Right. There we go. Right, ladies and gentlemen, welcome to the VakıfBank First Quarter 2023 Conference Call and Webcast. Thank you very much for standing by. There will be a Q&A session following the presentation. If you would like to ask a question, please press star five on your telephone keypad. That easy. To participate in our open Q&A, just type your question into the ask a question text area and then click the Submit button. With that, I will now hand you over to your host, Mr. Ali Tahan. He is the Head of International Banking and Investor Relations at VakıfBank. Mr. Tahan, as always, the floor is yours, sir.
Thank you, Rob. Good afternoon, everybody, and welcome to VakıfBank First Quarter 2023 Earnings Conference Call. As always, let us briefly walk through the important highlights of the quarter and thereafter, together with Nihan, we are more than happy to answer your all possible questions. As you can see on the first page, in this quarter, in line with the market consensus, we delivered slightly above than TRY 4.5 billion net income, which is up by 50% compared to the first quarter of previous year. Apart from this, quarterly year-over-year net income growth, as you know, this quarter, for the earthquake region, we donated TRY 12 billion.
To compensate the negative impact on the P&L, at the same time, we equally released TRY 12 billion from the free provisioning. This free provisioning and donation created no P&L impact overall. After releasing this TRY 12 billion free provisioning, now we are still having around TRY 7 billion free provisioning in our balance sheet. Apart from that, during the quarter, our coverage ratio, especially NPL coverage ratio and total NPL cash coverage ratio continued to increase. To provide more specific numbers in terms of NPL cash coverage ratio, it further went up to more than 83%, which was 81% a quarter ago.
Total NPL coverage ratio continued to increase to above 215%, which is again an all-time high NPL coverage ratio. While we were delivering this quarterly net income, we were also continuing to strengthen our provisioning numbers. The next page has important highlights of the quarter related to our balance sheet and P&L. Of course, one of the most visible developments of the quarter was related to robust total revenue growth, driven by both eye-catching fee income growth as well as supportive trading income. In this quarter, our annual fee income came at 136% year-over-year. Our quarterly fee income growth came at 14% compared to Q4 of last year.
Thanks to this very eye-catching fee income performance, fee to OpEx ratio came above than 51%, 51.3 in this quarter, which is one of the highest in the last couple of years. Apart from this very strong fee income, our revenue generation capacity also supported by a strong TRY 2.3 billion trading income. This trading income is also double up compared to the same term of the previous year and also 19% up compared to a quarter ago. Out of this TRY 2.3 billion trading income, we also had around TRY 500 million swap cost, which decreased almost 52% year-over-year and almost 40% Q-over-Q.
Apart from this, robust total revenue generation capacity on the balance sheet side, on the lending side especially, this quarter, we had retail heavy, quarterly, lending growth, mainly supported by earthquake, support packages in the form of, general purpose consumer loans, retail credit cards and retail overdraft. In this quarter, we had total lending, growth of 16.5% quarter-over-quarter. Of course, this was mainly driven by Turkish lira loans. Turkish lira loans are up by 22.8%. As we mentioned, it was mainly driven by the retail side. On the FX side, FX loans were flattish quarter-over-quarter. On year-over-year terms, it was down by 6.9% compared to the same term of the previous year.
Another important highlight of the quarter was related to interest structure of the balance sheet. Similar to what we did in the year of 2022, we also continued to make our especially Turkish lira interest-earning assets coming from more floating-rate assets rather than fixed. As of first quarter, within our Turkish lira loan portfolio, almost 80% now became floating. Only remaining 21% are coming from fixed-rate loans, dominantly coming from the retail side. The same is also true even for Turkish lira securities in terms of the interest rate structure. Out of total TL securities as of first quarter end, 83% are coming from floating-rate Turkish lira securities, coming from both floating as well as CPI, and only 17% is coming from fixed-rate Turkish lira securities.
This kind of composition of both Turkish lira securities and Turkish lira loans puts us relatively more advantageous position and creating a much robust hedge mechanism against a possible change in the interest rate environment. Apart from this, another important development came in the form of capital injection. In this quarter, we had TRY 32 billion CET1 injection by the main shareholder of Turkey Wealth Fund. And as a result of this capital injection, our paid-in capital amount increased to TRY 9.9 billion, which was 7.1 previously. And this capital injection created almost 284 basis points positive impact in our solvency ratios, both in the form of total CAR as well as in the form of CET1 and Tier 1 ratios.
Apart from that, very strong solid liquidity levels also maintained during the quarters. In terms of short-term liquidity level, our hard currency LCR continued to remain strong at 466%. Total LCR came at 177%, one of the highest in the last couple of years. Apart from these very strong short-term liquidity levels, we also had around $7.1 billion free hard currency liquidity. More importantly, in terms of Net Stable Funding Ratio, Net Stable Funding Ratio as of first quarter end came at 131%, one of the strongest in the peer group, and well above than the BRSA requirement of 100%.
On the LTD ratios, loan-to-deposit ratios, we also see further decrease in our total loan-to-deposit ratio, which came down to 87%, which was 94% a year ago. More importantly, as of first quarter, our Turkish lira loan-to-deposit ratio further came down to less than 100% area, came at specifically 96%, which was 116% a year ago. Another important highlight of the quarter was related to very remarkable international funding transactions. We just announced today a new rollovers for our May syndication with the amount of $825 million with the participation of five new banks compared to a year ago, with the total participation number of banks of 36.
Apart from that, maybe more importantly, in this quarter, we also issued $2 billion DPR securitization with the participation of nine different international investors. This $2 billion DPR at once was the biggest DPR issue, not only in the entire history of VakıfBank but maybe in the entire history of Turkish banking sectors. Therefore, especially, this DPR issue was very remarkable with the five year final maturity profile. Apart from those two remarkable fresh international funding transactions, we also had a Eurobond redemption in the beginning of the year with the amount of $650 million without any fresh Eurobond issuance. On page four, you can see the P&L details item by item on a year-over-year and Q-over-Q basis.
One important development is related to effective tax rate. Similar to Turkish banking sector in general in the first quarter, our effective tax rate also came negative at -12.5%, mainly because of the free provision reversal as well as heavy donation amount under our OpEx with the amount of TRY 12 billion. Because of those two items in this first quarter, our effective tax rate actually came negative. On page five, you can see our net interest margin. Reported twice in the quarter, our net interest margin came down to 1.8%.
Assuming we have a sluggish CPI linkers contribution in Q1 versus Q4 of last year, our comparable reported net interest margin would be 3%, which is more or like in line with our full year guidance. Similarly, our swap adjusted net interest margin would be 2.8%, with the similar assumption of CPI contribution. As you know, this quarter, our CPI expectation for October to October came down to 37%. A quarter ago it was 85%, with the full correction of the full year. But just to be on the conservative side, we decided to start the year with 34%, which promises additional potential interest income for upcoming quarters.
This 34% CPI estimation produced around TRY 9.7 billion interest income out of our CPI portfolio. As of first quarter end, the CPI linkers portfolio shares in our shareholder equity already exceeded 100% threshold at 104%. Maybe more importantly, unlike many peer group banks, average real yield in our CPI linker portfolio remains strong at CPI + 2% area. As you know, in many cases, the average yield for CPI portfolio is below the CPI itself. In our portfolio we still have the advantage of above the CPI 2% real yield for our CPI portfolio. Another important development related to this page can be seen on the left-hand side below chart related to total money market funding.
Our quarterly average total money market funding decreased to even lower compared to a quarter ago. Here you can see a decreasing trend, given the fact that the real liquidity Turkish lira providing channel became Turkish lira deposit gathering rather than money market. In line with this declining trend, quarterly average cost of money market funding also came down to less than 9% in line with the policy rate, 8.9% more precisely. Equally important, in terms of the swap usage. Swap usage also in a declining trend, which came at TRY 42 billion during the entire first quarter. Swap cost also declined to TRY 511 million , which was more than TRY 800 million even a quarter ago.
On the next page you can see the eye-catching fee income, commission income growth across the board. Sector-wide speaking, we also see a similar trend. By looking at the BRSA data, we understand that sector fee income growth on an annual basis is also above 120%. In our case, this number is even stronger at 136%. In line with the sector also, we also understand there is also some sort of trade-off between interest income and fee income. Maybe interest income in our loan portfolio was lower than our potential, but to some extent it was compensated by relatively higher fee charge. Therefore, the main contributor effect came from cash lending related fees, which makes around 51% of total fee income breakdown, and followed by payment system.
In terms of quarterly and annual growth, cash lending was the strongest contributor in terms of quarterly fee income growth. This is also the case for the annual growth rate with more than 174%. As a result of this strong fee income performance, our fee to OpEx ratios delivered one of the highest with the ratio of 51.3%. The next page is related to OpEx. Again, by looking at sector data, we understand that sector also had around 150% year-over-year OpEx growth.
Excluding TRY 12 billion donation in the first quarter, our comparable OpEx growth year-over-year would be 163%, which is more or less in line with the sector average. In terms of the breakdown HR versus non-HR, we see a slightly higher increase in our non-HR OpEx growth with 200% year-over-year, while HR cost increase remained at 116%. Therefore, as a result of that, in terms of the breakdown of OpEx, the share of HR cost further came down to 37%, while administrative and all other non-HR costs constitute around 63% of the total OpEx. Remember, that ratio was around 40- 60, but because in last year, OpEx grew mainly driven by administrative and non-HR OpEx growth side, now the ratios have slightly changed.
On page eight onwards, we can see the developments related to balance sheet, starting with the lending growth. Overall, in this quarter, VakıfBank total lending growth was 16.5. TL-wise, it was almost 23%. FX lending wise, it was flattish. All of those numbers are slightly above than the sector growth. Therefore, across the board, we continue to gain market share. Our ranking in total lending market share remained as number two, which is same compared to 2020- 2022 year end. In terms of the quarterly lending growth, retail lending growth is very visible. As you can see, quarterly lending growth is 38%.
Out of this, in this quarter, we provided around TRY 9.4 billion earthquake support package loans to retail customers living in the earthquake region. That was one of the main driver of the quarterly retail lending growth. This GPL growth also followed by very strong retail credit card and retail overdraft. As a result, most of the quarterly Turkish lira lending growth came on the retail side. On the non-retail side, it was a much more balanced and relatively stable lending growth. On the SME side, we see around 13%, and on the corporate and commercial side, we see around 11% quarterly growth.
As of first quarter end, Turkish lira loans make 73% of total loans, while the remaining 27% is coming from FX loans. The share of FX loans each and every quarter started to decline. Remember, that was hovering around 33% in regular times. Now it came down to 27% as of first quarter. Page nine is related to loan portfolio. Especially in this quarter, CGF loans are remarkable. As you can see on the left-hand side, below chart, this quarter we had both earthquake-related and other CGF loan exposures. In this quarter for the SMEs, we had fresh exposure of TRY 1 billion.
More importantly, other CGF loans under different CGF packages, which are not covering COVID-related CGF loans, increased to TRY 16.4 billion, which was TRY 9 billion a quarter ago. Especially on the retail general purpose consumer side, as well as on the SME and corporate and commercial lending side, this quarter, CGF coverage was very visible across the board. On page 10, you can see the ratios and numbers related to asset quality. NPL ratio in line with the sector continued to come down at 1.8%. NPL coverage ratios increased, especially this increase is very visible in the form of NPL stage coverage ratio, which materialized at 83.3% as of March, which was 81.1% a quarter ago.
In terms of the stage two, similar to NPL ratio, stage two ratio in the total loan portfolio also went down to 7.2%, which was 8.3% a quarter ago. NPL stage two coverage ratios remained more or less flattish around 24%, one of the highest in the peer group banks also. Apart from NPL ratio and stage two ratios, this quarter we still have positive net cost of risk with the precise number of 69 during the quarter. This decline compared to a year ago, more or less also in line with our initial budget expectations. Conservatively, out of this 69, this net cost of risk we also provided around 20 basis points net cost of risk proactively for the loans we provided for the earthquake region.
Page 11, related to deposit, especially in this quarter, as you know, because of the regulatory environment, Turkish lira deposit gathering was very important. One of the target for the banks was to make Turkish lira deposits in the total deposit portfolio at a higher percentage. As of first quarter end, in terms of those regulations, we exceeded 60% threshold for both retail and commercial segments in terms of TL deposits over total deposits. Retail TL deposits made 62% of total retail deposits. On the commercial side, this ratio was even stronger at 64%. We successfully delivered to exceed this 60% threshold, which resulted us not to accumulate additional long-dated fixed-year Turkish lira securities.
Equally important, apart from this target of Turkish lira deposit composition, in terms of the total deposit growth, we had around 11% total deposit growth. Again, similar to lending side, that was also mainly driven by Turkish lira side. Turkish lira deposits were up by almost 12% Q-over-Q. On the FX deposit side, because of this regulatory environment, we had around 7.8% contraction in our FX deposit portfolio in dollar terms, which is also in line with the overall sector trend. Because of those developments, in terms of the currency breakdown, around two-thirds of our total deposits now in the form of local currency and only one-third in the form of hard currency deposits, mainly coming from euro and dollar accounts.
As of first quarter also, FX index deposit portfolio reached TRY 184 billion. Out of this outstanding amount, we see a balanced distribution among retail and corporate clients. Out of this total amount, 47% are coming from retail accounts, while the remaining 53% are coming from the corporate accounts. As a result of those numbers and those developments, we see additional declines in all loan to deposit ratios, blended loan to deposit ratios, Turkish lira loan to deposit ratios, as well as FX loan to deposit ratios. Maybe for the first time, FX loan to deposit ratios even came lower than 70% area. On page 12, you can also see the developments related to wholesale borrowing and external funding transactions.
DPR funding, as we discussed in the highlight, was very remarkable with the $2 billion fresh DPR issuance with the participation of nine different international banks. Out of those, two were the banks from U.S., two banks from U.K., two banks from Japan, one bank from Gulf region, and two banks from the continental Europe. It was a very well-balanced DPR issuance with the participation of well-diversified location banks. It increased our again total wholesale borrowing amount to $13 billion, despite $650 million redemption, Eurobond redemption, in the beginning of the year.
As of today, our free hard currency liquidity stands at $7.1 billion, very comfortable level, which provides 1.4x coverage for the upcoming one-year period of time. Net Stable Funding Ratio also remains strong at 131%. On the solvency ratio side, as you know this quarter, there is a very limited differential numbers between reported solvency ratios versus solvency ratios without the BRSA forbearance measures. Those numbers now very similar to each other. Especially after TRY 32 billion fresh capital injection in the quarter, which boosted our capital ratios by 284%, our solvency ratios continued to increase. Total CAR came at 15.9. Tier 1 ratio came at 14.3.
CET1 ratio came at 12.6%. Including TRY 7 billion free provisioning to our hypothetical capital ratios. Our core ratio, Tier 1 ratio, and CET1 ratios will be 16.5%, 14.9%, and 13.3% respectively. All of those numbers are well above the regulatory requirements as well as above our internal capital buffers. Therefore, we believe this capital injection was also very timely and was very effective. For the sake of the time, I don't want to go through the remaining part on the appendix page. Thank you very much for your patience. If you have any questions, we are more than happy to answer. Please let me hand over to Rob again at this stage.
Thank you, Mr. Tahan. All right, ladies and gentlemen, as Mr. Tahan said, we are now. It's time now for the question and answer session. If you would like to ask a question, audio question, please press star five on your telephone keypad. It's that simple. Then to participate in the written question and answers, just type your question into the ask a question text area and then click the Submit button. Right now we'll see. We'll have the floor open to see if there are any audio questions, and if not, we'll move on to the written questions. Star five on your telephone keypad for audio questions. The floor is open. All right, Mr. Tahan, we don't seem to have any audio questions coming through. If you would like to start with the written questions, that would be great.
Thank you, Rob. To my knowledge, we don't also have any written questions. I mean, today is a very critical day for Turkey, especially following the election outcome yesterday. Normally, we are supposed to announce our first quarter financials as of last week. Because of the head office movement and because of some issues related to logistics and movement, we couldn't make it last week. Sorry for this last-minute change, actually. We are the only remaining department still working at the old head office division. This is the last conference call we are making from here. Going forward, in a very short period of time, we will also be moving to our new head office location.
With this occasion, we would like to thank everybody for their participation. We would like to also notify you in case you have additional follow-up questions. We are at your disposal. We are available all the time. With this occasion, we would like to thank you and say goodbye as of now.
Thank you, Mr. Tahan. Yes, indeed. With that concludes this webcast, and we wanna thank you very much for your participation. You may now disconnect. Thank you.