Good morning, everybody, and welcome to FirstRand's half-year results for the six months ended 31 December 2021. The group metrics on slide two continue to reflect what we refer to as rebound performance against the base, driven by much lower credit loss ratio. Normalized earnings up 43% to ZAR 15.7 billion. Pre-provision operating profit pleasingly up 6% to ZAR 26.4 billion. Point-in-time return on equity sharply up to 20.1%, and NAV in the group increasing by 12%. Operating leverage showing a slight improvement. Core equity Tier 1 accreting further to 13.6%. A dividend of ZAR 1.57 in line with the growth in earnings. Moving on to slide three, we see the performance and distribution at a per share level on a rolling six-month basis.
It is apparent when one looks at this slide that the normalization journey for earnings is materially complete. On this next slide, on the left, we reflect our generation of economic profit. That is our accounting profit charged for a cost of the capital that we have consumed in generating those profits, and it is a cost that has increased slightly over the year. We are pleased to see the restoration of material economic profit in this period. A noticeable recovery in ROE, and now that is comfortably within our range of 18%-22%. On the right-hand side, we depict the growth in NAV per share, as I said, increasing 12% on a constant currency basis, up 10%. On slide five, we decompose our return on equity. Increased levels of capital, as you can see, have lowered the gearing in the group.
Return on assets at 31 December is now very similar to pre-pandemic levels, with both NII and NIR recovering. Sticking with our return profile for a moment, we articulate some key messages on this slide as to the sustainability of these returns. By far, it's the transactional franchise that underpins the return on assets that drives the returns. Although our deposit performance advances mix disciplines on how we price credit and our financial resources generally all contribute. Mindful that digital transformation, competition, and regulation may, in the fullness of time, erode the contribution of our transactional franchise. Several years ago, we began to diversify our revenue streams, primarily into the activities of insurance and investment management, and I will cover those two on the next two slides.
Outside of those two activities, we are further optimistic about opportunities for scaling our commissionable revenues and other navigate life interactions, further diversifying NIR. Having a quick look at the diversification strategies of insurance, the growth in these businesses really exceeding our expectations, running way ahead of the original business cases. FNB Life is already a meaningful contributor to group non-interest revenue. It's the third-largest insurer in the retail customer base, and we see ample opportunities for further growth in premium and in the commercial segments. FNB Life insures 6.8 million lives, and it has paid claims of over ZAR 7 billion since inception. ZAR 4 billion of which was just for the pandemic-related death and retrenchment claims. The group now offers the full suite of retail insurance products, as well as group risk cover for large corporates.
The short-term insurance build-out is now complete with the successful launch of comprehensive motor insurance a couple of months ago. Unlike insurance, when it comes to asset management and wealth and investment management, these have taken longer. In 2019, the investment management activities of the group were repositioned to create stronger alignment with the main bank customer strategy. Ashburton Investments has seen good net inflows, particularly into fixed income funds. Building strong capabilities in equities management to capture inflows into multi-asset funds remains a key focus for us. The turnaround in the investment performance of the Ashburton Balanced Fund, Global Multi Asset Funds, and the Targeted Return Fund are all very encouraging. FNB Wealth and Investments focus on the retail customer base, and this is paying off, with customer accounts growing by 12%. New competitive and convenient products and solutions have been launched.
I can refer here to FNB Shares Zero, FNB Retirement Annuity, and the FNB Core Balanced Fund, and these are all conveniently available on our digital platforms. Scaling further into asset management and increased distribution into the FNB customer base remain the key objectives, as we look forward. All right, moving on to some of the macroeconomic environment that we faced in generating these returns. Up front, I think I need to acknowledge the very fluid Ukraine-Russia situation and the uncertainty it creates. We continue to monitor channels of contagion around commodity prices, inflation, how central banks may respond, and then any consequential impacts on household affordability. Moving on from making this point, we expect economic activity here to reach pre-pandemic levels later this year, especially if the terms of trade continue to be supportive as they are.
Despite the economic rebound, the recovery remains incomplete in several important aspects. For example, unemployment remains at an all-time high. Investment spending remains at post-pandemic lows relative to economic activity, and private sector credit demand and supply remains very low compared to savings. While these features have structural underpins to them, there are cyclical components that we see are starting to shift. It is good to make sense of the pandemic period that we have navigated, and I think through that period, we saw a marked shift in savings and debt dynamics. It's easy now with the benefit of hindsight, but I suppose this is not a surprise. The private sector, as you can see, pulled back activity due to falling levels of confidence and pandemic restrictions. At the same time, government had to step in with fiscal support and stimulus.
This outcome is reflected in the graph on the right, which is showing government debt to GDP increasing significantly. It was already climbing for a number of years pre the pandemic, but it scaled significantly into the pandemic, that of corporates and households falling. The bank's activities as gatherers and allocators of savings in an economy would, of course, reflect these dynamics. What do we expect as we come out of the pandemic? We think we're going to see a reversal of the cycle, albeit not some of the structural trends. What does this mean? Households and corporate confidence should begin to lift, increasing levels of activity. Private sector savings growth should soften, and the private sector demand for credit should increase, funding the purchase of more durable and semi-durable goods.
The need for government to provide the same levels of pandemic support should fade as the private sector begins to lean into the economy, enabling some consolidation of the fiscus, as of course was mentioned in the recent budget. These trends, again, should be reflected in the gathering and savings and allocation of savings in the banking sector. On slide 12, we capture some important macro insights impacting our U.K. businesses. The U.K. economy has experienced a strong rebound. However, at the moment, there is a real cost of living squeeze related to higher inflation and the start, of course, of a rate tightening cycle. Despite the high inflation and the rate cycle, the labor market at the moment is very strong. Wage growth is robust and the economy is holding up well. This should all be supportive of house prices and the demand for credit.
Slide 13 takes us back to the current performance, and the left-hand side shows first half earnings for the past five years. This period, of course, is setting the record. The top right-hand side reveals that the materially lower credit charge has been the driver of the earnings. Indeed, at ZAR 4 billion, the charge for the period relating to credit is lower than the average charge in the years prior to the pandemic. The credit loss ratio, as you can see now, is comfortably below our through the cycle range of 100-110 basis points. Just looking at the balance sheet credit consequences, Slide 14 considers the staging of our advances and the decline in both Stage two and non-performing loans is evident. A function of better collections, write-offs, account curing, and a noticeable slowdown in the formation of operational non-performing loans.
Total credit-related provisions, as well as stage coverage, remain healthy, as you can see on the slide. What happened to our balance sheet during this period? Advances grew over the past year, although the growth really only manifested over the past six months, with growth now evident across most portfolios. We have isolated out the currency impacts on the right-hand side. This is real growth across all those different portfolios. Previously, discerning origination did not keep pace with repayments and overall advances declined. Originations now outpace repayments, and we expect this trend to continue as the emergent credit cycle unfolds in South Africa. New business risk distribution for both FNB and WesBank reveals a tilt to lower risk business.
This is because this is where we believe the cohort exists with credit capacity, and hence the very sharp focus on this category of borrowers. While retail secured and unsecured books saw little, if any, real growth over the past 18 months, in the recent six months, net growth has returned particularly to mortgages and to personal loans. Looking at commercial and wholesale advances, encouragingly, FNB commercial advances grew 9% led by agriculture and asset-based finance. Wholesale advances in RMB up 6% with some sectors lagging others by some margin. RMB does appear well-placed to benefit from the expected infrastructure expenditure program in South Africa. Looking at deposits. The group deposit gatherers, most notably FNB, have performed very strongly, with FNB being the largest custodian of household deposits in South Africa.
These customer deposits enable Group Treasury to reduce borrowing from more expensive institutional funders, lowering their overall cost of funds for the group, boosting liquidity and of course net interest income. Having a look at capital on slide 19. This is the walk of the group core equity tier one ratio for the year, December 2020 to December 2021. You can see that the ratio has lifted slightly since our last financial year end in June with net NAV accretion being absorbed by balance sheet growth. Risk-weighted asset density ended a touch higher over the past 6 months. Right. Let's unpack some of the operating businesses in a little bit more detail. On this next slide, you can see the group's normalized earnings of ZAR 15.7 billion by operating business with a rebound across the board.
I'm going to unpack the customer franchises in some detail. The central period-on-period movement reflects the performance of Group Treasury. Greater levels of unallocated capital as well as higher levels of government securities, we refer to these as HQLA or high-quality liquid assets, has boosted NII. This links back to the pandemic market dynamics I referred to earlier. As private sector credit extension gathers pace and government issuance slows, we expect a gradual NII shift in the group back to customer franchises. Looking at this next slide, pre-provision operating profits, these are profits before considering credit charges, have gradually improved and now exceed levels established before the pandemic. Starting with FNB's performance for the past six months, earnings up strongly, a story of a much-improved credit loss ratio, boosting return on assets and elevating return on equity.
Non-interest revenue grew, particularly over the most recent quarter, offset to some extent by continued claims in the insurance activities. Net interest income growth more muted, a reflection of the recovering advances growth. A slight deterioration in operating leverage all results in a pre-provision operating profit being flat. Looking at some of the operational data from FNB. New customer acquisition was seen across FNB in a strategy to upgrade eWallet users into FNB Easy Accounts, which is an entry-level transactional accounts, gained traction. Customers continued to engage with us digitally with 69% of all retail customers, it's 85% for our private bank customers and 79% for commercial customers we consider to be digitally active. Overall transactional volumes for FNB increased 12% with digital volumes up 13%. You can see their monthly logins are now 143 million a month.
Our plans to onboard more customers and conduct more business with our customers are on track. In the period, our Vertical Sales Index, this is a measure of average business per customer, lifted to 2.94. Loyalty earned via eBucks. You can see it's now at a run rate annualized of ZAR 2 billion, with generosity remaining a very powerful component of FNB's customer proposition. Account and transactional fee give backs over the past six months by FNB amounted to ZAR 500 million, boosting FNB's value propositions for customers, and this is well evidenced when one looks at the Solidarity market survey on bank fees. Just having a look at the insurance. FNB Life continued with COVID-19 claims into the first quarter of the current reporting period.
Claims experience improved thereafter on the back of higher levels of vaccination and community immunity. FNB Life had a strong period of new business driven by funeral products and credit life as customer lending gained traction. Value of new business grew 66%, supported by an improved claims outlook, driving embedded value up 50% to ZAR 6.1 billion. Short-term insurance just launched with 243,000 policies grew in-force APE by 37%. The launch of homeowners and motor insurance products drove new business APE up 54%. Pleasingly, customers are adopting digital interfaces on platform for application and servicing needs, and this brings significant operational leverage to this insurance business. FNB insurance customers rewards ZAR 334 million from eBucks since inception. It's great to see how the generosity is playing into the insurance activities for our customers.
Right, moving on to RMB. Earnings up 15%, again, a function of a much lower credit loss ratio. Encouragingly, growth in RMB's core lending portfolio returned, and we are hopeful that this accelerates with the anticipated infrastructure program taking shape in the country. RMB's profit before tax was boosted by the jump in the contribution from their banking activities. This comprises investment banking and corporate transactional banking, up 17% on the back of lower impairments. Their markets business up 6%, a solid contribution from the currency and commodities activities, with domestic fixed income playing catch-up. Strong rebound from private equity, mainly because of lower portfolio impairments. Looking at WesBank briefly for the performance for the past six months.
Despite, I think, a strong recovery in new vehicle sales in calendar 2021, the industry still has some way to go to recover lost ground. While WesBank's earnings rose 17% in the six months under review, operating profit, you can see, pre-credit charges was 12% lower. And this is really a function of lower origination, pricing pressure, and a deterioration in operating costs. Recent loan production is looking much better following more competitive scorecards, higher appetite for loan-to-value, balloon profiles, and terming out of some of the funding propositions. Right, looking at our portfolio of businesses in broader Africa. These have bounced back strongly with earnings jumping 54% and pre-provision profits climbing 18%. Portfolio return on equity above 16%. This is very pleasing given the drag coming from our growth subsidiaries.
Digital customer engagements are gaining traction, and the cash plus distribution model continues to scale. Profit before tax for the FNB subsidiaries up 64%. The help coming from lower credit charges, especially from the growth subsidiaries. Deposit growth very healthy. Of course, this is a very key focus area for the portfolio. Costs, as you can see, are headed in the right direction. RMB's results in the region, which include in-country activities as well as their cross-border lending book, declined 10% due to credit provision releases in the base year. Excluding the effects of this release, the period-on-period performance was similar. RMB's regional focus areas on the particular areas they focus on, and a lot of those around mining and commodities, should benefit from the ongoing commodity tailwinds. Moving to consider our businesses in the U.K.
Slide 32 sets out some of the key performance metrics. The Aldermore Group, just to remind everybody, focuses on the provision of finance to U.K. SMEs, homeowners, landlords, and vehicle owners, as well as providing a range of competitive savings products. The decline in the cost of credit on the back of better than expected U.K. macros, improved collections, and in-life portfolio management pushed earnings up strongly in the period. As the results show, Aldermore is a good business. It has navigated the pandemic really well, albeit that it has lost a little bit of momentum in loan growth, and this is noticeable in the mortgages area. A highly regarded and experienced CEO was appointed in May last year, and he has nearly completed a refresh of the business strategy.
More on this when we present our annual results in September, but we should expect the strategy to be more focused on the existing attractive opportunities rather than any significant pivot. We are starting to see some good market share growth in both auto and SME finance. Aldermore continues to be well capitalized with strong liquidity levels. As you can see, it is generating decent returns. Thank you. I'll hand over to Harry to take us through some of the detailed numbers.
Good morning, everybody. Thanks, Alan. Okay, let's have a look at the total Group's six months results to December. It is definitely pleasing to present our highest H1 results at ZAR 15.7 billion. That's 43% up period-on-period. Yes, it is off a depressed base last year, given that it was impacted by COVID lockdowns and characterized by higher impairments and definitely lower volumes in the December 2020 base. What is particularly pleasing, and you see it in the green box, is a 12% growth against a pre-COVID earnings base of December 2019.
Now, that took a lot of discipline and a lot of effort across many people across all the businesses to get us here. What you'll see a bit later, that that is even the case at an operational level. Allan's covered, we're pleased to pay a dividend, interim dividend at the bottom end of our cover range. That's a 56% payout ratio.
NIC has substantially improved since December 2020. It is not at peak levels, and that's largely due to higher capital levels. ROE continues to rebound to 20.1% and its midpoint of our range. Strong capital generation, CET1 at 13.6 and NAV per share. There's net asset value per share up 12%. Moving on to the income statement, you can see credit is the single largest contributor to the increase in earnings. Having said that, interest income and non-interest income both up 5%, cost up 4%. Overall pleasing. I will cover most of these components separately as we go through the presentation.
Tax and other charge, clearly, given the improvement in earnings, is up for the period, but the tax rate is also up, and that is largely driven by the change in mix to effectively more taxable revenue streams. Okay, pre-provision operating profits. Moving on to that. That's overall for the group up 6%. That actually demonstrates the resilience of the underlying franchise businesses. What you see here is that it's actually up 4% against December 2019, and that's the pre-COVID level benchmark. If you look at the graph on the top right, that's overall revenue up 5%. Good growth on NII, and that's due to good deposit growth and actually good strategies deployed by Treasury.
NIR was mainly driven by the rebound in volumes and good growth in customers across the FNB base and strong trading revenue coming in from RMB. Impairment charge, we'll cover in lots of detail as we go along through the slides. Okay. This slide is looking at the composition of the group's pre-provision operating profit, and it reflects specific investment strategies implemented by Group Treasury, including its ALM strategies, so its asset and liability management strategies, and credit origination strategies executed by the operating businesses. Starting off at FNB, flat largely due to its subdued NII growth coming in from the credit strategy as you would see in Alan's show is actually retail, in particular, focusing on far better quality, lower risk customer base. Now, that comes in at a margin impact, so it's actually lower pricing.
In addition, the tilt towards secured residential mortgages places further pressure on our overall NII. The good growth in deposits clearly benefited, and so does NIR growth. WesBank pre-provision down 12%, impacted by effectively the muted advances growth and the tilt towards better quality, lower margin, business also impacted, and clearly the shift towards more variable rate businesses also impacted in terms of pre-provision and NII in particular. RMB, 2% reduction. Similar story in terms of NII drag. You've seen subdued credit origination. You would have seen actually a 6% overall growth in advances, but the average advances for the period was actually down. You've seen the growth in advances coming in towards the latter part of the period end, so latter quarter. They bode well for the next six months, but that impacted overall pre-provision operating profit.
Turning to the U.K. operations, Aldermore certainly benefited from the stronger rebound in the U.K. economy. Aldermore particularly grew business finance advances. Residential mortgages and buy-to-let advances actually contracted given competitive pressures, but also operational strain within the business itself. Virgin Money, good advances growth across the business. However, pre-provision impacted by some provisions taken relating to certain operating events. Bottom left graph shows effectively the interest income from Group Treasury, and what you'll see is a very similar trend, what you saw up to June. So the prior six months up to June. Now, this reflects the FRM strategies implemented during the COVID pandemic period. Strong deposit franchise certainly help support Treasury in terms of lowering its or continuing to lower its institutional funding.
In addition, there were some one-off benefits sitting in the six months to December, and the balance sheet was further strengthened with higher levels of liquidity and capital, as Alan has detailed. On this slide, 39, we move on to the total summary of net interest income. As I said, although the balance sheet is up 6% overall for the group, excluding repos, which as you're aware, is transient in nature, as well as currency movement. The rand actually depreciated period-on-period, but the average actually appreciated. Excluding those two impacts, advances were actually operationally up 2%. That, together with a mix change towards secured lending, that effectively led upward lending NII. Lending interest income down 3% for the period.
Transactional NII, that includes effectively credit card growth as well as deposits, and in particular, endowment deposits benefiting from the customer growth, was up 4%. Deposits, and this is your effectively yield pricing deposits, with customer moving towards that, growth, effectively saw the shift under the deposit pricing, so that was down 3%. Good deposit growth across Africa. That's all with customer acquisition. Good growth across that piece. NII coming in the U.K. operations, 5%. Lower funding costs, the biggest single driver, as clearly as well as advances growth. As discussed, we've covered the movement in treasury that's higher capital base as well as ALM strategies on NII. Okay, moving on to a very busy slide. I'll go through it in component pieces. Overall margin is up 10 basis points from December 2020 to December 2021.
Having said that, actually, it's more in line with the trend that you would have seen up to June. So against June, it is two basis points up to the June 2021 margin. As in prior periods, we actually show separately the U.K. margin operation or the margin impact from the U.K. operations. So the first red bar that shows effectively nine basis points reduction in margins, all we're doing there is rebasing by the increase in balance sheet. So we take net interest income and rebase the growth in balance sheet, and then we start off with the component movements of income for the period. Lending margin, seven basis points down for the period. Clearly, it's impacted by the shift in tilt towards lower margin, better quality advances growth, as well as the mix change, as we talked about in terms of more secured advances.
Offset clearly by the growth in advances that you're seeing, as well as lower NPLs that I'll cover later. Overall margin from deposits up four basis points, and that's the strong growth coming in from the deposit franchise, as well as lower institutional funding benefiting the cost of funding. Capital endowment up six basis points off a higher capital base. The treasury benefits that we covered incorporates the ALM strategies as well as exchange movements and certain other mismatches that come into play, so that overall results in margin uplift for the period. Okay, deposit franchise. Overall deposit growth up from the franchise up 11%. You can see strong growth from both retail and commercial up 9%, clearly supported by good customer acquisition as well as competitive product pricing within the business.
RMB up 7% in its deposit, targeting main bank customers at market rates. Africa up 4%, coming in off customer growth in the business. London in pound terms up 14%, clearly putting in competitive price products into the market. Then that effectively gives you the additional benefit from the deposit franchise plays into lower issuances in the institutional market. That, together with what Alan was saying, is deployment into higher HQLA assets. The majority of the reduction in institutional funding, actually the 318 is a very similar number to what you would have seen at June 2021. That actually played out in the period to June. Okay, moving on to this busy slide again on advances. This is slide 42 that's found in the book.
Advances, as I said, excluding the impact of repos and currency move is up 2%, but reported up 6%. The growth is largely driven from residential mortgages, corporate commercial, as well as the vehicle and business finance in the U.K. market. Looking at the composition, and that's the donut on the left, you still see it's a fairly well-diversified advances book across the group. Retail actually decreased to 48%. As I said, that is the impact of this outsize increase in the repo book to December. Yes, the repo book is transient, so excluding just the uplift from the repo book, effectively, the retail advances still approximate to about 50%. Top right, we start off with the advances split across the various stages, and what you will notice is the improved distribution of the staging of the advances book.
NPLs down 10%, benefiting from the lower inflows. Conservative origination, we talked about. Definitely stronger collections from the business overall. Curing of some of the paying NPLs, which I will show a bit later. That cures into Stage two. Despite the curing, effectively, Stage two is down 1%. Again, implying good collection as well as lower rolls from the conservative origination playing out. Moving on to the middle section, that's effectively the absolute stock of provisions that we have on the balance sheet. You'll see it's largely been maintained across the June reporting period. In fact, it's marginally down by just over ZAR 400 million since June. Against December, it has substantially decreased just over ZAR 3 billion. That was due to the improving macro environment that's improving in your forward-looking view.
The table at the bottom is what you see on Allan's slide, is the coverage provisions. If you look at the coverage on Stage one, that's the bottom one. That's 97 basis points, largely maintained, so that's about two basis points are higher than June. That does include certain post-model provisions being held. That's because at December, level of uncertainty was still high. Yes, we did not predict where you see the uncertainties around Ukraine, so that's definitely not built in. What we did have is uncertainties around higher level of inflation, higher level of interest rates, both looking at globally as well as in the domestic market, and clearly unknown where we end up with the flat scenario on Omicron. Effectively, that was built into the modeling, and we did maintain the flat scenario.
Although at a lower level of probability as well as a lower severity relative to June. That plays out in terms of overall coverage, in terms of Stage one. Stage two coverage, marginally lower. Clearly, the curing coming into place from the NPL is playing to that because that's paying customers have a lower coverage. Clearly, that impacts the curing ratio into NPLs, and as such, NPL coverage then does increase. Unpacking overall NPL is always worthwhile looking at the picture on a rolling six months basis. Group overall NPL since June has reduced 10%. When you unpick this, let's just start off in terms of looking at it excluding Aldermore. The bar on the top left, NPLs decreased 13%, and this is all against June.
When you look at NPLs just on a paying basis, so that's your curing NPLs. Paying NPLs decreased 12%, and despite that curing, effectively operational NPLs down 9%. That's what we're talking about lower roads coming into, i.e. quality of origination, as well as lots of effort by the business in terms of good collection stats. Similarly, you see U.K. operations in terms of collections into NPLs, as well as no longer borrowing in terms of perfection of security. That drove down NPLs 5% since June. Okay, this is an absolute decrease in terms of impairment charge. 57% decrease to ZAR 4 billion, unpacked across all the various product lines. Now, this definite impact reflects the improving macro picture that you see from the COVID base last year.
You can see against ZAR 9 billion, a substantial decrease across that. As I mentioned, this does include some of the uncertainties and product overlays that we talked about. You see it very subtly in terms of FNB center, where some of that post-model adjustments, you see it being raised, in particular in the ZAR 420 million. Although it is lower than what was raised in prior December. NPL ratio on the bar chart on the left at 4%, as you would expect, is still at a sticky level, and you would see that going across. At 61 basis points, it is the lowest that you have seen in many years. I think that is the consequence of IFRS 9, the life fund loading, and then you actually see it pay out in the peak.
Okay, unpicking that, or rather unpacking that ZAR 4 billion impairment charge. Let's start off with Stage one. Overall advances up 8% in Stage one. Coverage marginally up at two basis points. That results in a ZAR 1.1 billion increase in absolute provision from June. Stage two, balance sheet down 1%. Marginal coverage change. That results in a ZAR 500 million reduction in balance sheet stock. NPLs down 10%. That results in a ZAR 1 billion reduction in absolute provisions. That sums up to what you see in the middle of the next slide, a net reduction of net release of ZAR 415 billion. On the top of that slide in the middle, you effectively see fairly healthy maintaining of post-run recoveries of about ZAR 1.4 billion, and then gross write-offs being at a very similar level at ZAR 5.8 billion.
Effectively, that's how you see the unpack of the total ZAR 4 billion charge for the six months of impairments. Okay, moving on to non-interest revenue. Overall, up 5%. The big driver is volumes and a good performance from fee and commission income, trading and investment income across the piece. This is slide 28 if you're following on the booklet. The bar graph on the top left shows you fee and commission income has grown 3%, and that is despite absorbing low fee increases in July. The fee giveaways that Alan spoke about, the increased eBucks generosity, as mentioned earlier, and this growth is largely driven from higher transactional volumes. The customer base we talked about last year, 3%, and then the 4% that we've got period-on-period in this reporting period to December.
Insurance income. I'll pick up on the slide maybe later. That's down 7%. RMB trading activities delivered another strong performance off a higher base. That was 14% up for the period. Investment income benefiting from resilient annuity income, private equity, principal investment portfolios. What you see is minimal impairments required this period. Insurance income, overall against December, down 7%, and that's given the higher claims and claims-related provisions. This is expected given the higher mortality experience with COVID. What is definitely very pleasing is 11% growth in premium income against December last year. Actually, 6% is what you'll see, the premium income growth since June. What you also see pleasingly is the normalization of claims cost. That is actually down 29% since June. Private equity performance was actually quite pleasing.
Annuity income is actually up 5% growth. That is against both old and new vintages benefiting from effectively the rebound and the recovery in the SA macro conditions. The business is successful in deploying about ZAR half a billion in new investments. That's after about ZAR 300 million in the six months to June, so you can see activity coming back into the market. The quality and diversity of the portfolio is captured in the unrealized value, increasing to ZAR 4.8 billion. That was effectively ZAR 3.9 billion last year December, and ZAR 4.4 billion unrealized value sitting at June. All right. Operating cost up 4%. I mean, that effectively reflects continued focus on cost management in the business. What we do expect is some reemergence of costs coming into place as the full workforce comes back onto premises.
This cost does still include investments in our growth initiatives. In the second half to June 2021, we did have some accelerated write-offs of certain assets, and what you see, it does play off into the benefit of depreciation in this six months to December. The benefit of that depreciation, you actually see it quite starkly in the bottom right in terms of the impact on IT costs. You can see it actually growing only up 3%, and that's actually probably the lowest you've seen in many periods of reporting. As I said, the focus on cost savings were realized. That effectively allows us to invest, continue investing growth initiatives. Overall staff costs. I mean, overall staff costs was up 5%, resulting in cost growth for the group up 4%. This slide you've seen before.
What we show you here is effectively a five-year track and the CAGR of costs, so that's effectively your compound growth of costs. The group, what you see here is it's still the cost build up in line with the group's strategy of building into platform. At the bottom, you see IT costs are up on a compound basis at 8.9%, despite effectively the group overall compound growth of 4.7%. Effectively showing you the cost savings excluding IT costs of 3.7%, and you can see the staff costs up at 4.5% compound over the period. Sorry, 5.4%. That's probably wrong. 5.4%. That includes both salary increases as well as headcount growth. This just shows you the continued investment in platform through IT spend. This is my last slide.
I'm not gonna cover all of the items. I've covered that across in the pieces. Very, very good set of key drivers, across the results piece. What I'll leave you with is definitely strong set of liquidity, strong set of capital, strong position of balance sheet, as well as capacity within the business to effectively capitalize on what the economy recovery that actually we see coming to us going forward. Thank you very much, and I'll hand you back to Alan.
Thank you. Right. We're almost done. Looking forward, it is useful just to touch base with the sort of the economic environment that I think we are going to face. Despite the geopolitical uncertainty I mentioned earlier, South African corporates and employed consumers can increase their demand for credit and investment for durables spend purposes, notwithstanding a high level of interest rate uncertainty. We show that on the top right. We refer to this, you know, so-called sort of debt capacity highway, if you like, and you can see that there is plenty of room on that highway, even if some of the interest rate hikes do manifest for further capacity. We think we are kind of well poised to really lean into that.
Crucially, the promising signs of a pickup in investment spending by South African corporates need to gain pace if we are going to build the long-term recovery for this country. We are encouraged by recent signs that the enabling environment is starting to get better, and this is hopefully gonna make this investment spend possible. We expect the credit cycle to lift, and we are already seeing signs of this in selected pockets of secured credit and in particular in asset finance. All right. Wrapping up. We believe we are very well positioned to play strongly into the improving domestic economic backdrop. We have ample financial resources, we have the customer propositions, and our strategies are well-founded and remain on track. We are feeling good about our prospects in South Africa, in broader Africa, and in the U.K.
Growth in earnings, of course, for the full year to June 2022, will exceed our long-term target of a real growth in earnings as the last tailwinds of the pandemic recovery are felt. Right. Just to end off some thank yous. Thank you to our various regulators in all of our markets for their guidance and relief to our sector and to our group. They certainly make us a better organization. Thank you to our many customers. We never forget that we have no business without you. Finally, thank you to all our employees. The way you have pitched up and given of your best is impressive. Thank you very much all for your attendance, and we're happy now to take any questions you may have. Thank you. Right. There's a question over there. Mr. Dipenaar.
Alan, I think it was the IMF recently expressed concern about the amount of short-term, short-dated government debt that the banks hold. That's collectively all the big banks. I'd just like you to comment on that, and if you feel there's reason for concern.
Thanks, Mr. Dipenaar. That IMF report did indicate that there's been a pickup by the banking sector of government issuance. It links back to those slides that I showed, where government really had to lean in and support the economy. That needed funding. Of course, the savings were captured by the banking sector. Less of those savings went into advances for customers, and so those savings needed to get invested. Banks would typically invest those in HQLA and treasury bills. That has picked up significantly. What they did point out in that report is, of course, the nexus that we all understand between the sovereign and banks.
Of course, if the sovereign's creditworthiness deteriorates significantly or you know, in the worst case scenario, I guess, gets into trouble, of course, that transmits directly into the banking sector. These things in many respects are joined at the hip. What they did say in that report, though, is that if they look at the levels of investment by the banking sector into government securities, it is not out of line with other international markets. It's not as if what they were signaling is, listen, the direction of travel is up. Now what we are expecting is we think that that growth that we've seen in HQLA is going to start to dissipate. We expect that shift into our customer franchises. That's certainly where we are now, and the last couple of months is showing that that's happening. Another one over here.
Morning. Thank you, Alan. Sorry, can you hear me?
Maybe take your mask off.
Can you hear me? There we go.
Now we can.
Let's try that. Two questions from my side. Thank you. Just regarding NIM, particularly from the group component there, the 20 basis point uplift. If you could perhaps give us some color on how we can expect that to trend from here. I mean, can it be sustained? Does it unwind? Does it continue to be supportive? On credit losses, obviously 61 basis points, a pretty strong print. How should we think about that going into the second half against your longer term range? Thank you.
Okay. Good questions. Harry.
All right. Sorry, James. The 20 basis points, I missed the beginning part of it. 20 basis points regarding NIMs?
Yeah, NIM. From the group, there was 5% and 15%, so the uplift was 20%.
Okay. NIMs. James, that's why I actually referenced June in particular. June NIMs is effectively two basis points for the total group. I think what you would see is clearly rate cycle, but you would know that we effectively mitigated some of the endowment negatives, which means the uplift is also not fully taken apart. We do expect continuation of NIM enhancement. Clearly, a rate cycle of the 50% mitigation playing into account, but you won't see substantial enhancement. You're seeing a couple of basis points uplift as you see, especially in the shorter term. Credit, the reality is gonna be that effectively what you're seeing is not a big change in provision stocks. Park them on one side. You are seeing increase in credit coming in. You see origination coming in.
The origination comes in with origination strain. You see Stage one provisions will build up and a s a consequence of that, charge comes back. I think we got a healthy level of provision stock. I think it'll probably be marginally up, but not significantly up in the bigger schemes of things. Then it depends on how macros play out. There's a fair amount of uncertainty. It depends on how you call macros. If macros significantly deteriorate between now or rather where we see at December to where you land up at June, let's say for instance, the Ukraine environment escalates significantly, global macros change dramatically by June. Difficult to call it, but the direction of that FLI, I can tell you one way, is gonna be up, in which case it may hurt you. If macros land up to be similar, we don't have a play on releases.
I don't think it's gonna be substantially more favorable macros. I do think excluding Ukraine, the trend line was gonna be, uplift an environment far more supportive of the economy, which means the economy, effectively, the uplift on the economy gives you a little bit of tailwind on that. That hypothesis tells you that there is a little bit of tailwind on releases on provisions, not substantial. I think the call is gonna be effectively, unfortunately, where the escalations come out of Europe around where our friend Russia decides to play.
Good. Happy, James? Good. Right. Any more questions from the room? Let's have a look at the. Right. Can we check the other venues? Sam, we've got questions there?
Al, I've got one quite long question from Ndumiso Buthelezi from Fin24. I'm gonna try and ask it. You mentioned that the group has adopted a discerning credit origination approach for retail. The first question is, how exactly did FNB and WesBank change their credit risk appetite? Two, does that mean that FNB will reduce its exposure to new unsecured origination even more? Are there any particular sectors that you're staying away from? Is it FirstRand's view that this is not the right time to be growing the advance book aggressively?
I'll make an opening reply to Ndumiso Buthelezi on that, and then I'll get Jacques to make some comments. Also Chris. I think, Chris, you can also talk a little bit about WesBank and what's happening. You know, with respect to credit, I think we've been very mindful, sort of as we transition out of this pandemic, how customer incomes are recovering, where we think the pockets of acceptable credit risk lie, and where that capacity that I spoke about sits. We look at bureau data. We look at our own prism score data. We look at, you know, what's happening on new business that we're writing. We look at early vintages. We are tracking all of that stuff.
It's not, in our view, simply business as usual that you open up the credit tab. We've spoken about this discerning approach that we've had. We are tilting it towards lower-risk customers, better-rated customers. Again, I emphasize the point, the reason we're doing that in our view is where the capacity for borrowing sits. We think there's very thin capacity in certainly some of the higher Prism scores. We are obviously nervous, I think, to dive into that space. Jacques, maybe you could just add some comments, and then you just follow it up. Chris. Thanks.
Thank you, Alan. I think, well, I guess I can just speak for it. The storyline for us certainly has been an increasing growth agenda in credit from where we were in 2020. I guess, as a conservative outlook towards getting our clients through this, through the pandemic, and certainly those early lockdown phases. Last year, we started gaining momentum. It's pleasing to see that in the early indicators, certainly in retail mortgage, as well as in the FNB personal loan businesses into our existing clients. That's got nice traction. There's a direct access business that we're still struggling a little bit with some of the outcomes. The impacts of the new legislation as it relates to personal information protection and all that.
That'll play out on, I think, our innovation in that space, also gaining momentum. I think the storyline for this season, certainly as we get not only momentum into our existing clients, but certainly our franchise customer broader client growth also will give us more opportunities. We exceedingly excited about some of the innovations related to, especially as how we attract new clients to switching experiences, getting customers across with trying to get really on the front foot with those credit needs as they've navigated through COVID. I think we all think that there's. It's such an incredible story for people to have come through. Their balance sheets are stronger, our customers are in good condition, and we think that this is gonna be a year where we'll see further growth. I'll go into Chris quickly for WesBank.
Thank you. Thank you very much, Jacques. Yeah, from a WesBank perspective, our acquisition models, our strong presence on the dealer floor as well as our joint ventures continue to present us with opportunities to write low risk, good quality business. We've stuck to those principles right throughout the COVID period. I think you can see that, the impact on our results has been a tilt towards a low-risk book. It has also come with the associated lower margins. We are really well positioned now to become more aggressive in terms of writing credit into the market as customers' capacity to borrow increases.
As I said, our acquisition structure inside the market allows us to have a really good look at those transactions as our appetite improves. I think going forward, you can expect to see some changes to our appetite, which will hopefully result in our books starting to grow certainly faster than what we have been able to do up until now.
All right. Thanks, Chris.
If I could just add. One thing you gotta remember, what we talked about is the origination to get to the results to date. The question then flips is the forward-looking view. Clearly, one of the things you would have seen is the recovery of the economy, which means the recovery of individuals' earning capacity. Income levels have also rebound, which then gives you capacity back to backward risk. That's what you see the two gentlemen telling you about. As the forward-looking view comes in, is that your risk will tilt back to more normalized levels, and there's a gradual lift towards that. Clearly, if you're saying is, the second question was, are we seeing a lift even more away from risk? The answer is no.
In essence, capacity has come back into the economy, which means you lift back to be able to support customers that actually have the capability to take on credit.
Good. Sam, there's another one. Yeah.
Yeah. There's a couple more.
Yeah.
Stefan Potgieter from UBS. Congratulations on a strong set of numbers. With the core transactional and credit franchises relatively mature, how do you see the contribution from insurance and investments increasing from here?
Okay. Thanks, Stefan. I mean, hopefully it came across in the presentation. Otherwise, I didn't do a good job. We are excited about our insurance businesses. I mean, the first point to make around the insurance businesses, and already they're pretty hefty contribution into non-interest revenues, is there was no goodwill paid here. I mean, we built these businesses from basically zero. Shareholders haven't, you know, we've added sort of chunky NIR into the mix. We haven't had to write an investment check. I think that's firstly the great story. We're very excited about the nascent short-term insurance business. That's, you know, we've just launched it. You can see how quickly it's scaling.
Why we are excited about short-term insurance, in particular, is, you know, one, those are typically annual policies that come up for renewal. We find customer loyalty to insurance for short term is certainly less sticky than it is certainly for life products. Also in short term, it's a digital distribution model. I mean, pretty much all of the competitors out there follow a digital approach. We have the digital rails. We've got the platform. We've got the you know, a brand that resonates deeply into our customer base. It's our opportunity to kind of scale short term into our base, we think is huge. It's just started, but watch this space.
The second thing I would with respect to life insurance, I think, I mean, if I stand under correction, I think we're about five years old, maybe. Okay. When we started off, and we look at a number of sort of measures, one of the data points that, of course, we can see is debit orders coming off our retail customer accounts, and we can see for life products and who those debit orders are going to. We knew when we started what our goal was. I think when we started out, I think we were probably seventh or eighth in our retail customer bases. As I disclosed, we're now third.
You can appreciate probably the two big institutional names that are ahead of us, and they've been around a long, long time, certainly not seven years. We are making progress. We think we've got lots of runway, I think, to get into that premium base. We're particularly excited about the opportunity sitting in commercial. Again, I mean, we're at the absolute early stages there. We are pretty excited about it. I mean, we would like to obviously continue scaling it. I guess at some point, you know, once we saturated our existing customer base, of course, we've always got the opportunity to go open market. We're not choosing to go open market at the moment. You know, we have so much internal business and focus, you know, with our own customers. You know, we are pretty excited about it, Stefan. Hopefully there's more to come.
Harry, have you got a pen? 'Cause I've got a long question from Stefan Swanepoel at M&G. You might have to write some of them down. Okay. Thank you for the presentation. You talk about the pre-provision operating profits displaying the resilience of the various franchises. However, the divisional pre-provision operating profit was negative except for the center, which benefited from once-offs. Can you please highlight the value of the once-offs? That's the first question. Can you also highlight your expectation for the center division going forward? Given your comments explaining your pre-provision operating profits, would you be prepared to commit to structurally lower through the cycle credit loss charges, given your changes in risk appetite? Last question.
If you annualize your second half 2021 ROE, it is at 20.9%, it appears marginally lower than your first half 2022 ROE at 20.1%. Do you expect your ROEs to increase in the second half compared to the 20.9% in the second half of 2021?
Can I go? All right. Sam, long answers. Let's go with the first one. Okay. I think the reason I put up a slide that shows you pre-prop of the center is actually to dispel the misnomer of large once-offs. In fact, if you have a running six months number that shows you a trend line of similar, it isn't large once-offs. It shows you the NII. The NII is coming in from, as Alan mentioned, unallocated capital, higher holding of HQLA. Effectively, when you have lower deployment of advances sitting in the franchises, that's when you have lower level or rather higher levels of unallocated capital sitting in the center. What you will see displacement is when advances start growing, as Alan's explained earlier into the slides, into the franchises. Capital allocation goes there.
Clearly, the return on capital goes with the capital, and you'll see that little bit of a scissor movement in the center. Am I prepared to disclose the once-offs? To be honest, I mean, the OneSource is probably ZAR 200 million. It isn't more than ZAR 200 million, and it's not even more than ZAR 500 million. It's a number far less than that, in all fairness. Well, listen, we can find out absolute numbers if you want, but it isn't a material level to do of a swing. There's technicalities around Forex. It's settlement of some Forex exposures that effectively cycle through FCTR to income statement. Yes, that's not gonna be recurring, but it isn't a material number for non-recurring sitting within that. Hopefully that dispels the issue of it is OneSource that effectively driving pre-provision of the group 6%. Actually, it is structural in my personal view.
On the second one, happy to commit a structurally lower credit loss ratio given the tilt toward lower risk? The tilt toward lower risk was a very, very specific FRM strategy we deployed in the pandemic. Very happy with the deployment of that. It isn't a structural permanent shift. You cannot be in a business where effectively you always have no risk, no appetite for high-risk business. As a bank, you gotta have to play across all the risk spectrums, and you gotta satisfy customer needs across that piece. Unfortunately, what I am then saying is, we will trend back to TTC levels around that piece, and then I will always land up saying 100-110 basis points was struck at the level when we were sitting in an IFRS 9 world.
In IFRS 9 world, the volatility on a TTC level is a different ballgame. We have now given enough datasets. I don't think we're fully through that, so our credit teams have done a lot of work. We haven't finalized it. The reality is, in IFRS 9 TTC level, we actually have to have a little bit of a higher band to compensate for volatility. Having said that, I don't think we need to. The answer, Chris, is no. I wouldn't commit to a lower TTC levels just because of effectively a pandemic level tilt towards lower risk. On the second half ROE, Sam, to be honest, I did have a pen, but I didn't calculate all your ROE. Doesn't matter. I understand the trend line.
Mathematically, the 20.1 ROE, all it does, it accretes to your current capital base for December, and all it takes is a 15.7 × 2. The one thing we guarantee you with a 56% payout ratio for dividends that we payout in April. No, there is 44% capital accretion just from December, and we are saying we are gonna be profitable for the six months to June. In which case, we are saying we're gonna be capital accretive by the time we land up in June. Simple math says the denominator for capital is higher, and then my earnings base, that's different. I'll leave that to you to decide how you forecast our earnings base.
The earnings base at 15.7 times two, what I'm saying is, I think there's a little bit of pressure on ROE, but we are confident that we still think we're gonna be definitely at a very similar level of ROE by the time we get to June.
Thanks, Harry. If I can just add on this focus on Group Treasury performance. We must remember that Group Treasury, I mean, is not an independent entity in the group. It is the recipient of the deposit gathering activities that happens in the franchises. Of course, they will then transmit those resources back into the franchises for lending purposes. Also they regulate the pricing of our financial resources. Indeed, the outperformance, and let's call it an outperformance or by Group Treasury, is as a consequence of the outperformance by FNB. It is because FNB is the number one gatherer of household deposits. We've done exceptionally well on the deposit side.
Of course, we attribute the credit for that to FNB and we put FNB up in lights as we should. The reality is the consequences of that end up in Group Treasury. That's essentially the firepower that Group Treasury then sits with, which then has to be deployed. I think the question is, you know, is it high quality incoming Group Treasury? Absolutely. Is it sustainable? Well, I guess if the deposit gathering activities continue to outperform like they are, I mean, you know, Group Treasury is gonna be the recipient of these flows. We are leaning onto the front foot. We're gonna be, you know, pushing on the advances. We're gonna be, you know, as Jacques and Chris both spoke, we're pretty optimistic.
We've certainly seen it in the last couple of months, how those advances have turned up. You know, we expect a lot more of that to come. It may well be that the outperformance on deposits continues to run ahead of advances growth, in which case, listen, Treasury is gonna have to do what Treasury does, I guess. Thanks, Sam.
Okay. I have another question from Charles Russell at SBG Securities. There's a couple of questions. Can you please unpack your last statement regarding full year 2022 earnings benefiting from the last tailwinds of the pandemic? It sounds as though you think there are only another six months of benefit, but you also sit with 3.7% book coverage well above pre-pandemic levels, and you acknowledge a rebound in credit growth. Does this statement mean that you think overall coverage is now structurally higher and that credit growth only has another six months before cooling off again?
Okay. Yeah. Thanks, Charles. I guess what we're trying to do is be helpful around our immediate guidance to our year-end. I mean, if we do simple math, sort of Harry mentioned, and we simply just double first half, you know, take our first half earnings and we assume we can repeat those in the second half. If one does the math compared to then the previous financial year-end, you can see that the year-on-year growth is going to run way ahead of nominal GDP. We talk about our long-term through the cycle earnings growth of nominal GDP, and we always say we want to do a little bit better than that, a couple of % more. I think if you check that for June, it's not a particularly helpful guidance statement.
Hence we teased out to say, "Listen, we are, we still are enjoying growth of a base that is not fully normalized. And so you should expect certainly for the run into June for that to be exceeded." Now, I don't think that's a surprise. I think if we look at market consensus of where the earnings are expected for our full financial year, I think the market has latched on to that point. The second part of the question though relates to, okay, when are we fully normalized? Now, I think Harry spoke about those balance sheet provisions that we sit there. We have ZAR 50 billion odd of balance sheet stock. And the question is, you know, how much of that is needed versus how much of that can recycle back into earnings?
Clearly, if that recycles back into earnings, it's going to lift our earnings profile. You know, we would expect that certainly some of that is going to find its way back into the income statement. We have no intent to hold onto it. We don't think structurally we need to hold on to, you know, to that sort of level of coverage or provisions. You know, how is it going to happen? Well, I guess it's a complicated question because it also is going to need to relate to, you know, what happens to origination strength for Stage one. You know, how punchy does that growth look? You know, we haven't got into the budgeting cycle. You know, that's an activity that really takes place after we get over the results season.
I think then we'll get a really good sense of where business sees advances growth pushing over the next three years. It'll allow us to make probably some more informed insights around what we're gonna do with balance sheet stock. We have no mindset that says structurally we need to sit on higher levels of provision. You know, I mean, in fact, we prefer to say that essentially looks to us like sorta trapped earnings, and so we are mindful of that.