Well, good morning, everybody, and thank you for joining us for Absa's 2021 results presentation. I'm going to start with the operating environment we faced during the period and give my perspective on our performance. Thereafter, Punki will unpack our numbers, following which I'll take you through our strategy refresh, focusing on sustainability. At the end, I'll provide our guidance for 2022 and our medium-term targets, and then we'll take your questions. At a headline level, the macroeconomic backdrop was better than we expected last year. As you can see, South Africa grew 4.9% last year, rebounding from the depths of the downturn of 2020. This growth is ahead of the 3% that we expected a year ago. On the production side, agriculture recovered strongly while construction shrunk for the third consecutive quarter.
It's worth noting that the fourth quarter real GDP was 1.7% below pre-pandemic levels. South Africa's economic recovery has been uneven and remains incomplete. Its recovery has had two phases. The first started in the second half of 2020 and continued through the first half of 2021. It saw a robust expectations beating rebound in economic activity due to strong policy support, improving global economic activity, and a surge in export commodity prices. Unfortunately, the next phase, commencing in the second half of 2021, has been less inspiring, including some adverse supply shocks. With inflation increasing towards the upper end of the Reserve Bank's targets in late 2021, the MPC increased policy rates by 25 basis points in November. The rate increase was slightly earlier than we expected and signals the start of a rising cycle.
Turning to our Africa regions, all our presence countries look to have returned to positive economic growth during 2021, with those countries hardest hit by COVID-19 related economic slowdowns the previous year generally recovering faster. From 2020's slight recession, we expect strong GDP growth of 5.7% from our ARO countries in 2021, somewhat more than we forecast a year ago. I should mention that despite weakening in the second half, the rand was 14% stronger on average against our ARO currencies during the year, causing a 2% drag on group revenue growth. While South Africa's GDP recovered materially, the macro backdrop faced a number of challenges that we highlighted in August. For starters, South Africa's stretched power supply remained a challenge.
As we cautioned in August, last year's load shedding was considerably worse than the previous highs of 2020, with some intense bouts, particularly in the second half. Moreover, the current load shedding is concerning and a clear risk to sentiment and this year's growth. Second, 2021 had three waves of COVID-19, including the tail end of the second wave in the first quarter, the third wave in winter, and the Omicron wave in the fourth quarter. The third wave was worse than we expected, particularly in Gauteng. Fortunately, the Omicron wave abated very quickly with relatively mild virulence, and government eased lockdown restrictions in late December. Lastly, the unrest and looting in parts of KwaZulu-Natal and Gauteng in July were deeply concerning, hitting not only economic activity, but also damaging fragile consumer and business confidence.
We navigated this challenging operating environment and the sudden departure of our chief executive in April, particularly well to produce record results. Pleasingly, revenue increased 6% to ZAR 86 billion, driven by 9% higher net interest income. Revenue growth was better in constant currency, up 8%, our strongest performance for several years. Revenue growth is an area where we have generally lagged peers in the past, so it's been good to see that improvement. As Punki will show, excluding one-offs, our revenue growth was around 2% higher on an underlying basis. Our diluted normalized HEPS rebounded strongly, up 132% from the low 2020 base impacted by COVID-19 and the significant economic downturn. Importantly, it was also 14% above pre-COVID-19 levels.
It's worth mentioning that consensus HEPS for us increased by 33% in the past year, and today's results are 4% ahead of consensus at the time we released our trading statement very recently. Within these numbers, our second half performance was particularly strong, with 9% higher revenue in constant currency and record earnings of ZAR 10 billion. Our return on equity was 16.3% in the second half compared to 15.3% in the first. Reflecting this positive momentum and improved equity markets, our total shareholder return improved to 30% last year, our best performance since 2014. Now looking at the salient features, these all showed very positive trends. Given solid revenue growth, pre-provision profits increased 7% to over ZAR 38 billion. Pre-provision profit grew 10% in constant currency and even more on an underlying basis.
Our credit loss ratio improved more than we expected, falling significantly from last year's high base to the bottom end of our through the cycle target range. While it benefited from model enhancements in RBB and some releases from our macro overlay, our coverage remains strong and still includes ZAR 4.8 billion of macroeconomic variable overlays. Our return on equity improved to 15.8%, returning to 2019 levels and exceeding our 14.5% cost of equity. We achieved this while increasing our CET1 ratio materially, which when combined with strong loan coverage, positions our balance sheet with tremendous resilience and a strong opportunity to fund our growth ambitions. Lastly, our NAV per share increased by a robust 13% given our strong earnings growth. This slide highlights the strong second half momentum within our overall 2021 pre-provision profits.
During the second half, our net interest income increased 12% year-over-year, well above our first half growth, in particular due to the weaker rand during the second half. Similarly, COVID-19 related claims and provisions in Absa Life were significantly less of a drag on group non-interest income during the second half. As a result, our revenues grew 8% year-over-year in the second half, or 9% in constant currency, well above the 3% in the first half. Cost growth was also slightly lower in the second half, largely due to the split of bonus accruals in the prior year. Combined with strong revenue growth, our second half pre-provision profits grew 14% year-over-year or 16% in constant currency. During 2020, we focused on preserving capital and liquidity and protecting our balance sheet and client franchise rather than on growth.
While shifting more to growth last year, the balance sheet trends remained very resilient. Firstly, our capital ratios strengthened further. Given strong earnings growth, our CET1 capital ratio improved strongly to 12.8% above our board target range from 11.2%, which was at the bottom end of our target range. Besides capital generation, low risk-weighted asset growth also contributed to our capital ratio. This benefited from substantial risk-weighted asset optimizations totaling ZAR 45 billion in CIB and RBB, which we've worked on for some time. Our very successful issuance of $500 million of Basel III compliance additional tier one capital is evident in the graph. It was heavily oversubscribed and a hugely successful debut issuance for our region.
At 17%, our total capital adequacy ratio comfortably exceeds our target of above 14.5%, so there's scope for us to optimize our capital stack. Strong deposit growth was another feature of our results. Total customer deposits grew 12% to ZAR 1.1 trillion and continues to exceed our customer loans. Deposit growth contributed to our revenue momentum and net interest margin. We show our RBB South Africa deposits here because it's a good indicator of our customer franchise health. It's grown low double digits for four consecutive years now. Our share of retail deposits in South Africa improved slightly to almost 22%. CIB's deposits rose 11% excluding repos, with average deposits 19% higher. Another strong performance. Looking at our divisional performance, normalized headline earnings recovered very strongly from 2020 lows, with RBB more than doubling and CIB up 54%.
CIB is 30% above pre-COVID levels in 2019, and RBB South Africa is 1% lower. Significantly lower credit impairments drove RBB's earnings growth since its pre-provision profits declined 3%, given Absa Life's elevated mortality claims, customer-centric price cuts and higher performance costs. CIB's pre-provision profits grew 10% or 16% in constant currency and its credit charge dropped 78%. Our divisional returns rebounded to well above the cost of equity. RBB's returns on regulatory capital improved to 18.5%, with RBB South Africa's higher at 21%. RBB ARO remains low at 5%, indicating there's substantial opportunity for improvements there. Having stabilized its franchise, RBB South Africa is in the second phase of its 2018 strategy now, focusing on smart growth.
Its priorities are to improve customer primacy, progress with digitization, and growing capital light revenues, including in our integrated bank assurance operations. CIB's return on regulatory capital improved to almost 22%. Having completed the balance sheet-led phase of its strategy and the separation from Barclays, it's also successfully prioritizing customer primacy plus deposits and non-interest revenue growth, carefully balancing growth and returns. CIB did well to complete its separation from Barclays and replace the lost revenue that came from PLC connectivity, as well as implementing new technology platforms and capabilities which will benefit our client franchise nicely going forward. I'll now hand over to Punki to take you through our financial performance in more detail. Over to you, Punki.
Thanks, Jason, and good morning, everybody. Throughout my presentation, I will talk to our normalized results, which better reflects our underlying performance because it adjusts for the consequences of separating from Barclays. We reconcile these with the reported IFRS results in our booklet. Starting with our income statement. It is very evident that our strong earnings growth was largely driven by far lower credit impairments. Although net interest income growth also contributed. Given the tough operating environment, revenue growth of 6% was solid considering the large impact of COVID-19 on Absa Life that I'll unpack later. In constant currency, our top line grew 8%, which better reflects our underlying performance. Net interest income grew 9% or a strong 13% in constant currency, largely due to margin expansion.
South Africa's net interest income grew 14%, while Africa Regions was down 3%, although it did increase 8% in constant currency. Non-interest income was flat or up 2% in constant currency and higher on an underlying basis. As you have come to expect of us, operating expenses remained well controlled, growing 4% largely due to higher bonuses given our improved performance. Excluding bonuses, group costs grew 1% or 3% in constant currency. These combined to produce 7% higher pre-provision profits or 10% in constant currency. Excluding insurance, our group pre-provision profits increased 12%. Our credit impairments fell 59% or ZAR 12 billion, somewhat more than we expected as our credit loss ratio improved to the bottom end of our through the cycle target range following last year's significant charge.
The large increase in other is mainly driven by higher taxation given the improvement in pre-tax profit. These drivers combined to produce normalized headline earnings of ZAR 18.6 billion, which was up 133% relative to last year. Turning to our balance sheet. Average interest-bearing assets were up 2% given modest growth in average customer loans. South African customer loans grew 7% to ZAR 893 billion, and Africa Regions increased 15% or 7% in constant currency. RBB customer loans rose 9% to ZAR 618 billion, while CIB grew 7% to ZAR 398 billion. Our largest book, Retail South Africa, increased 9% to ZAR 429 billion, largely driven by solid growth in secured lending.
Relationship banking grew 3% as muted demand for commercial asset finance and commercial property finance dampened continued solid growth in agri. RBB ARO 's loans grew 15% or 8% in constant currency, mostly due to growth in personal lending. Total CIB customer loans increased 7% to ZAR 398 billion, given improved second half production, even though most of the growth was due to 39% higher reverse repurchase agreements. Excluding these, CIB's loans grew 3%. CIB South Africa grew loans 6% to ZAR 338 billion, mostly due to reverse repurchase agreements. Given reduced demand for short-term funding, its average book decreased slightly. CIB ARO customer loans grew 14% or 6% in constant currency, with strong growth in trade loans. Also, its average loans were somewhat lower over the year.
Our retail market share continued to increase slightly to over 22% as we grew our secured books. Home loans grew 9%, reflecting strong new business production for the previous 6 consecutive quarters. Total applications rose 18% and new mortgages registered increased 49% given healthy demand, improved turnaround times, and enhanced originator relationships. Our market share increased slightly to almost 24%. Vehicle and asset finance grew 10% or 24% higher production, increasing our market share to over 23%. Embedding our digital application system across dealer, branch, and virtual channels resulted in industry-leading turnaround times. Credit card grew 7%, largely due to 3% in total limits and higher utilization, with card turnover 13% higher, albeit flat on pre-COVID 2019 levels. Personal loans increased 1% given our tighter risk appetite until the second quarter when this was released.
Production improved materially in the second half. Personal loans remain a small portion of our overall retail lending, and our market share is very low at just 10%. Growing core deposits remains a priority and is a good indicator of the health of our franchise. Strong deposit growth has produced positive balance sheet draws over the past three years. Our deposits grew 12% ahead of 7% growth in gross customer loans. Our average loan to deposit ratio reduced to 84% from 86%. It is pleasing that customer deposits increased to 82% of our total funding, reducing the proportion of bank deposits and debt securities. Managing our liquidity has been a priority over the past two years, and our sources of liquidity remain strong, growing 16% to over ZAR 300 billion.
Lastly, our liquidity coverage ratio of 117% and net stable funding ratio of 116% are both comfortably above regulatory requirements. Total customer deposits grew 12% or 10% in constant currency, with average deposits 12% higher. Excluding repurchase agreements, the growth was 11%. South Africa deposits increased 10% to ZAR 888 billion. Within this, retail rose 12% to ZAR 280 billion, improving its market share slightly to 22%. Transactional deposits grew 11%, while investment deposits rose 13%, which benefited from the migration of the ABSA Money Market Fund. Relationship banking grew 13%, a solid performance. Growth was similar in transactional and savings products, reflecting customers building up liquidity and the migration of the Money Market Fund, respectively.
Deposits are also a priority for CIB South Africa, particularly corporate, and rose 11% to ZAR 321 billion. Corporate South Africa grew 9% or 28% on average, driven by strong growth in notice, savings, and foreign currency deposits. It also benefited from the migration of the Money Market Fund. These were partially offset by a reduction in national government balances. Investment bank South Africa increased 17% on strong markets and repos growth. Africa Regions deposits grew 23% to ZAR 195 billion, in part due to weaker spot rand as it increased 12% in constant currency. RBB ARO deposits increased 21% or 9% in constant currency. Its growth was largely in transactional balances and foreign currency deposits rather than in investment products, where some competitors are pricing aggressively. CIB ARO grew deposits 25% or 15% in constant currency.
A strong growth in call and check deposits outweighed lower fixed deposits. In 2020, our net interest margin fell 33 basis points, predominantly due to significant policy rate cuts, which had a negative endowment effect that our structural hedge only partly offset. With rates largely flat in South Africa during 2021, the substantial negative prime reset did not recur, and our margin widened by 29 basis points to 4.46%. Our second half margin of 4.5% was back at 2019 levels. Unpacking the drivers, our lending margin continues to improve, again due to improved client pricing in home loans, vehicle and asset finance, and CIB South Africa. Mix-wise, faster growth in home loans and VAF than in unsecured retail and our overall interest-bearing assets was a drag.
Our deposit margin decreased in RBB South Africa, Corporate South Africa, as well as Africa Regions, reflecting lower rates and competitive pricing. This was partly offset by reduced reliance on wholesale funding, which has a positive composition impact. With the average prime rate in South Africa down 82 basis points, there was a drag on the endowment income on lazy deposits and on equity. Our structural hedge released ZAR 3.2 billion to the income statement, 8 basis points more than in 2020. The net impact of lower endowment on equity deposits, as well as the structural hedge, was a 4 basis points drag. The cash flow hedging reserve reduced to ZAR 800 million from ZAR 4.3 billion.
The nonrecurrence of prime reset losses from the 300 basis points of rate cuts in the prior improved our margin by 13 basis points, while higher yields on the liquid asset portfolio were also positive. Growing non-interest income is a priority. Looking at the graph on the right, however, 2020 was impacted by the COVID-19 lockdowns and the sharp reduction in economic activity, which dampened our fee income. Insurance was a significant drag this year, offsetting the improving growth in our banking non-interest income, particularly in global markets. Total non-interest income was flat and increased 2% in constant currency, given an improved second half performance. Looking at the components, the largest net fee and commission income grew 2% or 4% in constant currency. Within this, transactional income increased 1% with muted growth in RBB South Africa. Merchant income grew 10%.
It was pleasing to see 12% growth in CIB's fee income. Net trading, excluding hedge ineffectiveness, grew 17%, given a strong performance from global markets, which I will cover shortly. Other non-interest income dropped 31%, reflecting significantly higher life insurance claims and further reserving for the third and fourth waves of COVID-19 in South Africa. At a divisional level, RBB's non-interest income decreased 4%, largely due to reduced insurance income. Excluding this, it was flat, reflecting customer-centric pricing actions, the shift to digital from traditional channels, and subdued economic activity given COVID-19 lockdowns and July's unrest. CIB's non-interest revenue grew 22% or 28% in constant currency, an excellent performance. The growth was driven by the investment bank, given a combination of strong global markets and non-recurring fair value losses in the base.
Global markets revenue grew 14% or 20% in constant currency to over ZAR 7 billion, which is a credible performance. The markets histogram in our booklet shows a material year-on-year decline in lost days and a shift right to positive days. Markets SA rose 24% with fixed income and credit up 20% due to strong client flows and a couple of large client trades. After a strong second half, FX and commodities decreased 6% off a high base that benefited from significant volatility. Its underlying client activity was 13% higher. Equities and prime services rebounded from a low base with improved client flows and tight risk management. Although Markets ARO grew 2%, it was 14% higher in constant currency off a high base as it continues to diversify by product, client segment, and geography. Moving to costs.
Our operating expenses increased 4% or 7% in constant currency. Much of this growth was due to the sizable increase in bonuses off a very low base last year, given our improved performance. Excluding bonuses, costs were up 1% or 3% in constant currency. Total staff costs grew 4% or 7% in constant currency and remained the largest component at 55% of group costs. However, salaries decreased 1% as headcount reduced by 4% or almost 1,500. Provisions for bonuses rose materially in line with group earnings. Non-staff costs also increased 4% or 7% in constant currency. Calling out areas of high growth. IT costs grew 19% and amortization increased 12%, reflecting continued investment in digital platforms. Marketing increased 16% due to higher campaign spend, particularly in RBB South Africa.
Fraud and losses also rose materially in other, which was partially offset by reduced travel and entertainment costs. Of the other large items, property costs were flat, given our property optimization strategy and lower spending on COVID-19 protective equipment. Depreciation fell 9% on lower depreciation of physical IT infrastructure. Lastly, professional fees grew 2%, reflecting higher change and technology services spend, partially offset by insourcing of our IT staff in prog. It is very pleasing that our cost-to-income ratio has improved for the past two years. I want to give you a longer term perspective of the main components of our cost growth. Since 2018, our group costs grew 3% compounded annually. Within this sub-inflation growth, we have continued to invest heavily in technology. In fact, our total IT related spend, including technology costs, associated staff costs, amortization, and depreciation grew 16% compound.
We continued to invest even in 2020 when our total costs declined. At over ZAR 11 billion in 2021, total IT spend constitutes 24% of our group costs from 18% three years ago. The offset has come from areas such as marketing. Despite growing 16% in 2021, it has decreased 7% compound since 2018, largely due to a significant reduction in our sponsorship spend. Also, our cash transportation costs declined 4% compound, reflecting muted economic activity, the shift to digital, and increased cash recycling. We have also managed our property costs very well for several years. These grew just 2% compound over the period, given our optimization strategy, and we see scope for further efficiencies here. Lastly, our biggest item, staff costs, grew 3% compound since 2018, largely due to headcount reduction. Turning to credit impairments.
Our charge dropped significantly from the exceptionally high base of ZAR 21 billion in 2020. I'll spend some time unpacking the improvement. Both RBB and CIB's credit impairments dropped materially by 54% and 78% respectively, resulting in a ZAR 12 billion or 59% lower group charge. This reduction was largely due to the non-recurrence of the substantial ZAR 5.4 billion macroeconomic variable provision we raised in 2020. A net ZAR 1.2 billion MEV release this year, plus improved collections and model enhancements in RBB. Although single name impairments decreased 13% to ZAR 2.4 billion, these remain elevated with certain sectors still under pressure. Our group credit loss ratio improved substantially to 77 basis points at the bottom end of our expected through the cycle target range of 75-100 basis points from last year's high of 192 basis points.
The reduction exceeded our expectations. RBB's credit loss ratio fell significantly from 278 basis points to 121, which is within RBB South Africa's through the cycle target range of 110-155 basis points. It benefited from better underlying performance, model enhancements in the South African retail portfolios, and improved collections. RBB South Africa's models were also enhanced to achieve greater consistency between regulatory and IFRS model and to refine certain assumptions, including the mortgage loss given default model to reflect empirical workout behavior. These model changes decreased our first half charge by ZAR 916 million, with the largest reduction in home loans. RBB South Africa's NPL ratio has historically been an outlier to the sector due to a more conservative application of the definition of default in determining the staging of advances.
Aligning our definition to the industry, specifically on curing and the treatment of restructures, resulted in lower NPLs, particularly in the secured portfolios. The change reduced our credit charge by ZAR 166 million. Home Loans credit loss ratio improved to negative 5 basis points from 88 basis points due to the improved macroeconomic outlook, model updates, and improved collections. Vehicle and Asset Finance credit loss ratio fell significantly to 145 basis points for the same reasons. Everyday Banking's credit loss ratio dropped to 5% from 8.4%. Within this, cards charge fell 39% due to model enhancements, the revised definition of default, and the improved macroeconomic outlook. Personal loans credit impairments decreased 43% given strong collections, the improved macroeconomic outlook, and a reduction in SICR charges as customers cured from stage two.
These were partially offset by model enhancements that increased its charge. Relationship banking's credit loss ratio fell 67 basis points as arrears improved and it released some MEVs. However, single name charges increased as we proactively managed the sectoral risk within the portfolio. RBB ARO's credit loss ratio dropped considerably to 2% from almost 4% given non-recurrence of the coverage built last year and improved collections. Lastly, CIB's credit loss ratio improved from 75 basis points to 17, which is slightly below its 20-30 basis point through the cycle target range. The decrease was due to lower single name charges, a partial release of its macroeconomic overlays, and an improved portfolio construct in the performing book. Our group non-performing loans, or stage three loans, declined to 5.4% from 6.3%.
Unpacking the improvement, part of it was aligned to our overly conservative definition of default with our peer group. Implementing a revised definition of default produced a significant reduction in NPLs, particularly in home loans and vehicle and asset finance. We also sold some personal loans and cut legal balances while write-offs increased in our unsecured portfolios and the backlogs in legal processes in secured lending started to clear. Of course, 7% loan growth in the denominator also reduces the ratio. These positives were partially offset by increased delinquencies and higher NPLs following the expiry of payment relief. After our significant increase in total coverage in 2020, it decreased slightly last year. However, our coverage remains comparatively high at 4.1%, which we believe is appropriate for the operating environment based on our current expectations.
In these graphs, we also show our 2020 loan coverage after we changed the definition of default in the first half of last year to show the underlying trend in coverage. Stage 1 loan coverage decreased to 81 basis points, largely due to better macroeconomic outlook relative to 2020 expectations, which saw some release in macroeconomic overlays in both RBB and CIB. Stage 2 loan coverage rose from our adjusted level due to a change in mix as CIB South Africa balances, where coverage is lower, decreased the most last year. This offset higher coverage in home loans and everyday banking. Stage 3 loan coverage increased to 44%, in part due to our definition of default, as loans with lower coverage migrated to stage 2.
It also reflects a shift of macro overlays to stage three as the payment relief book matures, some aging in the home loans and vehicle asset finance legal books, and additional cover on distressed names in CIB South Africa. Moving to our divisional performance. RBB's earnings rebounded strongly off a very low base, more than doubling to ZAR 10.2 billion. Its growth was largely due to 54% lower credit impairments as its pre-provision profits decreased 3% impacted by insurance's significantly higher claims and COVID-19 provisions. Excluding insurance, pre-provision profits grew 2% and were substantially stronger in the second half, increasing 10% year-on-year. During the year, RBB cut fees by ZAR 600 million to alleviate strain on customers. Excluding this and total insurance, its revenue grew 3%, and its pre-provision profits grew 5%.
CIB's earnings grew 54% to ZAR 7.8 billion or 64% in constant currency. Its pre-provision profits grew 10% or 16% in constant currency, and its impairments fell 78% off a high base. CIB's earnings were almost a third higher than 2019 pre-COVID-19 levels. As noted, its non-interest income grew 22% or 28% in constant currency well above 10% cost growth. The ZAR 2 billion improvement in head office, treasury, and other was due to non-recurrence of the large prime reset losses in the base, higher yields on the liquid asset portfolio, and lower funding costs. Unpacking RBB's franchises all rebounded significantly, with the exception of insurance. Home loans produced an excellent performance with record profits of ZAR 2.5 billion. Strong 12% net interest income growth was well ahead of 3% cost growth, generating 15% higher pre-provision profits.
As mentioned, its credit impairments improved considerably to a small release, mostly due to model refinements. Vehicle and Asset Finance continued to generate strong pre-provision profit growth, up 18% on the back of 16% higher revenue due to 10% book growth and improved margins. Its credit impairments also dropped 53%, although its credit loss ratio remains above the through-the-cycle target range. These combined to increase its headline earnings by ZAR 1.5 billion year-on-year from last year's substantial loss. Everyday Banking's earnings grew 63% to almost ZAR 4 billion, largely due to substantially lower credit impairments in card and personal loans, which both rebounded from losses in 2020. The business faced several revenue headwinds, including moderate first half loan production, while the low interest rate environment compressed margins across the balance sheet.
Continued lockdowns in 2021, together with fee reductions and the shift to digital channels, weighed on fee income. These revenue headwinds resulted in lower pre-provision profit. Customer numbers increased slightly to 9.6 million, primarily in the middle market and retail affluent segments, which grew 3% and 2% respectively. Primary customers decreased slightly to 2.8 million, largely due to reduced transaction activity and income, particularly in entry-level banking. Digitally active customers grew 11% to 2.1 million, and the products per customer improved marginally to 2.4. South Africa Insurance earnings dropped by over ZAR 900 to 68 million, given significantly higher mortality claims and increased reserves in Absa Life due to COVID-19.
Life insurance lost ZAR 174 million as the second and third waves of COVID-19 were worse than expected, and it increased reserves to ZAR 423 million for expected impact of the fourth and potential fifth waves. Life's net premiums grew 7% to ZAR 4 billion, with growth in funeral and instant life business resulting from the integration into the bank. Short-term insurance earnings decreased 35% to ZAR 242 million as motor vehicle accident claims normalized off a low base and investment income decreased, given lower interest rate and a reduction in excess capital. Relationship Banking's earnings increased 49% to ZAR 3.5 billion due to 57% lower credit impairments and 5% higher pre-provision profits. Strong deposit growth and 14% higher card acquiring volumes supported 4% revenue growth, offsetting customer-centric fee reductions and lower check income.
Relationship Banking's returns remain very attractive. Lastly, RBB ARO's earnings improved by ZAR 700 million year-on-year, improving from a loss due to a 49% reduction in credit impairments and 8% increase in pre-provision profits. Within this, the banking operations rebounded strongly with 15% pre-provision profit growth while Insurance ARO was loss-making given significantly higher COVID-19 claims and reserving. Turning to CIB. This slide splits it by business and geography, although we run it on a pan-African basis. Corporate's earnings grew 69% to ZAR 2.3 billion or 88% in constant currency. Credit impairments were the main driver, declining significantly off a high base to a small reversal. Its pre-provision profits were flat, although this was 7% higher in constant currency.
Corporate revenue grew 5% or 10% in constant currency, with South Africa up 9% and ARO down 1%, Africa up 10% in constant currency. Corporate South Africa's growth reflects strong increases in deposits and trade finance, partially offset by subdued demand for short-term funding. Costs grew 8% or 11% in constant currency, largely due to higher bonus provisions. Investment bank earnings grew 48% or 55% in constant currency to ZAR 5.5 billion. This reflects the combination of 15% pre-provision profit growth and 61% lower credit charges. Its revenue grew 14% or 18% in constant currency, with solid growth in all business units. As mentioned, markets revenue rose 14% or 20% in constant currency, while commercial property finance grew 13%.
South Africa's revenue increased 22%, while ARO declined 1%, although it grew 11% in constant currency. Costs rose 13% due to higher bonus provisions and incremental run costs. Its cost-to-income ratio remains low at 39%. Using a geographic lens, CIB South Africa earnings grew 62% to ZAR 5.1 billion, giving 66% lower credit impairment charges and 18% higher pre-provision profits on the back of 17% revenue growth. Its return on regulatory capital improved to 19%. CIB ARO earnings grew 39% to ZAR 2.6 billion. The strong rand weighed on its performance because in constant currency, its earnings grew 67% and revenue was 11% higher rather than down 1%. Its credit impairments decreased 94%, resulting in a low credit loss ratio of 12 basis points.
CIB ARO's return on regulatory capital remains high at 30%. The 14% strong average rand was a headwind for ARO's contribution in 2021, although it was less in the second half, and the spot rand ended the year weaker. ARO's revenue decreased 2% to ZAR 20 billion, although it was up 9% in constant currency. Its earnings grew 107% to ZAR 3.1 billion, giving 67% lower credit impairments and 3% growth in pre-provision profit. ARO's earnings are still 9% below pre-COVID 2019 levels, while South Africa is 20% above 2019. However, it remains a meaningful contributor, accounting for a sixth of our group earnings and almost a quarter of our revenue. We see significant scope to grow our existing portfolio over the medium term.
In particular, we aim to improve RBB ARO's 70% cost-to-income ratio and its low 5% return on regulatory capital. We remain well-capitalized. Our CET1 ratio increased to 12.8% from 11.2%, which is better than we expected a year ago, given strong capital generation and lower risk-weighted assets. This is above the top end of our board target range of 11%-12.5% and comfortably exceeds regulatory requirements. RWAs increased 2% to ZAR 932 billion, with the largest component, credit risk, up 1%. As Jason mentioned, we had substantial optimization benefits of ZAR 45 billion across RBB and CIB. We remain capital generative, with profits adding 2% to the CET1 ratio over the year. Other includes nine basis points for the final phasing of IFRS 9, which was completed in January 2021.
There's also a 21 basis points increase in our foreign currency translation reserve, which offsets the currency-driven RWA growth. The strong CET1 ratio allowed us to resume dividend payments, initially at a payout ratio of 30% and increasing to 40% for the final dividend, which amounts to 43 basis points of CET1. Thank you for your attention. I'll hand you back to Jason.
Thanks very much, Punki. Clarifying our strategy was one of our biggest priorities as a leadership team last year. We refreshed it based on the latest market context while re-anchoring it to our 2018 strategy. We are confident that most of our key strategic calls in 2018 were the right ones that we've delivered well against and which remain very relevant today. Our purpose of being a leading African bank, bringing possibilities to life, has five key strategic themes. First, creating a winning, talented, and diverse team is obviously a prerequisite. Second, as I mentioned, both RBB and CIB aim to be the primary partner for our clients, a priority for us medium term. Third, deliberate market-leading growth includes targeted growth and allocating capital to attractive segments based on risk-adjusted returns.
Fourth, we prioritize digitization, which is a mega trend that has accelerated due to COVID-19 and a greater opportunity than we previously envisioned. We will continue to invest heavily there. Becoming a digitally powered business means creating a superior digital experience for clients and colleagues at the front end while using data as a strategic asset, continuously evolving our technology architecture, embedding state-of-the-art security and a digital culture and ways of working. We will continue to digitize key business processes and leverage digital partnerships to accelerate delivery. Lastly, the significant focus on ESG in recent years makes being an active force for good in everything we do even more important now. I'm going to spend a bit more time on that aspect today. Along with digital, ESG was elevated to even more of a priority from our 2018 strategy. This slide shows our refreshed ESG strategy.
Climate change is the main theme in the environmental agenda. We aim to become South Africa's sustainable finance leader, and we will soon publish an ambitious net zero carbon target while managing climate change risk. Inclusive finance is our main impact area within the social agenda, while promoting diversity and inclusion is also a priority. Given its importance, I want to spend some time on the progress we are making on sustainability. For starters, our ESG ratings suggest we're doing well. All seven of our global ratings improved last year, some materially. To highlight a few, we were particularly pleased with continued improvement to the 86th percentile amongst banks globally in our S&P SAM ESG rating. Also, our CDP climate change rating jumped by two notches. The only South African bank to improve last year.
We're one of only two banks in the FTSE/JSE Responsible Investment Top 30 Index, which uses FTSE Russell scores. We entered Corporate Knights' most sustainable corporates rating for the first time, ending up in the top 2% of banks globally. Lastly, we were tied first in Citigroup's CEMEA Bank ESG ranking, and first among South African banks in Integritam's ESG rating. In our view, sustainable finance offers a significant growth opportunity which is larger than the risks from climate change, at least near term. We were the first South African bank to announce sustainable finance targets. CIB aims to finance ZAR 100 billion of ESG-related loans and debt by 2025. On top of this, relationship banking plans to finance ZAR 2.5 billion or 250 MW of embedded power in South Africa by 2025.
Last year, CIB provided ZAR 19 billion of ESG-related financing, almost double its target for the year, while relationship banking's renewable finance grew 80% to around ZAR 460 million. Given South Africa's carbon-intensive economy, there's a huge opportunity to finance renewable energy. We're the leader here after dominating the fifth round of renewables, where our clients won over 80% of the deals. Cumulatively, we've been involved in deals totaling 5 GW. The sixth round is expected to close next month and the seventh by September. Government increased the cap on embedded power generation to 100 MW last June, and we see substantial interest from corporates to generate their own power, particularly in mining, which we're well positioned to finance.
You also would have seen our partnership with African Rainbow Energy, which created South Africa's largest black-owned renewables fund with over ZAR 6 billion in renewable assets. We've made good progress in embedding climate change into our risk management framework, including publishing a sustainability risk policy and rolling out an environmental and social management system. We're also focusing more on inclusive financing, including the mass market and SMEs, affordable housing mortgages and so forth. There's a big opportunity in funding where DFIs and other funders expect banks to have strong ESG credentials and proper ESG systems and controls. For instance, the IFC provided us with an attractively priced $150 million green loan last May, which was Africa's first certified green loan.
I was particularly pleased that our B-BBEE status returned to level one, and we expect to bring you details on our proposed BEE deal in due course. Before getting into our guidance, I'll cover the macro prospects as we see them. The outlook for the global economy in 2022 is particularly uncertain. Events in Ukraine are acute, and sharp moves in commodity prices and potential interruptions to supply are likely to trigger significant reassessments. Furthermore, high inflation in many developed markets is expected to result in moves to start normalizing accommodative policies with uncertain consequences for asset prices and flows into emerging markets. Against this highly uncertain global backdrop, we currently expect South Africa's economy to grow by 2.1% in 2022, getting back to pre-COVID absolute GDP levels by the end of the year.
We see some increase in fixed investment spending and exports being offset by higher imports, fiscal consolidation, and limited household income growth. Sectoral differences are likely to remain elevated, with high commodity prices boosting parts of the mining sector while households face the steep headwinds of increases in fuel and other commodity prices. We see more downside than upside risk to South Africa's economic outlook. Downside risks could also snowball quickly, while upside performance would be a slow grind stronger. Eskom's operational challenges and debt burden remain a key risk to growth and investor sentiment. Moreover, a fifth COVID-19 wave is expected to emerge as soon as next month, and its impact is uncertain at this point. Of course, the global outlook could deteriorate given the events in Ukraine.
Consumer price inflation is likely to remain elevated, particularly in the first half, and we expect the Reserve Bank to continue increasing rates in a measured way that is slower than the markets are currently pricing in. We think prime rates will increase to 10% in 2024, back to 2016 levels, and well below the previous 15% peak in 2008. Moving to ARO, we forecast strong 5.3% GDP weighted economic growth for our presence countries. Policy rates are likely to rise in many of them, albeit gradually. Based on these assumptions, and excluding further major unforeseen political, macroeconomic, or regulatory developments, our guidance for 2022 is as follows. We expect high single-digit revenue growth driven by improved non-interest income growth, in part due to lower COVID-19 related life insurance claims.
We expect high single-digit growth in customer loans and deposits, while our net interest margin will benefit from rising rates. The banking book net interest income sensitivity for a 1% rise in rates is about ZAR 600 million post the structural hedge impact on an annualized basis. We expect mid-single digit operating expense growth resulting in positive operating jaws and high single-digit growth in pre-provision profits. Our credit loss ratio is likely to increase, although remain in the bottom half of our through-the-cycle target range of 75-100 basis points. Consequently, we expect our ROE to be similar to 2021's. Lastly, our Group CET1 ratio is expected to decline but remain above 12%. We aim to increase our dividend payout ratio to at least 50% in 2022.
I'll now finish with our medium-term guidance, once again highlighting the unprecedented levels of uncertainty in the global macro environment. As you saw earlier, we expect modest GDP growth and gradually rising interest rates in South Africa medium term, with stronger economic growth from our ARO portfolio. To the extent that this macro scenario materializes, we aim to reduce our cost-income ratio to the low 50s and improve our return on equity to over 17% by 2024. Thanks very much for your attention. We'll move over to take your questions on Slido now. At Slido, I'm gonna read out the questions that have come through just in case any of you don't see them. The first one's from Charles Russell, and there's three of them.
How long do you anticipate to hold on to the ZAR 4 billion MEV, considering that you've only used ZAR 300 million since it was first raised in H1 2020? Punki, can you take that one?
Yeah, I'll do. Thanks, Chase. So Charles, I think thanks a lot for that question from your side. I think if we take a step back a bit, at the end of 2019, beginning 2020, we already sat on the balance sheet with about ZAR 1 billion, you know, in MEV provisions already. Then when the crisis hit, we added another, you know, ZAR 5.4 billion. In essence, I mean, you know, by the time we ended June 2020, we had, you know, just over ZAR 6 billion overall in provisions. When the macro improvement, you know, started to come through in the current year, we then released about ZAR 1.2 billion.
I think, at this stage, I mean, if I look at overall, I think it's hard, obviously, you know, to predict, you know, what's gonna happen as we go forward. Otherwise I think the release will be done, I think, over time, and it will be linked broadly, you know, to how the broader macroeconomic environment plays itself out. Thanks.
Yeah. Thanks, Punki. Totally agree with that. I think, Charles, the way to, you know, evaluate that or model it. Punki says, you know, part of it is there to be utilized should risks manifest, and part of it is there, you know, to protect us in the future around the macro scenarios. I think we've got a fairly conservative set of assumptions there, but, you know, there's obviously emerging risks all the time, and that part will be carefully evaluated. I'm actually very comfortable that we're kind of a very strong coverage at the moment, and I think that's a good position to be in. The second one from Charles: Do you know what retail deposit growth was, excluding the money market fund transfers? Punki, can you take that one as well?
Yeah. Thanks, Charles, again for that. I think overall, Charles, the key thing to remember is that, you know, there was a significant focus in the RBB business, especially in retail banking, you know, on ensuring that we can comfortably and safely, you know, migrate customers, you know, towards the balance sheet from, you know, the money market fund. A lot of effort, I think, went towards really making sure that, you know, the transition is seamless. If you remove the impact of the shift from money market fund to on balance sheet, and you just look at underlying, we saw growth of about 6% coming through overall. Hopefully that helps to answer that question. Thanks.
Thanks, Punki. Charles's third question is: Why do you think we are not seeing the benefit of 1% growth in RBB's fees and commissions? Once again, Punki, if you could take that one first.
I think it's a multitude, you know, of issues. Firstly, we obviously adopted a much more customer-centric approach, you know, to our fees, because we do believe that it's important for the future sustainability of the business. Also at the same time, I mean, we understood, you know, some of the pressures I think that the customers were sitting with, given the fact that we are in the middle of COVID. Within that, we've taken about ZAR 600 million, you know, in fee cuts. That would be maybe the one thing that really impacted on overall our fee and commission income growth. Over and above that, I think there's two other components that really played a significant part there.
Firstly, if you look at, you know, the level of shift in towards digital transactions and the fact that the margins on those fees are generally low, so the mix impact, I think, would have had an impact. At the same time, the COVID restrictions as well did dampen, you know, some of the growth rates that we're seeing in transaction activity. In particular, I mean, if you look at things like cash, for example. Cash would have been significantly impacted by lockdown restrictions. I would say that those are the other two factors, you know, which had an impact on our non-interest revenue overall. Thanks, John.
Thanks. The next one's from Stephan Potgieter. Why do you expect your CET1 ratio to decline in FY 2022? Thanks, Stephan. Our board target range for CET1, as you know, for a couple of years now has been 11%-12.5%. Going into COVID, we were sitting at the bottom end, you know, 11.2%, and I'm pretty pleased we got that up to 12.8% by the end of last year on the back of various initiatives. Stephan, the 12.8% is of course slightly above our board target range. You know, once you pay that dividend that we've just declared, goes down by 40-odd bps. So back within the target range. I think today we said we'd like to keep CET1 above 12%. There's always a balance to be had.
I think the flexibility of having capital so that we can fund the growth that we see is important. The trade-off is always the extent of dividend you declare, and then the outcome being your return on equity ambition. All of these things will be thought through carefully as we go through the year. We do see momentum in our business, and so therefore it is important for us to have capital to fund that risk-weighted asset growth. We said today you'd expect the dividend payout ratio being progressive, in other words, going up to at least 50% in 2022. All of those dynamics play out, Stefan, in terms of how we look at that this year. The next question is from an anonymous person.
Given your elevated provisioning levels at each stage relative to historic levels, why would you expect your credit loss ratio to rise in FY 2022? I think, Punki and I will dovetail on that answer. If I think of it very high level, our expected range of credit loss ratio for our group and the portfolio of assets that we have originated, I think it's between 75 and 100 basis points. So we came out today with 77 basis points, so towards the lower end of that range. I think what we said is we could go up a little bit towards the midpoint of that range. Now, that's not a material shift, I don't think. However, if you look at the macros, you've got the start of a steady rising interest rate cycle.
You've got real inflationary pressures coming in. Oil price and the like, particularly will have an impact on household expenditure, particularly filling up the tanks at the petrol stations and the like, and then knock on into logistics and others. A little bit more headwinds there than we may have thought and therefore, I think the macros probably mean that, you know, loan losses go up. However, I would kinda remind of the question earlier that we've got significant levels of coverage going into this to protect our book from any, you know, future losses, you know. Punki, I see if you wanna add to that.
Yeah. Maybe, Jason, I think to your point is we obviously are coming off a very low, I think, starting position. That starting position has also been influenced somewhat by the model enhancements that we did, you know, in 2021, which we don't expect to recur, I think, as we go forward. That should have an impact, obviously on our MEVs. I think to Jason's point, I think the, you know, elevated inflation levels and also some of the macro risks that we're seeing will also influence, somewhat, you know, where we're ending. In particular, I think for us, as we were thinking about, you know, our outlook and forward-looking positions, the key driver really was, you know, the elevated inflation levels that we're seeing, globally and also in the country.
Thanks, Jason.
Thanks, Punki, for adding that. There's another anonymous question here, but I think I've covered it. It says, "Please explain your dividend cover, given your return on equity, expected risk-weighted asset growth and current level of CET1 above the top end of the board target range." I haven't got anything in addition to add to the question that I answered from Stephan Potgieter. Once again, it's a balance. The next question, also an anonymous person. "How are your insurance provisions looking now relative to current claims experience?" I'll start off again. We've modeled you know extensively around the various waves of COVID. We thought that the third wave was a particularly harsh wave, and that's what it turned out to be.
You saw how in the results presentation, Punki spoke of the extensive provisions we raised and claims we booked last year on the back of that. We saw a far less virulent fourth wave, the Omicron wave, and we think that the fifth wave is a few weeks away. We think that starts late next month, which we've modeled. You know, from that perspective, I think the relative claims experience is actually looking well within our expectations and probably slightly more optimistic relative to some of our expectations. Just hand it to Punki.
Yeah.
Yeah.
Yeah. Thanks. Thanks, Jason. I think, I mean, to Jason's point, from our side, we largely raised just over ZAR 450 million in short-term provisions to cover both the fourth wave as well as the potential fifth wave. At the moment, I mean, from a loss experience point of view, I think the split of the provision, about two-thirds of the provision, relates to the fourth wave, and then the remainder largely to the fifth wave. Of the ZAR 836 million or so that we had raised in June, we released ZAR 700 million in the second half of this year. That's largely in line with the claims that we've seen manifest during the year.
Then in terms of the claims experience, I mean, we're seeing obviously better claims coming through in relation to wave four as well as obviously wave five is still to come. I think if you look at the life business, the life claims increased 49% year-on-year. The short-term insurance claims have also increased by about 2% as the, you know, the motor claims or motor vehicle activity, you know, resumes and, you know, we're beginning to see a lot more accidents, you know, also happen on the road. Broadly, I would say that, you know, from a life point of view, we're seeing better than expected claims. Short-term insurance, we are seeing, you know, claims experience increasing marginally. Thanks.
Thanks, Punki. James Starke. "Do you see fee cuts continuing over and above the pressure posed by the shift to digital channels?" James, my response to that would be that at Absa, for a couple of years now, we've taken a very dynamic approach to pricing, having regard to movements in the market. A couple of years ago, I think we were relatively expensive, and that came through the various surveys that we ran. Whereas all of the modifications that we've made today put us in a very competitive position. We don't see, you know, particularly large fee cuts ahead of us as we see it today. However, I would say that it's a very dynamic market, highly competitive market, and we'll continue to adapt and respond.
The other side of the coin is, of course, you see big migration at Absa into digital channels. You know, with the number of digitally active customers up nice strong double digits. It's more about getting more customers through that channel now than, let's call it, the price of it, I think. Then we've got one last question from Sia Dayile. "Given that we expect an interest rate hike cycle, what's your expected impact of this on NII in 2022 in terms of basis points?" Sia, that is right. You'll see we speak of a steady rising interest rate cycle. What that means is, you know, a few 25 basis point rate increases ahead of us. We think rates go up to about prime of 10%.
Now, some forward curves at the moment indicate that could be steeper than that. However, we think that a measured approach will be adopted in our markets. The impact is ZAR 600 million for every 100 basis points on an annualized basis. Okay, that's the last question. Thanks, very much, everybody, for joining us this morning for a very pleasant and interesting question and answer session, as well as a great presentation. Thanks. Thanks, Punki.
Thanks.
Thanks, everybody. Bye.