This is Muharrem Baykara speaking, Head of Investor Relations. Today, me and my colleagues, Gizem and Kamer, will host you in our earnings call. We will update you on the operating environment and Halkbank's financials. At the end of the presentation, we will hold a Q&A session. Before delving into specifics of our performance, I'll start with the operating environment. As you know, the Turkish economy grew by 4.5% in 2023. Domestic demand continued to be main driver of the growth last year. Leading indicators show that the economic activity has remained strong during the Q1 of 2024 on the back of resilient economic demand. Along with the lagged effect of the tightening in the financial conditions, economic activity may lose some momentum in coming quarters.
On the external side, weak global macro backdrop has weighed on the global economy. Delayed rate cut expectations from the Fed has put some pressure on the economic activity, yet some other notable central banks, such as the Swiss National Bank, already start to cut rates. Moreover, money markets price in that the European Central Bank will start cutting its policy rate by June. The European economy is very important for the Turkish economy because it is responsible for more than half of Türkiye's exports. So ECB's potential rate cuts are positive for the Turkish economy. In summary, we are at an inflection point when it comes to global monetary policies. Some central banks already start to pivot, others will follow, and then they'll probably synchronize on easing cycle. By the way, Fed's taper from quantitative tightening also heralds easing cycle in the global monetary policies.
Under this domestic and external landscape, we envisage somewhat a slowdown is likely for the full year. So we expect economic growth in 2024 to be around 4% in line with the Medium Term Program's target. The inflation trend continued to remain relatively high. The challenges posed by the underlying inflation are expected to ease by middle of the year with the help of the strong base effects. Divergence between CBRT's year-end forecast and the market participants' median inflation expectation is a key factor that shapes the CBRT's response function, in which CBRT has strengthened its focus stance recently. Furthermore, CBRT is not only hiking its policy rate, but also simplifying its policy framework and deploying it with macro-prudential policies. For instance, exiting from security maintenance practice is reflected in higher yields in the bond markets.
All in all, monetary transmission mechanisms start to run efficiently, and this makes CBRT policies more effective to reach the price stability goal. Furthermore, external balance indicators have also been improving by the help of the coordinated tightening in the monetary and fiscal policies and improving consumer sentiments that may push back the consumption demand. In this regard, current account deficit narrowed from $6-ish billion to $30 billion. This dramatic improvement in the current account balance explained the credit rating agencies' positive decisions in favor of Türkiye. To sum up, CBRT's decisive tilt towards orthodox monetary policies, recovery in external balances, shift swift decline in country risk premium, replenished international reserves, and finally, re-rating narrative are all the obvious outcomes in the new era. Following the rate hikes carried out by the CBRT to tame inflation, the asset repricing continued throughout the quarter.
So cost of funding of the sector has increased in line with the rate hikes and additional tightening with alternative tools. On the other hand, with the help of the CBRT's evident success in its forward guidance, following this policy shift in May 2023, banks have managed to reprice loans quickly because they could forecast the interest rate hikes before the Monetary Policy Committee meetings. In this context, the ongoing tightening enabled the banks for high-yield loan repricing while curbing excess loan demand. The normalization in the loan demand is assumed to limit the interest income generation for the sector. However, the sector could generate income from CPI linkers, fees and commissions, remuneration on required reserves, and other earnings items in the short run.
In the medium and the long run, restoring macro and financial stability will create a favorable environment for the banks to utilize the growth potential with widening currency spreads. We, as Halkbank, start the year with relatively solid financial results. Securities spurred asset growth in the Q1, yet continuing normalization steps, both on the regulatory measures and the policy rates, have created a more challenging environment for the loan growth. However, Turkish Lira spread has improved on the back of the quick asset repricing, despite the ongoing rise on the cost of funding. There will be gradual improvement on the Turkish Lira currency spread throughout the year.
Thus, we expect to see Turkish Lira core spread in the positive territory, especially for the second half of the year. On the margin side, there might be some additional pressure on the net interest margin in the first half of the year, which stems from incomplete recovery of the Turkish Lira core spread. But in the second half of the year, we will largely compensate it with an accelerated momentum of core spread improvements. Finally, we aim to end the year with a flat headline in net interest margin compared to previous year. In summary, we firmly believe that the policy shift will result in lower inflation and sustainable growth. Moreover, rebalancing economy, improving expectations, increasing credibility, declining risk premium, decreasing exchange rate volatility, and increasing visibility in the market will shape banking sector balance sheets in the coming period.
Gizem will now provide insights regarding our Q1 performance. Following her presentation, I'll be available to answer your questions. Thank you very much. Gizem, I am handing over to you. Please go ahead.
Thank you, Muharrem Baykara. Welcome, everyone. Thank you for joining our presentation today. Starting with the first page, details of our assets. Total assets grew by 10% quarter-over-quarter and 49% year-over-year, and reached EUR 2.4 trillion, but mainly due to the increase in securities and TL liquid assets. Total loans share in total assets dropped to 53% from 56%, while liquid assets share rose to 15% from last quarter's 13%. Liquid assets basically consist of reserve requirements, which has increased quarter-over-quarter due to the tight financial measures taken by the CBRT. On the right-hand side chart below, you may see total FX liquid assets make $13.4 billion in total, including swaps, and it is roughly two times higher than our FX wholesale debts mature within one year.
Page two shows the details of our securities. Total securities increased by 12% compared to previous quarter, mostly resulting from the increase in FX fixed rate bonds. On the bottom left-hand side chart, you may see our CPI-linked lease income produced in roughly TRY 28 billion, while we continue to evaluate our linkers with 65% in line with the previous quarter. Their volume reached EUR 236 billion, as their share makes up 39% in total securities. And please recall that every 1-point increase in CPI linkers evaluation rate has a roughly 26 basis points impact on net interest margin or EUR 1.2 billion impact on NII. Turning to page three, details of loan growth. Total loans were up by a limited 4% quarterly, predominantly driven by SME loans, mainly cooperatives.
This below-sector growth reflects the tight monetary policy course and low loan demand considering high rates. While TL loans were flattish with a 1% increase quarter on quarter, we've seen some demand for FX loans. Considering the high share of the corporate segment in the FX loans, the growth is mostly due to the corporate segment. The reason for this is that companies have turned to FX funding due to the high TL funding costs. Following page shows more details on our loan portfolio. TL loans make up 77% of total loans, while FX loans make up 23%. On the right-hand side chart, we may see that SME loans have the lion's share with a 49% share in total loan book, as in the previous quarter.
38% of it belongs to our unique cooperative loans, which have a low risk profile being subsidized 50% of interest payments by Treasury. Corporate loans follow SME loans with a 44% share in total loans, and retail loans make up 13% of total loans, while they are largely consist of mortgage loans, which are inherently well collateralized. Asset quality details on page 5. NPLs increased by a slight 4% in line with the loan growth. Therefore, our NPL ratio remains same at 1.5%. On the bottom left-hand side chart, we've seen stage two loans share in total loans has increased to 6.5%, which is mostly driven by the currency depreciation. Further details on NPL ratios on next page.
You may see corporate, commercial, and consumer loans' NPL ratio stays below sector, while SME loans is in line with the sector. Credit cards' NPL ratio is slightly below sector. However, their share in our total loan book is only 2%. Moving to further details of our asset quality on page 7. On the left upper side of the page, you may see that in this quarter, we have set aside some stage 2 loan provisions due to expected credit loss rate adjustment according to individual assessments. On stage 3 side, we set aside a written provision similar with the previous quarter. While NPLs are aging, their provisions get higher automatically. That is the reason we set aside those provisions. As you may see on the bottom left-hand side of the page, our total loan coverage ratio is still at a prudent 3.8% level.
Turning to liabilities on page 8. Loan to deposit ratio decreased 68 basis points to 67%, due to our muted loan growth this quarter. On the right-hand side table, we see that deposit share in total liabilities declined roughly 4 points, while interbank money market share inched up by 4 points. So this strategic shift aim is to mitigate the marginal cost. In terms of the effects, wholesale funding, consisting of mainly subordinated debt as of first Q, only makes up 3% of total liabilities. Details of deposits are on the next page. Total deposits are up by 5% quarterly and 53% on a yearly basis, mainly driven by FX savings accounts. TL deposits shrank by 2% quarterly, in line with the decrease in appetite for TL loans.
In terms of effects deposits in USD terms, they increased roughly 5% quarter-on-quarter, driven by savings accounts and interbank deposits. On page 10, we'll see further details of deposits. Demand deposits up 9% quarter-on-quarter, reaching 24% share in total deposits, which alleviates the pressure on deposit costs stemming from the policy rate hike cycle. On to page 11, cost, yield, and spread details. Following the 750 basis points increase made by the CBRT against the increase in the main trend completion, the revaluation process of assets continued throughout the quarter. Due to the success of the CBRT in forward guidance in the recent periods, banks have carried out loan pricing quickly in advance as their forecast of interest rates increase. In this context, there has been an overall improvement in spreads due to the asset repricing trend.
Blended spread improved by 240 basis points. In detail, TL loan yields have increased 600 basis points, while cost of deposits increased by 500 basis points, despite the 750 basis points policy rate hike since end 2023. So our TL spreads improved by roughly 100 basis points. In terms of FX loan yields, it increased 50 basis points, while FX deposit costs improved 100 basis points, and this reflects as a 150 basis points improvement in FX spread. Moving to P&L items on page 12. Net interest income is up by 19% quarterly, driven by the improvement in spreads. In terms of net fees and commissions, they improved 17% quarterly and 168% year-on-year, both above the inflation rate, mainly due to the continuing progress in payment systems.
Next, details of the profitability. Total operating revenues up 42% quarter-on-quarter, driven by the improvement in NII and net fees and commissions. As you may see in the right-hand side chart, net trading costs came in at TRY 11.6 billion, similar with the previous quarter, and it is due to rising swap costs resulting from the increased rates. Though we have produced some trading gains and loan sales income this quarter, which makes our trading flow similar with the previous quarter. On the regulation side, remuneration on required reserves also supported our income. All in all, we reported net income of EUR 4.8 billion, up by 134% quarterly, while ROE came at 14.8%, improving 8 points comparing with the Q4. On page 14, we have the cost details.
OpEx up by 38% quarter-over-quarter, driven by HR expenses due to the salary increase made in the beginning of the year. On a yearly basis, OpEx up by only 2% because of the EUR 7 billion amount to earthquake donation. If we exclude this, OpEx would be up by 88% year-on-year. Now, the solvency ratios. Reported unconsolidated CAR came at 13.2%, down by roughly 100 basis points comparing with the previous quarter, mostly driven by the currency rate change for risk-weighted assets in various states forbearance measures. If we exclude forbearance, CAR and T1 will be roughly 100 basis points, and CT1 will be roughly 95 basis points lower from the reported ratios. Moving to our digital activities on the next page.
The number of active digital customers reached 6.4 million, with the help of our ongoing efforts to acquire new customers. Total digital transactions grew by 31% year-over-year, while our non-branch transaction share maintains its great position with 98%. These were my final remarks, and thank you for listening. Now we can move to the Q&A session. Thank you.
If you have any questions, please, you can ask in both audio or written forms. If you ask your question in audio, you can push the raise hand button and ask your question. Or if you wanna ask your question in written form, you can write on the chat. I think there is no question. Thank you for all joining our quarterly earnings call. Have a nice day!