are into PH business, for example. They will not be only selling Akbank's POS terminals, so they will be able to sell other banks' POS terminals as well.
This is, I think, is the vision we all have to actually embrace looking forward. I'm happy that Akbank is the first Bank to take those actions in advance, so that I think that this is something that we would probably be creating, you know, value earlier. At least that is the aspiration that we have.
Okay. Thank you.
Thank you, Bi, for your question. I see that there are no further questions online, but I think there's one written question that we haven't answered. Tuğçe, would you like to ask?
Sure. Yes, we have a number of written questions, but most of them have already answered. Among the remains, Pınar Uğuroğlu asked, "Can you please elaborate dividend payout assumption using your targets for 2023?
Maybe I can try to answer this question. Actually, first of all, sure, it will depend on BRSA's approval, the payout ratio. As you may remember, in the past, our payout ratio was in the range of 10%-25% levels. Actually, surely we would like to have the, we'd like to maximize the payout ratio. We'll see how BRSA decision will look like. Nevertheless, actually, the impact of the changing payout ratio will have a limited impact on the ROE calculation, since we already have the, by the end of last year, more than TRY 150 billion of equity size. This year, with the current profit generation, the average equity will be much higher. Therefore, actually, the payout ratio will have a minimum impact on the ROE.
Thank you, Türker . It looks like we have no further questions. Once again, thank you all for your kind attention. Hakan Bey, I leave the floor to you for any final comments.
Ebru, thank you very much. Again, thank you all for joining us today. As I have mentioned many, many times, we have been through many cycles, and I have full faith actually in our people's capacity and execution. I would like once again express my ample gratitude for their exceptional efforts. I also would like to thank you all, our stakeholders, our investors, for their consistent trust and confidence in us. Keep well, and I hope we see you all again soon. Take care, everybody. Thank you for coming.
Bye-bye.
Bye-bye.