Good morning, and thank you for joining us for Absa Group's 2024 results presentation. I will cover our operating environment, share my thoughts on where we are as a group, and talk to our divisional performances. Thereafter, Deon Raju, our Financial Director, will unpack our financial performance before we take your questions. Last year, the global economy held steady, with real GDP growth of around 3.3%. A resilient labor market saw the U.S. growing an estimated 2.8%, while a difficult domestic environment meant China's growth slipped to about 5%. Europe's performance remained subdued, with Germany still in recession and the euro area growing by less than 1%. Looking ahead, the global economic environment is likely to remain uncertain, largely due to the sweeping and dramatic changes being announced by the new U.S. administration.
Reflecting in part a concern on the inflationary impact of increased tariffs, the U.S. Federal Reserve is expected to pursue a shallower cutting cycle, while monetary policy across other major economies is expected to reflect country-specific conditions rather than a global trend. Geopolitical tensions are elevated, particularly in the Middle East and the Ukraine-Russia war. Lastly, the likelihood of global regulatory fragmentation is now elevated. In South Africa, two key elements shaped 2024, and we are likely to have long-lasting impacts. First, the swift formation of the coalition Government of National Unity after the May elections, which presented significant cause for optimism. We saw intensive electricity load-shedding come to an end, with broadly stable electricity supply from late March, although neither immediately translated into faster economic growth or a recovery in investment. Surveys of business and consumer confidence improved.
Real GDP growth was muted at 0.6%, inflation averaged 4.5% for the year. Rate cutting started in September, and the two-part pension system all boosted household finances. Looking ahead, we expect real GDP growth in South Africa of about 2% in 2025 and 2026, benefiting from improved sentiment and the much-needed improvement in Eskom's operational performance. Household incomes are expected to increase, with wage growth ahead of inflation. Although rate cuts are likely to be less than we had anticipated, they should lower the debt service burden, which in turn should lead to a modest acceleration in household consumption. Note, the souring relationship between the new U.S. administration and South Africa poses an important risk to our currency, investment, and economic growth projections for South Africa. Our Africa region's countries saw materially different narratives in 2024. East African markets generally continued to perform strongly as sustainability fears receded in Kenya.
Uganda moved closer to oil production, and continued investment boosted Tanzania. Ghana's economy expanded at a surprisingly robust pace despite still elevated living costs. Drought weighed heavily on Zambia's performance, whereas Botswana's economy contracted due to the sharp decline in diamond demand. Post-election violence and large fiscal constraints created significant headwinds for Mozambique. We currently forecast strong GDP-weighted growth for our Africa region countries of 5.3% in 2025. Disinflation, lower policy rates, improving weather conditions, strong infrastructure investment, and multilateral support continue to underpin the region's growth outlook in our base case, even as U.S. announcements around development aid raise a new downside risk. Turning to the salient features of our 2024 performance, diluted headline earnings per share grew 10% or 12% in constant currency, a material improvement after declining 5% in the first half. Dividends per share grew 7% based on a 55% payout ratio.
Importantly, our ROE improved to 14.8%, covering our cost of equity for the period. Net interest margin narrowed by five basis points, mostly due to compression in our deposit margin. With our revenue and cost growth both improving in the second half, our cost-to-income ratio was flat for the year at 53%. Pleasingly, our credit loss ratio improved more than we had anticipated to 103 basis points, slightly above our target range from an elevated level in 2023 and the first half of 2024. NAV per share grew 11% to ZAR 193, taking its compound growth since 2019 to 9%. Lastly, our CET1 capital ratio increased slightly to 12.6%, just above our board target range. Given low returns and muted earnings growth for the past two years, we remain a recovery story.
It is fair to say that 2024 as a whole fell short of our expectations as we dealt with both external and internal challenges during the year. However, the improvement in our second half performance is testament to our resilience as we confronted the challenges. As I said in December, you should expect steady improvement from here. We aim to improve our execution and consistently deliver on our guidance in the immediate, short, and medium term to regain market confidence. Three months ago, I said we were introducing four execution priorities to ensure that we deliver on our plans to improve returns. We have started to make progress on these in numerous areas. I will touch on a few.
We are focusing on precise growth at the right returns, and we have elevated ROE alongside headline earnings growth as the key focus areas in our scorecards, which are then cascaded deep into our business units and teams. Second, we are also investing in our capital allocation capabilities to enable the right trade-off decisions across the group. As an example of focusing on the returns and capital allocation, in vehicle and asset finance, we shifted to be more precise in origination for value, refining our risk appetite in certain segments and dealers, invested in collections capability, and increased our bank assurance cross-sell, all of which are crucial to improving returns. We have a strong liquidity position and started to apply greater precision to balance sheet value management, particularly in retail South Africa and relationship banking, which will support our net interest income over time.
Third, I said we would shift our focus from product profitability to both client and product profitability. In support of this, we are combining product solutions cluster, everyday banking, and private wealth banking into a single retail franchise to accelerate the turnaround and drive value through a single customer lens. The structure will be anchored equally on customer and product, enabled by data, digital, and rewards, and be delivered seamlessly across multiple channels. Our review is progressing well and expect to be live in May, meaning we will report on retail SA in our interim results at the half year. We are also following a franchise approach to our wholesale clients across CRB and relationship banking that will allow more precise pricing of certain products with a franchise lens.
In support of creating a holistic client and product view, we will reduce the loss in our group head office this year and further over the medium term, removing or reallocating costs where possible and ensuring that only group treasury and shareholder costs are retained. Deon will cover this in more detail. Lastly, our productivity program is leveraging technology and removing unwanted costs to generate the capacity to reinvest in growth. Again, Deon will cover this in more detail later. Our franchise health continued to improve as we made progress on several strategic fronts. First, we brought a fresh, purpose-aligned brand to the market in February, signaling our intention to be a brand with human empathy and intuitive and seamless customer experiences at its core, with our new brand positioning, "Your story matters." Second, growing active customer numbers and improving customer experience scores is a priority for us.
Our customer experience index improved across all businesses last year, and we saw pleasing customer growth trends. Third, we continue to invest in technology to strengthen our digital offerings while always ensuring security and stability. We are proud to remain one of the most stable banks with a group service availability of 99.9% and zero S everity One incidents for more than 1,000 consecutive days. We also made significant progress promoting digital adoption, achieving 14% group composite growth in digitally active customers supported by adoption initiatives and simplified digital onboarding processes. Fourth, being an active force for good in everything we do is a critical imperative, and I am pleased that we continue to exceed expectations. Notably, sustainability-linked financing reached ZAR 49 billion last year, helping to achieve our cumulative 2025 target of ZAR 100 billion a year ahead of schedule.
Lastly, while 2024 was a challenging year for staff, they remain engaged and have an increased sense of ownership via our share scheme that distributed its first dividend in May. The scheme benefits not only employees but broader communities in South Africa through our evergreen CSI Trust. Turning to our segmental performances, all our divisions grew earnings. We continue to see good momentum in CRB, particularly across transactional banking and markets in Africa regions. For instance, corporate transaction volumes grew 13%, and our markets' arrow income increased 19%. We are seeing a recovery of our product solutions and everyday banking performances with good earnings growth driven by declining credit impairments, although pre-provision profit growth was subdued for both divisions. Both improved returns noticeably from the first half. As mentioned, we believe that combining the businesses will accelerate our retail turnaround in South Africa with stronger revenue trends medium term.
Relationship banking's performance has been muted the last two years, and we need to generate improved revenue-driven earnings growth in this business. ARO- RBB has maintained positive underlying momentum in what has been a tough operating environment, including a material reporting drag from the stronger rand. We show CRB's earnings by activity and region, although, as you know, we run this as a Pan-African business. CRB showed continued momentum and benefits from diversification to grow 6% off a high base, having increased 21% in the prior year. Corporate earnings were flat off a high base that grew 29% in 2023. We saw modest pre-provision profit growth and lower credit impairments offset by the stronger rand. Conversely, the investment bank rose due to strong revenue-driven growth in pre-provision profits, which outweighed significantly higher credit impairments off a low base.
Geographically, CRB's SA earnings grew as strong pre-provision profit growth offset significantly higher credit impairments. CRB's ROE growth was modest despite strong pre-provision profit growth, given substantially higher credit impairments from a net release the prior year, as well as a stronger rand. Relationship banking earnings growth has been muted in recent years. Pressure on non-interest income, particularly the contraction in cash volumes and growth in low-margin products, has offset solid growth in net interest income. Moreover, investment in frontline staff in 2023 meant cost growth dampened our pre-provision profit growth, producing modest earnings growth. Given this investment, we need to see improved revenue generation, particularly in the SME segment where we are underweight as we continue to diversify commercial beyond our leading agri franchise. Moving to everyday banking, transactions and deposits earnings decreased as lower pre-provision profit outweighed the 19% reduction in credit impairments.
However, the substantial rebound in our lending businesses drove earnings growth. Card earnings more than doubled, while personal loans swung from a loss the prior year, given significantly lower credit impairments. A substantial rebound in lending businesses also drove strong product solutions cluster earnings growth. Home loans earnings rose substantially as credit impairments fell. Similarly, VAF's earnings recovered significantly off a low base, largely due to 18% lower credit impairments plus higher pre-provision profits. Insurance SA's earnings recovered materially in the second half to increase 10%, driven by strong growth in non-life insurance. ARO-RBB has good underlying momentum, having grown revenue, pre-provision profits, and earnings strongly over the past two years, particularly in constant currency. However, the strong rand was a drag on ARO-RBB's performance, especially in 2024.
We see the rand remaining a headwind for ARO- RBB again this year, but expect to generate solid earnings growth given the underlying momentum in the customer base and revenue. Finally, looking at our divisional returns, pleasingly, everyday banking improved noticeably. Medium term, we aim to increase it further as credit impairments continue to normalize and fee income growth picks up. We also believe that relationship banking can improve from current levels medium term as our investments pay off and we grow capital-light revenue. CRB's has consistently delivered returns above 20%, and we will be pleased to maintain them around current levels. Despite improving materially in 2024, product solutions cluster remains below cost of equity, and we expect our returns to increase from these levels, particularly given this segment includes insurance and home loans, which both generate attractive returns through the cycle.
Lastly, ARO- RBB's return on regulatory capital remains below cost of equity. We see scope to improve this materially medium term by reducing the cost-to-income ratio from 64%, driven by continued revenue growth and better efficiency. I will now pause here and hand over to Deon to take you through our financial performance and guidance through 2026. Thank you for your attention.
Thanks, Charles. Good morning, everyone. I will unpack our 2024 results before closing with our guidance. Starting with our income statement drivers, headline earnings grew 10% to just over ZAR 22 billion, a pleasing outcome considering our disappointing first half performance. Earnings growth reflected both increased pre-provision profit and lower credit charges. Net interest income increased 4%, reflecting higher average interest-bearing assets and slight margin compression. Non-interest income grew 6% as most businesses showed resilient growth. Total revenue also increased 5% to almost ZAR 110 billion.
Operating expenses rose 5%, while we continue to invest in the business to ensure sustainability of future revenue generation. As a result, our operating jaws were flat, and pre-provision profit grew 5%. A stronger average rand was a slight drag on group earnings through the period, reducing earnings, revenue, and costs by 2%. Our credit impairment charge declined 8%, driven by lower charges in retail South Africa and relationship banking off an elevated base. The increase in Other reflects several items, including a 25% larger loss due to applying hyperinflation accounting to Absa Bank Ghana. Tax expense grew 8%, given a higher proportion of exempt income, resulting in a slightly lower effective tax rate of 25%. The shape of our 2024 P&L was very much as we guided a year ago, with a far stronger second half after a disappointing first half.
Second half earnings grew strongly after declining in the first. As we guided, some substantial items impacted our earnings negatively over the past 18 months, particularly in the second half of 2023. Given their quantum, we provide a slide in the appendix laying out their impact on our results for the past four reporting points. Excluding the substantial items, our earnings grew 16% in the second half. Our second half ROE improved to 15.5%, which exceeds our cost of equity. Importantly, three areas that disappointed in our interim results all improved materially in the second half. First, cost growth slowed 2% in the second half from 8% in the first. Underlying cost growth was 4% in the second half, excluding a large reduction in Barclays separation costs. Nonetheless, improved cost growth was pleasing and reflected actions we took to contain our expenses, including launching our productivity program.
Second, non-interest income improved materially from down 2% in the first half to up 15% in the second. The underlying second half growth, excluding large NIRA losses in the base, was 11%. Lastly, our elevated first half credit loss ratio of 123 basis points improved materially to 85 basis points in the second half, a far lower retail SA charge, reflecting both the actions we took last year as well as an improving macro backdrop. Turning to net interest income, where growth slowed to 2% in the second half from 7% in the first. For the full year, net interest income rose 4%, accounting for 65% of our revenue. We saw slower net interest income growth across our retail businesses in South Africa. Product solutions cluster grew 3%, which was slightly better in the second half and in line with subdued loan growth, as our margin held up relatively well.
Everyday banking's growth reduced in the second half on slower loan growth and margin compression, given the deliberate decisions to reduce personal loan production. Growth slowed noticeably from 11% in 2023. Relationship banking grew 9% despite deposit margin compression. ARO- RBB rose 7% as loan growth accelerated in the second half. The margin compressed, reflecting increased cash reserve requirements in some countries. CIB grew 8% off a high base, driven by loan growth and a resilient margin. Our overall net interest margin declined slightly to 4.63%. Customer loan pricing had a small negative impact from tighter pricing and higher suspended interest in home loans, personal loans, and ARO- RBB. Customer deposits reduced margin, given a negative price impact from higher cash reserving requirements in Zambia, Mozambique, and Ghana, plus the lower deposit endowment impact and slow growth in higher margin deposits in everyday banking and relationship banking.
These outweighed a decline in wholesale funding. Other factors that affected our margin include the positive impact from higher rates on asset liability management in Africa regions and the decline in average loans to banks. Turning to our balance sheet, deposit growth was broad-based, with strong growth in CIB and ARO-RBB. Solid growth in everyday banking and relationship banking included significantly faster growth in low-margin deposits. Relationship banking included savings and transmission deposits up 23% and higher check account deposits. ARO-RBB reflected strong growth across transactional and investment products. CIB rose 18% as their SA deposits increased 21%, while CIB- ARO deposits rose 7%. Loan growth slowed across all our divisions except ARO-RBB. Retail lending in South Africa slowed to 3%, with annualized second half growth of 2%. Relationship banking saw mid-single digit growth across all books and slightly higher growth from commercial asset finance.
ARO-RBB loans grew 16%, with robust growth in retail and commercial. CIB increased 8%, with South Africa up 7% and CIB-ARO up 14%. Despite the slowdown in retail lending, our market share in South Africa remained broadly stable at 22%. Modest home loans growth reflected a subdued market overall, although there were signs of improvement in the fourth quarter. Our share of total sector flow improved slightly, particularly among first-time home buyers, and our backbook market share increased marginally to almost 24%. New business margins remained under pressure, particularly given our focus on low-risk primary customers. Vehicle and asset finance growth was against a backdrop of 3% lower new car sales. While our production reduced by 8%, our flow market share was flat. We made several operational enhancements, including to risk models, reducing risk appetite to higher risk segments and pricing.
Flow pricing improved in the fourth quarter after pressure during the first three quarters. Credit cards reflected limit increases, higher purchasing activity with turnover up 6%, and greater cash usage. Consequently, our leading card market share increased slightly. Personal loans reduced due to 20% lower loan production as we reduced our risk appetite, given the pressure on consumers. Moving to non-interest income, there was resilient broad-based growth led by a strong trading performance. Non-interest income growth improved materially in the second half to increase 6% for the year. Net fee and commission income grew 4% and accounted for two-thirds of the total, as everyday banking and relationship banking had a better second half. Within this, transactional fees and commissions increased 6%, with service charges up 15%, while electronic banking was flat, and check accounts and credit cards grew 3% and 6% respectively. Merchant income grew 17% on 8% turnover growth.
Net trading income increased 11% with strong performance from global markets. In aggregate, net insurance income rose 12%, with muted growth in life SA, while non-life SA grew strongly. At a divisional level, everyday banking's growth was due to improved point of sale and digital activity in the second half and 7% growth in transactional customers, partially offset by continued migration to digital channels. Relationship banking declined slightly as cash revenue fell 12% on lower volumes, which outweighed solid acquiring growth. Despite 6% growth in active customers, transaction income rose 1%, given growth in low-margin products. ARO-RBB was driven by growth in active customers. Growth was broad-based across transactional card and trade fees. Lastly, CIB grew double digits across all businesses, with strong growth from global markets off a low base, and corporate was up 12% on higher transactional volumes. Turning to costs, where growth reflected continued investment.
Operating expenses grew 5%, producing a flat cost-to-income ratio of 53.2%. Staff costs rose 7%, reflecting salary increases and investments in frontline staff in the previous year. Most of our hiring was in 2023, and while the end of 2024 reflected a lower headcount, average headcount for the year was higher. Deferred cash and share-based payments grew 48% due to our eKhaya employee share scheme costs, which is now in the base, while bonuses decreased 1%. Non-staff costs grew 3%. Within this, IT costs increased 13%, given continued investment in new digital capabilities and increased cybersecurity spend. Amortization of intangible assets declined slightly. Although excluding the smaller impact of our Barclays separation, it grew 33% due to further investment in digital automation and data capabilities. This increased our goodwill and intangible asset to ZAR 16 billion.
Total IT spend, including staff amortization and depreciation, increased 7% to account for 27% of group costs. Marketing costs rose on higher brands, campaigns, and sponsorship spend, while pro fees reflected spend on strategic projects. As Charles mentioned, we launched a group-wide productivity program, which should deliver substantial value over the medium term. We aim to achieve cumulative gross savings of ZAR 5 billion by the end of 2027, with the intention that savings from the program fund further investments in growth. Our 2024 costs include ZAR 1.4 billion of productivity savings. I oversee the program with senior leadership representation from our businesses and functions. Key productivity themes include: Firstly, process optimization, leveraging data analytics and automation to increase straight-through processing. Second, optimizing third-party spend through rationalizing the vendor landscape and commercial agreements to identify cost-saving opportunities. Third, channel optimization, ensuring the right balance between our physical and digital channels.
Lastly, head office property portfolio consolidation as we further optimize hybrid work environments. Productivity is a key enabler of containing cost growth to inflationary levels while creating savings for ongoing investments into the franchise. Productivity savings were used to fund continued digital transformation across front-end customer platforms, data engineering, investments in cloud, and cybersecurity. Charles referred to our intention to significantly reduce the level of head office costs, which increased 24% to ZAR 3 billion in 2024. Growth in Ghana hyperinflation accounting, staff share scheme costs, and treasury items such as deposit insurance and interest rate reset were partially offset by lower Barclays separation costs. Moving forward, we will see separation costs and Ghana hyperinflation accounting end. The staff share scheme and deposit insurance will be reallocated to the relevant business units. We also see further opportunity for ALM optimization.
Through these actions, we expect to achieve a level of head office costs of 7%-8% of group headline earnings over the medium term. Turning to credit impairments, our overall charge was better than we guided in December due to lower charges than we expected in CIB and everyday banking in particular. The shape of our credit impairments was as we expected entering last year, with retail charges in South Africa reducing noticeably from elevated levels, while CIB rose significantly off a low base. Our credit loss ratio improved noticeably to 103 basis points from 118, slightly above our through-the-cycle range of 75-100. Unpacking the portfolios, we saw lower credit losses in retail South Africa, reflecting our significant collections efforts and selective risk reduction, as well as the benefits of rate cuts.
Product solutions cluster improved noticeably, with home loans and vehicle and asset finance in particular reducing materially. Earlier rears improved across both books, and their impairments were driven by maturation of the NPL portfolios, given inflows into debt review and legal. Everyday banking charges also reduced materially due to deliberate risk cutbacks and enhanced collection strategies, supported by better forward-looking macroeconomic assumptions. Early-stage delinquencies improved, while late-stage remained elevated, with increased flows into debt counseling. Personal loans reduced noticeably. Finally, CIB increased to the top end of our target range from a low base. Stage 3 loans, or non-performing loans, grew 6% to ZAR 86 billion due to inflows across most businesses. The NPL ratio improved marginally from June. We remain appropriately provisioned for a tough operating environment. NPL coverage increased mostly due to higher CIB single-name charges and higher home loan cover, given our aging legal book.
Total group coverage increased marginally due to late-cycle pressure in South African retail portfolio and CIB coverage build. Our coverage remained well above pre-COVID levels of 3.3%. Risk-weighted assets grew somewhat ahead of our customer loan growth. The largest component, credit risk RWAs, was the main driver, increasing 10% due to loan growth, particularly in ARO-RBB and Kenya's sovereign rating downgrade. Turning to capital, we remain well capitalized to fund the balance sheet growth opportunities that we see. Our CET1 ratio improved to marginally above our board target range and comfortably exceeding regulatory requirements. We remain capital generative, with profits adding 2% to our CET1 ratio during the year. Further improving our ROE medium-term will, of course, increase our capital generation. Risk-weighted asset consumption and dividend payments each reduced our CET1 ratio by 1.1%. Other consists of reserve gains net of capital deductions.
We declared a 13% higher second-half ordinary dividend per share, and our total 2024 dividend per share grew 7%, delivering a payout ratio at 55%. Lastly, I'll cover our guidance, starting with this year. Based on the macro outlook Charles outlined earlier, and excluding further unforeseen political, macroeconomic, or regulatory developments, our guidance for 2024 is as follows. We expect mid-single-digit revenue growth with broadly similar growth in net interest income and non-interest income. We expect mid to high single-digit customer loan growth and low to mid-single-digit deposit growth. Our credit loss ratio is expected to improve to the top end of our through-the-cycle target range of 75-100 basis points. Our first half 2025 credit loss ratio should improve noticeably from 123 basis points in the first half of 2024.
We expect mid-single-digit growth in operating expenses, producing a slightly higher cost-to-income ratio from the 53.2% in 2024 and low to mid-single-digit growth in pre-provision profit. Consequently, we expect an ROE slightly above 15% from 14.8% in 2024. We expect the group CET1 ratio to finish 2025 at the top end of our board target range of 11%-12.5%. We expect to maintain a dividend payout ratio of around 55% for 2025. We expect a stronger rand to be a slight drag on earnings in 2025, although Africa region's earnings growth should be stronger than South Africa. Finally, looking ahead to 2026, we continue to expect a 16% ROE. We believe that 2025 is a year of further recovery as our NPLs and credit loss ratio continue to normalize, particularly in retail South Africa.
We would caution that NPLs are likely to remain sticky and take time to work out. We expect to see cease hyperinflation accounting for Ghana this year. Since we prioritize credit quality in 2024, retail loan growth in South Africa will be subdued in the first half of 2025. However, we expect it to pick up in the second half of 2025 as the macro environment improves, providing some balance sheet momentum into 2026. This will support net interest income recovery from the latter part of 2025. In addition, we continue to expect improving non-interest income growth medium-term. We also expect better franchise delivery of non-interest income over time from combining our retail businesses in South Africa. As noted earlier, we also have a strong focus on productivity to fund further investments through to 2025.
Lastly, we expect faster growth and improving returns from Africa region's medium-term, despite macro headwinds in some countries. These drivers of our ROE recovery will be underpinned by the key execution priorities that Charles covered in his comments. Thank you for your attention. We will now take your questions.
You see them?
Yeah, they've just come through. The first one is from Radebe Sipamla. Hi, Radebe. His question, he's from Mergence Investment Managers. His question is, "Good morning. Please, can you unpack the drivers of the strong NAV growth in the period?" I'm happy to take that. Radebe, very pleased with 11% NAV growth in the period. A component of that is earnings, as you would expect. We also saw a strong recovery in our cash flow hedge reserve. This is the reserve that holds the mark-to-market of our hedges that we have in terms of our interest rate risk management. These have gone from a big debit to basically a small credit. They effectively add the money as we speak. That also contributed to that slightly higher move in NAV than what you see in earnings. Radebe, you've also spoke about restatements.
Maybe Charles, I can take this one. There's been a restatement of the financials over recent reporting periods over and above normalized reporting for the Barclays separation and IFRS 17 impacts. Can you explain why restatements have occurred again in this period, and is it something we should expect on an ongoing basis? Radebe, we cover our restatements in 14.1 of our booklet, so we can pick up the detail there. As I explained in my speaker notes, what you can expect is that deposit insurance, as well as our eKhaya staff share scheme, will be reallocated out of the head office into the business units. That will be a component of restatements. You also heard Charles explain that the retail bank will be coming together. You'd expect everyday banking and PSC in June to form one division called Retail Banking South Africa.
Those would be the core of the restatements that you can expect going forward. Okay, and then also from Radebe, can you explain why the benefits of the structural hedge were not pronounced as the net interest margins decreased slightly in the period, despite strong deposit growth and improved loan growth? Charles, you want me to take that one?
Yeah, I think you can take it.
Yeah, so in terms of net interest margins, a couple of things to call out there. We did guide last year that we had a drag coming out of our Africa regions, particularly as it related to the cash reserving requirements. Ghana was a big one last year, but we also had drags in Zambia as well as Mozambique. The structural hedge will reprice higher over time. That's about a 10 basis points repricing per year. We saw a positive contribution from the structural hedge due to the repricing. It would have protected us against the big interest rate cuts we saw in the last quarter. I suppose a final item to call out on NII. We've seen some competitive pricing, particularly in our retail secured businesses, CIB South Africa, in our infrastructure businesses.
Some of that still sits into the NIM from last year, and we would see some of that into this year as well. Okay, then we've got Yatheen, Momentum Asset Management. Is there appetite to continue easing lending conditions, particularly in the unsecured lending front, given your significant market share in card? So appetite to continue to ease lending conditions.
I'll take that.
Yeah.
Yeah, thanks for that question. I think this essentially talks to exactly where we talk in turn our key priorities. Yeah, we had to pull back our risk appetite in some of these whilst we ensured that we got to grips with our impairment story. However, we're not in the space of pulling back on growth completely. We want to grow in the right spaces. This talks to the precision around the intersection of the franchise and the product. Where we see the opportunities, we absolutely need to ensure that we've got the right appetite either to enhance our market share and grow it, or where we've got a subpar market share, but we believe there is the right opportunity that we can look at that. I think yes, in answer to it, it is yes, but it's not blanket across the board.
It has to be precise.
The next one's from [Donata Subanda]. Congratulations on solid results. May you please add some more color on key drivers for the growth in non-life insurance? Is it a result of repricing or better claims experience? Fully a 2025 outlook for that book.
Sorry.
Yeah, happy to take that. [Donata], you'll see that we call out that our underwriting margins improved from about 1% to 4%. Gross written premium up 8% in non-life. Really due to process optimization in claims, so far lower costs in that business. We also had better cross-sell motor comprehensive value-added products. As Charles mentioned, it's a key unlock for ROE at a franchise level for vehicle and asset finance. Those are the main drivers. We don't provide guidance for that particular line item. Ross Krige from Investec, hi Ross. Thanks for the call and congrats on a very good H2 performance. Do you expect Ghana hyperinflation accounting to stop being applied from H2 2025? That's the first question. Ross, on that, Ghana hyperinflation, we currently expect to cease in the second half of the year. Then he's got a second question.
If your baseline 2025 SA real GDP growth forecast of 2.2% doesn't materialize, is there downside risk to your revenue guidance or has this risk been factored in?
You want to take it.
Yeah. Ross, in terms of GDP growth, look, we do expect a better position for South Africa in 2025. Clearly, the world is very uncertain at the moment as we look forward. We have factored some of that into our forecast for this year, some of that uncertainty as we think about this year. However, things could change materially given the global uncertainties we have, and then we would have to relook at it. I think we've taken some of that uncertainty into account. Our guidance for this year is premised that South Africa is better in the second half. It allows us to lend a bit more, allows more activity, particularly for our South Africa businesses. It is important for our revenue rhyme that South Africa improves in the second half for us. Chris, Ninety One, hi Chris.
Your appendix highlights negative ones off 5% of headline earnings. With this context, your earnings guidance looks disappointing. Are any of the other items anticipated to be recurring? If we look forward to 2025, we expect hyperinflation to cease. Separation will be a much smaller number, Chris. It almost becomes insignificant for this year. Those would be the items that we expect to repeat. Probably about 2.5% of earnings if you had to look at 2025. Charles Russell, SBG, hi Charles. Thanks Charles and Deon. A few questions, please. What would your NIM have been ex-hedging? It seems that you've stopped disclosing this data point. What is your strategy to see better growth in fee and commission in the year ahead? Charles, you want to take that one? Strategy for better growth in fee and commission income in the year ahead.
Yeah, happy to take it. Yeah, I think as we look to the future here, everything is about returns. Everything is about precision, and everything is aligned to driving it from a measurement of the franchise. Where we see those opportunities, we essentially intend to deploy our risk appetite, discretionary spend, investment to make sure that we are positioned to maximize on those returns-friendly revenues in IR essentially. I think I'll leave it at that. Thanks.
Yeah, then the next question, let's see. What would your NIMs have been ex-hedging? Maybe I can take that one. If you look at our booklet, you'll see 1.6 odd billion as being the negative release on the hedge. It's broadly similar year on year. Charles. What is driving the doubling of other impairments on income statement? Charles, the other impairments that we would take is impairments mainly on our Johannesburg property portfolio. That would be a key driver there. Why the sharp increase in cash on balance sheet? Charles, I think a lot of those items would come from our Africa regions, particularly our higher cash reserving that we called out. Okay, Chris, again from Ninety One. Will the increase in the cycle neutral countercyclical buffer set one requirements result in a rethink of the group's target capital ranges?
Yeah, Chris, the PA did confirm that that'll be 100 basis points starting from 1 Jan 2026. We'll have to incorporate that into our target setting for next year. It's difficult to give an answer without going through that exercise at this stage. 11-12.5 is appropriate for 2025. James, RMB Morgan Stanley, hi there James. NIM, please comment on the outlook for deposit pricing into 2025. James, you will see that we've disclosed low to mid- single digit deposit growth. A part of deposit compression that you will see in our booklet in the NIM. Part of that is the higher cash reserving requirements outside South Africa. If you look at within South Africa, we had very strong growth on investment type deposits over transactional type deposits. The growth there was a lot faster. We sit in a very strong liquidity position now.
If you look at our customer assets versus customer deposits, there's also ample liquidity in South Africa having moved from a shortage to a surplus system. We think there's opportunity for us to optimize. We do have some fixed deposits that are fairly expensive, higher than even wholesale funding. We think we've got some ALM optimization. I did call that out in my speaker notes that we can go through. We would like to improve the NII contribution from deposits. Lots of balance sheet growth, but the contribution to NII is not as strong.
I think if I can just add to that, I think it also talks to the precision on this front. We need to make sure where we apply support from a treasury perspective, it is an enhancement of our client customer franchise. Purely for investment deposits that does not, where we do not see the rest of the business activity, clearly does not fit into that category.
Yeah, I think it's that growth in market share versus precision and value. There's opportunities there. Let's just see if I've covered. Productivity gains of ZAR 1.4 billion. What is the outlook for productivity gains into 2025? Can you increase the tempo of savings from full year 2024 levels? James, as we called out, the overall target for the program is ZAR 5 billion. We believe the first few years has a lower hanging fruit. We expect to build momentum on that line item into this year. We would expect that momentum to result in a better outcome than the ZAR 1.4 billion for 2024. Relation to banking, you mentioned the need to generate improved momentum. Please elaborate on how you plan to improve the momentum and return profile in this area.
Yeah, sure, I'll take that. I think, yeah, I called that out. I think what you would have first seen, we've had a small change to our business operating model between our corporate clients and our business banking clients, the commercial side of it. Where essentially we are much more client focused and revenues follow clients. Implied in that is the precision around how we price for a client and price for a client holistically across the organization. This does not mean that there is not accountability to the products. The products have to be held accountable to that. What we've seen over the last couple of years and a lot of work has been done, particularly probably in the last 18 months, is there are certain products where margin profitability has decreased. We need to look at that and price for that accordingly across the broader franchise.
I think these are the elements that we need to look at very closely and what I'm referring to in terms of precision of capital allocation, precision of effort, and ultimately where we drive our business. I think if we get that right, we should see some significant improvement in our business bank.
Thanks. I think that's it from James. We have Harry, Bank of America. Hi, Harry. What proportion of the 10 million total SA customers do retail transactional customers plus 7% represent? We think it's about, yeah, if you look at it, it's between 7 million-8 million of that number comes out of the total number in the booklet. That's what the plus 7% growth represents. Do you expect continued growth momentum in retail SA non-interest revenue in 2025? Can we extrapolate second half 2024 growth rates? Yeah, Harry, I think a key item there is for us to deliver sustainable growth in our retail SA franchise. It involves us bringing the retail franchise together, as Charles has described, and driving improved cross-sell and upsell through the franchise. Those teams have started to work together.
Once again, the early wins will be the unlock in terms of optimization of NIR that you can deliver. We did see improved activity. We did see improved growth in customer numbers. If we look at this year and if we look at 2025, we want them to maintain that momentum into this year. It has worked for the second half. We think bringing them together, maintaining the momentum is important for our franchise for 2025. I don't know, Charles, if you want to add on that. No, happy, thanks. What level of savings are you targeting from your productivity program going forward? Also from Harry. Harry, like I called out, we have a target of ZAR 5 billion to 2027. We'll probably front end that a fair bit as you deal with the low hanging fruits. We expect over a three-year period, ZAR 5 billion.
That's our current plans. Okay, do I need to refresh, Alan? I'm just checking here. Oh, we're done. Alan says there's more. Okay. Okay, I've got Baron Nkomo , JP Morgan. All South African banks are flagging strong growth in primary bank customers within the retail banking business. Is Absa also seeing strong growth in primary bank customers? Please unpack the strategy to gain more primary bank customers in South Africa. The call out was primary bank customers, retail SA, 7% growth. Charles, do you want to comment any more on the retail strategy to gain more primary bank clients in SA?
Yeah, I think, I mean, this is a key battleground for us. I think it starts, first of all, for us bringing these franchises together, pricing the customer holistically across the franchise, understanding which customer segments we want to push harder with respective products and capability. Ultimately, where we apply lending, we need to ensure that we are tying in the transactional activity in the go forward. It is same principles as we apply on the corporate and investment banking and the client side there.
Antonio Segura, BCP Securities, thank you very much for the presentation. I want to ask you to provide more details on the drivers for non-interest income going up by ZAR 2 billion to ZAR 20 billion in the second half from ZAR 18 billion in the first half. Yeah, Antonio, like I said, partially base related in the 2023 second half base. We did have a large trading loss. However, we did have underlying better momentum and better performance in fee and commission income, particularly in our RBB businesses. Our insurance business had a very good second half. You'll see them up 12% for the year, much better than the first half. Underlying trading also had a better performance, even if you take out the impact of those trading losses from the base. Jared Houston, All Weather. Please give guidance for the substantial one-off items in 2025.
Jared, we expect by the end of 2025, the majority of them will disappear. Ghana hyperinflation will cease and separation will be a smaller month. We will not be publishing any more appendix, Jared, in future years due to these substantial items. Chris, can you provide a sense of your NIM sensitivity to lower rates on an after hedging impact basis? Chris, we have the NII sensitivity in the booklet. South Africa looks high. I would say that it is slightly elevated due to just that reset that we had over the year end. We expect South Africa to be largely protected except for three-month basis risk. Underlying structurally in South Africa, we have been about ZAR 300 million for the 100 basis points. If we look at Africa regions, there we have larger sensitivity. Chris, on an underlying basis, that is probably closer to ZAR 1 billion.
We do think the rates outside South Africa have peaked and will start to come off in 2025. We've seen Kenya, for example, cut much faster than our expectations. At the same time, last year, I said to you that cash reserving requirements, to the extent that rates start coming down, you're actually sensing that monetary conditions are easing. I would expect cash reserving requirements to also ease. That'll provide some offset. However, these two items don't move in tandem. We will sit with some of that mismatch as we go through the year. We've got Kabelo from Mazi Asset Management. What quantum of further cost cutting from the productivity program could be achieved in the coming years given that the business seems to be on track to recovery as a board started considering succession? Regarding the cost cutting, once again, 5 billion target out to 2027.
Shall I respond to the succession?
Yeah.
Look, obviously that was a board decision at a CEO level and they'll communicate it at the point in time when they have clarity and certainty on the way forward. Succession for us as an organization and at a leadership level, we're spending a significant amount of time on to make sure we really have got the right individuals in the respective places and ultimately that we understand what succession looks like in the go forward. Where we need to have plans to bolster, those are elements that we are looking at.
Jared had a similar question, so I think that's covered. I don't have any further questions. Alan, any further questions? All right, no further questions. Looking forward to the engagements over the coming days with all of you.
Yeah, thanks very much. I appreciate your time today and likewise look forward to the engagements with you over the rest of this week. Thank you.