All good. Right, good morning, everybody, and welcome to FirstRand's results for the six months ended 31 December 2023. The next few slides will highlight the macroeconomic environment that we faced over this period. Beginning in South Africa, here we find ourselves as a small, open economy in a much less forgiving world. The delivery challenges that we have at home are stark, and we are witnessing the collapse of state-owned enterprises. The fiscal challenges are also very acute in the face of an ever-elusive lift in the productive capacity of the country. The recent budget reading by the Minister of Finance was not an easy day in the office for him. However, a good budget emerged, which recognized a much greater role for the private sector. But there was also a stark message in the budget: time is starting to run out.
We are already witnessing the first phase of what we refer to as unconventional government financing and debt management, as capital markets become tighter and more expensive for South Africa to access. Looking at the macroeconomic conditions for the period under review, let's start with the top left. After hiking interest rates at the fastest pace in years, the South African Reserve Bank kept interest rates on hold since the middle of 2023. The restrictiveness of the monetary policy stance was exacerbated as inflation started to fall and real interest rates started to increase significantly. Top right, in addition to tight monetary conditions, consumer and business confidence continued to drift lower, as the lack of sufficient electricity, logistical constraints, and other infrastructure weighed on sentiment. The ongoing conflict in the Middle East and Eastern Europe further dampened confidence.
Bottom left, more expensive money and falling business confidence resulted in a decrease in private sector credit extension to both households and to corporates in South Africa. Then bottom right, from a medium-term, longer perspective, it was encouraging to see that private sector fixed capital formation growth was at least maintained at the levels it reached last year. Moving to slide three and looking at the broader Africa region, top left, inflation in most countries in the broader Africa portfolio started to trend lower in recent months. Given the extent that inflation in these countries is driven by food and fuel prices, the easing of these prices provided welcome respite to the relatively tight monetary policy in the countries. Bottom left, however, some countries continued to suffer from higher inflation.
In this instance, the rapid and very significant increase in the Nigerian inflation rate has weighed heavily on the cost of living in that country. This increase is as a result of the market and economic reforms that the country embarked on last year, which has resulted in a very significant exchange rate depreciation and fiscal adjustments. This process is not yet done. In fact, two days ago, they announced the first of a number of very significant interest rate hikes in Nigeria, so this is one to watch. Right side, in Zambia, the uncertainty around the debt restructuring negotiations have kept international investors on the sidelines, the exchange rate under pressure, and inflation from falling. Ghana, of course, was the headline story last year with the sovereign debt restructure.
Given the global nature of recent inflation and monetary policy and the monetary policy cycle, it is not surprising that the U.K. macroeconomic environment was also challenged. That said, the U.K. economy has performed better than what we expected a year ago. Just on the left-hand side, as was the case in South Africa and most of the world, the Bank of England reached the peak of its hiking cycle in the second half of last year. With inflation falling in recent months, monetary conditions in the U.K. have tightened significantly, as the real policy rate has lifted significantly. Top right, although the decrease in inflation has been bumpy and has caused monetary conditions in the U.K. to tighten, it has also provided help, a helpful boost to household real disposable income, which, alongside surprising resilience in the labor market, has provided support to economic activity.
And then bottom right, importantly for us and our business there, despite house prices contracting a little in recent months, the housing market has surprised with its resilience over the cost of living crisis, with prices not falling as much as was feared. Demand for U.K. accommodation continues to exceed supply. All right, moving on then to unpack some of the highlights from the six months' performance. Begin with this slide of these headlines, the group performance metrics here on slide six. I think displays what we refer to as a very commendable result. Normalized earnings up 6%. For the six months, ZAR 19.1 billion, driven by a strong top-line performance coming from both sides of the balance sheet, the lending and deposit franchises.
The credit loss ratio, as you see there, edged up to 83 basis points, printing well below the midpoint of FirstRand's through-the-cycle range for cost of credit. A much better outcome than we had anticipated. Net asset value, or we refer to NAV, increasing 14%, with a touch more than 20% of this period-on-period gain coming from currency movements. Point in time return on equity, that declined 1% to 20.6%, as return on assets softened by 9 basis points. Operating leverage, 49.9%, it benefited from strong top line, as well as some costs being offset against revenue in terms of the new IFRS accounting standard on insurance, and we've adjusted the comparatives for IFRS 17.
Our Core Equity Tier 1 ratio, CET1 ratio, you can see accreted 10 basis points to 13.3%. Given the strong capital position, the board was comfortable to declare an interim dividend at the same cover we ended the June 2023 year-end at. Just looking at our compound growth in NAV. This we really think is a big underpin to shareholder value creation, and you can see we've achieved this while maintaining a return on equity profile well-placed in our long-term range of 18%-22%. So this has really delivered significant shareholder value over many years. On slide eight, we turn to what we refer to as our key performance measure, economic profit or net income after the cost of capital. This is our accounting profit after we subtract the cost attached to the capital we have used to generate that profit.
Economic profit, you can see there for the six months, ZAR 5.5 billion, down 10% for the comparative period. Return on equity, as I say, at 20.6%, well situated in the range. Just in the next slide, I'm gonna unpack some of these movements. Right. On slide nine, we just set out some of the cyclical drivers behind the 10% decline in economic profit. The first place I want to start is the decline in return on equity of 1%. With respect to earnings, these were lower period on period. Firstly, given the pickup in the cost of credit. Secondly, the GBP 17 million swing, negative swing, in Aldermore's fair value hedge period on period, and of course, lower private equity realisations, despite a valiant effort from RMB to match the Studio 88 profit that sat in their base.
At the same time, return on equity, the calculation at this point in time references average capital balances, and these were up 12% period-on-period. Then the last component to deal with is just the cost attached to the capital used. You can see at 14.65%, it lifted compared to the comparative, the drivers being the increase in the sovereign bond yield, and of course then a premium for inflation. This increase alone in cost of capital accounted for 60% of the reduction in economic profit. Right, on slide 10, we set out the income statement walk period-on-period. Harry will cover pretty much all of the component movements. All I'm going to reference is the largest category of revenue, that's the big green block on the left.
Net interest income, or NII, as we refer to it, up a pleasing 14%. NII comprises credit risk earnings from our lending activities, income from the interest earned on deposits, as well as endowment earnings from our own resources. NII can further be split between volume and margin. Volumes were up strongly in these six months. Group margins were elevated, with South African margins improving, notwithstanding the origination tilt towards low and medium risk lending, as well as secured lending growing faster than unsecured lending. This was offset by slightly softer margins coming from the UK operations. Risk-adjusted NII remains very well balanced in FirstRand, given the healthy contribution from the deposit franchises. The origination stance over the past few years has enabled strong balance sheet lending, with impressive deposit growth ensuring that the bank has remained well funded.
Transactional NII, which really refers to that, customer growth activity, grew strongly, a function, as I say, of customer growth and healthy transactional lending and deposit volumes. But we return to the themes we, we, first unpacked at the June year-end, and we refer to them as the key value creation themes. These matter significantly for a universal bank. So beginning with the first one, liabilities, how did we perform there? And this is a good place to begin if you're a bank, because you know, a bank is more technically known as a deposit-taking institution. Right. The group's deposit gatherers, notably FNB, have performed admirably, with the deposit franchises growing balances 11% off an impressive base, coming in at just above ZAR 1.5 trillion, so really a pleasing picture to see there. FNB remains the top household deposit franchise in South Africa.
FNB's deposit growth, especially from commercial customers, enables group treasury to optimize the funding mix. It is pleasing to see the stronger growth in better-earning deposit products as retail and business customers seek better propositions. This is something I know the business has actively been driving. RMB also saw healthy growth in main banked customer operational deposits. Those are the ones that really attach to that main bank customer relationship, as well as from their efforts in the broader Africa region. Investment deposits declined in the period due to a single large corporate deposit in the prior period that was withdrawn.
As you can see there, it's pleasing to see the growth in the number of primary banked clients for RMB, and that's been a feature that they've been at it now for a few years and it, or many years, and that they continue to grow every year. Well done to them. Right. Notwithstanding volatile U.K. funding markets, Aldermore grew customer deposits 4%, with business deposits up a pleasing 18%. Aldermore has further significantly pre-funded their repayment of their TFSME funding, which is that preferential funding that is given to the banking sector by the Bank of England, and 60% of that funding for Aldermore matures later on this year, calendar 2024, with the balance due to be repaid in calendar 2025.
The UK banking sector overall is facing a total refinancing of TFSME funding and the like of about GBP 193 billion. So it's a significant amount of funding that has got to be refinanced in the UK. Right. The next value creation theme to consider is risk-weighted assets. This refers to the asset side of our balance sheet, and it's by far and away the advances component that comprise most of FirstRand's balance sheet. It matters for value creation for a bank because it attracts capital. Furthermore, assets, be they loans or investments, of course, generate earnings, which are welcome, but they also expose the bank to risk of loss. Right. On slide 17, we reveal group lending.
You can see that similarly, like deposits, up 11%, with good growth across all the portfolios in South Africa and broader Africa. The UK business took a sensible approach to focus on funding, given the volatile savings market, and ensure that pipeline origination does not come at the expense of margins. Looking here at retail lending, so firstly, on the left is you have FNB Retail, and on the right, WesBank. I guess all your auto loans. And you can see there the top talks about front book origination, so new retail lending, FNB and WesBank continues to reflect the tilt that we have spoken about towards low- and medium-risk customers. And it's because this customer group, we think, has the best sustainability to withstand the combination of higher interest rates and higher inflation.
The total risk distributions are reflected in the bottom images, and you can see they continue also to reflect a pleasing picture, notwithstanding there's obvious risk migration that will happen after you've written the business. Moving to commercial. Solid growth here, with lending up 12%, targeted on those sectors expected to hold up really well in the current environment. Really also pleasing to see WesBank Corporate. They focus on asset-based finance. You can see how that, that's growing strongly. And growth here, I think, is very promising for future economic activity. And again, just on the right-hand side, you can see front book, the front book risk distribution continues to reflect that same origination tilt. On slide 20, we see RMB's lending. That grew 14% period-on-period, with a strong contribution coming domestically as well as from their cross-border activities.
Just on the right, the RMB book remains well diversified, and the credit risk rating continues to reflect appropriate origination as well as in-life credit stewardship. In the UK, the combination of higher interest rates and the cost of living challenges have resulted in one of the most subdued property markets in years. Customer affordability remained under pressure, while fierce competition remained the order of the day. Owner-occupied mortgages declined 15% period-on-period, following some risk cutbacks introduced by Aldermore. The snapshots on owner-occupied mortgage concentrations, both in balances and regions, as well as portfolio loan-to-value, present a pleasing picture. Lending advanced to UK landlords, this is referred to as buy-to-let mortgages. You can see here increased 5%, the only Aldermore portfolio to show some growth period-on-period.
Again, the risk distributions present a sound picture. The other area to consider is asset liability management, and you can see this is managed by group treasury, and it's anchored to a number of what we refer to as ALM principles. The aim here is to protect and then enhance earnings through the most optimal outcome in an economic rate cycle. We follow a very consistent philosophy based on a disciplined investment process. The ALM strategies have added significant value to FirstRand and have contributed to the funding of dividends, and this next slide will give you an indication of that. On slide 24, we see the ALM strategies now, for the very first time, produced an opportunity cost in these six months. This is the first opportunity cost since the program was introduced in 2018.
This opportunity cost is a lower yield on endowment relative to what we would have earned had the endowment balances all been invested overnight at repo. In other words, the growth in group NII, that I referred to earlier, which printed at 14%, would have been 19% if our endowment balances were kept overnight. The cumulative ALM benefit to date from the program after the current period opportunity cost, as you can see there, remains at a very substantial ZAR 16.8 billion. This is the extent of the outperformance to date relative to a repo benchmark. The last area to complete the discussion on NII and lending is, of course, credit impairments. On the left, we see the annualized credit loss ratio. It increased to 83 basis points, lower than we had expected, and at the bottom, our end of the through the cycle range.
Payment strain, however, continues to manifest, impacted by the steep rate cycle, mainly coming from the consumer segment. This is expected to continue over the short term due to lagged effects before stabilizing. FLI unwinds occurred during H1 as rates near peak, with marginal further reduction in FLI anticipated in H2. The WesBank credit performance needs a shout-out. So in H1, their credit loss ratio printed significantly below all of the other retail portfolios. So a really good showing from WesBank. We are keeping a very close eye on three areas. The first area, the unsecured run rate momentum that we are seeing in the portfolio versus the remaining FLI overlays that we have to offset that momentum.
The second thing we are watching closely is the lagged effects of macros, and on consumer, and consumer strain coming from the commercial portfolio and the large corporate portfolio, and also then the watchlist counters that are sitting in the large corporate portfolio, because the overlays that we have in RMB are now largely spoken for. The staging, as you can see there on the right-hand side, is in line with expectations, and coverage remains appropriate. The provision stack, you can see, increased since the June year-end, now sitting at a bounteous ZAR 53 billion. Right. The next value creation theme to visit relates to revenues that attract less or no capital in the bank, as well as those revenues that come from activities outside of bank. These we commonly refer to as non-interest revenues. Right. Group non-interest revenue grew 4% period-on-period.
This is lower than our historic run rate, although in line with expectations for a tougher H1 given base effects. We would highlight the following: firstly, three headwinds we faced. The first was the unwind of Aldermore's fair value hedge that I've already mentioned. The second was the non-repeat of the outsized Studio 88 private equity realization in RMB that was in the base. The third was the targeted fee reduction that took place in FNB. I'll cover that in a slide or two, and that was then offset, I guess, by one tailwind we had, which was the non-repeat of the Ghanaian sovereign debt provision. The operating businesses' non-interest revenue present a mixed picture. Right.
Starting with FNB, FNB's platform strategy and its well-recognized digital customer interfaces enabled customer growth of 5%, transactional volumes increasing by 7%, pushing FNB's overall NIR higher by 5% period-on-period. It's very pleasing to see the VSI edge closer to three. FNB's NIR print was impacted by two items. Firstly, the sub-inflation price increases that were implemented from July 2023. Those were all lower than we had anticipated, initially. And then secondly, FNB considered the charges for low-value real-time payments and chose to reduce all of these customer fees in both retail and commercial, and that impacted their fee and commission line by ZAR 477 million in these six months. So post these fee cutbacks, FNB saw the volume of real-time payments increase by 30%.
So we know this landed really well for customers, and we are favorably positioned with respect to this activity compared to the peer banks. FNB continues to maintain a highly competitive customer fee construct that positions that franchise well in the current environment. Staying with FNB, growth in group insurance activities continue to scale impressively, with non-interest revenue on own licenses, that's life and short term, growing by 27% period on period. Total insurance activities now contribute 7.3% of group non-interest revenues. Looking at FNB Life on slide 29, the most mature part of our insurance activities, we see the strong growth in premium and non-interest revenue continuing as product offerings and distribution scales. Since inception, FNB Life, and this is a startup, has contributed dividends of ZAR 6 billion.
On the left on, on the left of slide 30, the short-term insurance business continues to grow strongly, with comprehensive personal lines products resonating with our retail customer base. Robust growth in premiums, supported importantly here by sensible underwriting, has resulted in the short-term insurance business turning profitable in this period, well ahead of expectations for a startup. On the right, returning here to FNB Life, we tease out the growth in life customized. These are the higher value individual policies, as well as the growth in commercial lines, both new initiatives which we are pushing quite hard, and you can see they are scaling well, and the implied runway here is very encouraging. FNB has also been focusing on expanding insurance and investment advisory capacity over the past 18 months through increasing the number of wealth managers and private advisors.
This is important as the higher value, more sophisticated insurance and investment products are advised rather than sold. This slide shows the progress in new business APE in insurance and retail flows into investment solutions, and again, promising growth here that we hope continues. Moving to RMB, pleasing to see non-interest revenue in RMB that lifted 9% off a challenging base. Highlights here to include knowledge- based fees and related deal fees up strongly in the period. That's a huge shout-out. It's not something you would expect from a lackluster economy, but RMB is finding a way. So well done there. And then there was a welcome, a very welcome contribution from their principal investments business, and then a smaller contribution coming from private equity, which filled a lot of the gap left by Studio 88.
On the other hand, in RMB, revenue from markets was disappointing, as strong performances from fixed income currencies and commodities were offset by a challenging six months in equities and structured credit activities. There was a strong markets performance coming from broader Africa, but again, that was offset by that naira devaluation that I spoke about earlier. The final value creation theme to cover relates to operating costs. Right. Harry Kellan did promise me a cost to income print below 50%, and he delivered, just. But it came with a little help from IFRS 17. So well done, Harry. I appreciate it. As expected, first half costs grew high single digits, lifting 9%. FNB's costs only grew 5%.
This is a highly commendable performance given the inflationary environment, and we are super excited about what this implies from ongoing efficiencies coming from the platform investment. So we think this is really the start. If we can get this kind of print in an inflationary environment like this, I think we're onto a good wicket there. And FNB, of course, talks for most of the costs in the group. So FNB's performance, sadly, was offset by elevated and then ongoing investment expenditure in RMB here domestically, and then Aldermore is also in the early stages of some investment into people, processes, and systems there, and so that continued as well in the UK. Slide 35 sets out the group's unquestionably strong CET1 capital position.
Capital demand from balance sheet growth, combined with FCTR movements, consumed much of the internal capital generated over the six-month period, resulting in CET1 lifting 10 basis points since our June year-end. At 13.3%, this is well above the internal target of 11%-12%. The group has ample resources to deliver on its growth ambitions. Then finally, the board, as I said, was comfortable to maintain the dividend cover at 1.7 times and declare an interim dividend of ZAR 2.00, which increased in line with normalized earnings. At this point, I'll hand over to Harry to take us through some of the numbers in a bit more detail. Thank you, Harry.
Good morning, ladies and gentlemen, and welcome. So Alan has actually unpacked the composition of the earnings, which is up 6%. That's in line with the guidance that we had given at year-end, and we do believe it's a commendable outcome when you consider the environment we're actually operating in: higher interest rates, higher inflation, and low growth. Now, I'll cover most of these metrics in this table as we go along the side - Oh, sorry, slides. Just one or two call-outs. NAV per share up 14%. 70% of that growth is actually coming from income generation from the business, and that is what is used to back risk-weighted assets growth. Currency translation, as Alan's covered as well, plays a part. It's based on the calls that we have made on jurisdictional allocation of capital.
Now, out of interest, the total translation gain amounts to about ZAR 10.5 billion at December. The breakdown of that benefit is about ZAR 13 billion from the UK capital allocation and ten bill, sorry, ZAR 3 billion reduction coming in from broader Africa. Now, this provides actually positive diversification for the capital deployed, and it demonstrates the UK is presenting positive outcomes for shareholders at a net asset value per share level. Now, this is the incremental change in the income statement, the above-inflation cost growth and the higher impairment charge effect, and that's coming off the book growth, as well as a normalization of NPLs, was more than offset by the strong top line, particular NII, as called out by Alan.
The impact of sticky inflation across all the jurisdictions has certainly pushed costs up, along with the investments spend in SA and in UK, and I'll cover that a bit later. Lastly, the effective tax rate is very similar to what we have seen at last year at December. The 9% growth year increase is coming in mainly from the AT1 issuances for this period, the net issuances of about ZAR 2.7 billion in total. Interest income up 14%. Let's have a look at some of the balance sheet growth. Now, Alan's had shared the success of the group's deposit franchise. Overall, 11%, and that is after the withdrawal of the large corporate deposit, given the settlement of some of the corporate action, and certainly the help of currency devaluation coming in from Aldermore.
FNB has definitely continued to encourage customers to move to more rate-sensitive deposits. Hence, most of the growth since June is in from variable rate deposit products. FNB's ongoing customer acquisition is definitely the underpin for deposit growth, and the franchise is remarkably resilient, given the endowment impact, and that is despite some of the customers actually starting to access some of their savings. Institutional funding has increased by the debt issuance by Treasury during the year. In particular, it was largely to fund advances growth. Aldermore deposits just short of GBP 16 billion. It's 4% up, enhancing the bank's liquidity as advances actually contracted, and Aldermore has concluded a securitization this period, the first since COVID. You have seen me present this slide for a while now. This is the group's proportionate use of institutional funding.
What you see here is that there's still substantial capacity available to Group Treasury. The decline in the average term profile, and that's the consequences of the debt issuance, largely in the shorter dated NCD market at 31 months average tenure. It is still very healthy, and it's marginally up against the 29 months that we had at June. We saw 11% growth in advances, clearly also benefiting from the currency impact, which amounts to about 4% of that growth, so 7% effectively at, excluding currency impact. Now, this growth trend in advances has slowed, over the last six months, and that's expected given we see the pressure on affordability in the environments that we operate in.
That is with the exception of RMB, as Alan has called out, which was underpinned by the focus on strategic sectors and definitely benefiting from some currency impact across the cross-border book. Aldermore advances continued to contract despite pocket, a pocket of growth, which is the UK specialist buy-to-let, and as you would expect, that is mainly due to demand, given affordability, affordability levels. Now, SA retail unsecured still printed a good growth of 10% for the period. Similarly, commercial and broader Africa portfolios also reflected double-digit growth. As Alan covered, the endowment uplift represents... the portion there is what you see the endowment, and not all of our endowment base is invested in ALM strategy, so the uninvested piece is where you see the uplift coming in. Lending NII demonstrates our origination strategies.
The transactional NII and the investment deposits reflects our focus on, A, liability gathering and actually product as well as platform innovation, assisting customers easily to seek better-yielding products. Far right, UK operations NII is marginally up at 1%, and with asset margins contracting, that is offset by the focus on the savings franchise within that business. Broader Africa benefiting from clearly the endowment and the growth of both sides of the balance sheets as we grow customer franchises in cross, in the various countries. On margins, the group continued the judicious and tactical in its origination while still supporting customer franchise. Hence, the lending margins are still under pressure, which was more than offset by the endowment benefit, as well as the good growth in deposits. Now, margins excluding Aldermore were up 18 basis points for the period.
Given Aldermore's marginal decline in the margin and coupled with that currency impact, which actually changes the average weighting that it has to the group's assets, overall margins increased drops by 9 basis points to nine itself, and coincidentally, that's this very same margin as at June at 447 basis points. Okay, moving on to impairments, which is up 28% this period. Alan's covered a lot of the slide already. Just some additional points I want to make. The ZAR 6.4 billion charge for this six months, and that's 8% up on the charge for to June, and that's ZAR 450 million only across that, and that's on the top left-hand side.
Now, on the bottom side, you see this represents 83 basis points, well below our TDC range and very similar to the run rate that you've seen at June. On the right-hand side, overall provision stock up 10%, 4% since June. Picking up on coverages, stage one coverage did decline, given that release of that forward-looking information as the macros had improved relative to what we had seen at June. Stage two coverage largely being maintained since June, and actually overall stage two balances largely remained flat as well. Now, that is expected given the role that you see into NPLs. Similarly, the coverage for NPLs or stage three have largely remained similar to that of June. Now, moving to NPLs, as expected, the continuation of the trend upwards across most portfolios since it bottomed out at December 2022.
This is the consequence of A, the book growth, origination strain, and clearly the weaker macro environment. Hence, it is up effectively 20% when you exclude the currency impact. None of this increase should be a surprise to anyone, in fact. Now, both RMB and commercial NPLs have decreased since June, and that's given some settlements and some hard work on the workouts. Now, if you actually step back and you consider this environment that we operate in this, this picture is actually very pleasing, and that's a benefit of the group's origination strategies post the pandemic. As Alan has covered, past two years as origination strategies gradually aligned to those of pre-pandemic appetite, appetite levels, NPLs have and will continue to be impacted accordingly. Broader Africa is also showing lower than expected NPL growth rates other than what you see in Namibia and Ghana.
Coverage across all product sets was very similar to that of June 2023. Now, this slide, and Alan presented earlier the group credit loss ratio, as it said, printed below the group's TDC range or well below the TDC range, midpoint. This just shows you graphically, despite the steep rate hike cycle, NPLs as a percentage of advances has not reacted to the same extent, and neither has our cost of risk. Now, when you exclude the benefit of Aldermore's lower impairment charges period, even the 99 basis points, which is excluding Aldermore, is still below the TDC midpoint of 105 basis points. Again, without wishing to labor the point, the organizational pieces to wait for recovery post the pandemic and the tilt to low and medium risk clearly continues to play out in what you see here.
So the impairment charge, this period, is largely driven from the increase in NPLs. With stage one FLI release and the marginal increase in stage two provisions, performing provisions in total was largely flat since June. Yet another example of a good outcome. Hence, if you look at the bottom left, the net provisions are up ZAR 2.2 billion since June, all driven by the NPL or rather stage three provisions. Top left, there's not much in it between write-offs and recoveries when you compare period to period. The donut on the right shows the composition of that ZAR 2.2 billion charge in NPLs, which in turn demonstrates the origination mix across the portfolio, and you can clearly see the net decline, which is the benefit coming in from our commercial portfolio. NIR, up 4%, lots of moving parts.
The 4% growth in fee and, fee and commission income is more muted than what you have seen in prior periods, but it's an example of that strategy from FNB to address fees on a very targeted basis to meet customer needs. As Alan has said earlier, it is telling that volumes have already started to respond positively. The other impacts on NPLs, Alan covered largely the private equity realization, prior period unwind of the UK operations, interest rate instruments, that swing of just over ZAR 17 billion, that eventually swing does pull to par in time... Insurance income delivered 10% effective PBT growth, and why I'm stressing PBT is under IFRS, all insurance costs are set off under non-interest revenue. I'll cover insurance next.
Okay, so the group has been executing actually for a long, its long-term strategy to diversify our sources of NRR, particularly given the actions we have taken on fee and commission income over the number of years. Insurance income is definitely contributing. This is more like insurance profitability, as I said, under IFRS 17. Unpacking the good performance on the insurance business, we saw strong growth in premiums and net of expenses, and claims PBT was up 27% when you consider just our own licenses. The cell captives, as a consequence, continued to run off, and those are the darker bars you see on the bottom right. Life's income up 14%, supported by premium growth of 10%, and after and credit life actually was only up 8%.
Now, that is clearly the impact of slower growth in unsecured lending. Short-term insurance is still in both phases, but an impressive 45.3% increase in premium and with revenue growth, overall profitability from the life insurance, as I said, is up 10%. Private equity. Although RMB's private equity earnings reflect a 49% decline this period, that is a consequence of that non-repeat of that outsized Studio 88 realization in the prior period. That's what you see in the light gray bar. The annuity income, dark piece, is up 15% period on period, demonstrating the operational performance of the various underlying counters in the portfolio. This six months, unfortunately, provided limited investment opportunities, and only ZAR 300 million was deployed.
Still some impairments this period as well, with the increase in the profitability, and the good investment flows that we see in the underlying counters, unrealized value in this portfolio stands at ZAR 6 billion, which is up from ZAR 5.2 billion at December last year. Moving on lastly to cost, up 9%. FNB's cost growth of 5% was offset by RMB's 13% and Aldermore's 11% in pound growth. Both businesses are investing heavily, while you see FNB is extracting early efficiencies. Staff cost still represents 64%, two-thirds of our total cost base. That increase, 9%, that's including a salary hike of 6%. FNB did benefit from a marginal decline in headcount since June.
Elsewhere, the expenses growth continues to reflect the investments in platform and the significant currency devaluation, as not just Aldermore, but a lot of our IT costs are denominated in hard currencies. But, for example, the Aldermore 's 11% growth translate to a 28% growth in rand terms. The investment in platform and the processes emanated from both Aldermore and RMB, but commensurately, you see the increase in IT and staff costs to that. Now, to round off my presentation, the group's cost-to-income ratio improved to 49.9%. Thank you, Alan, for that, but that is all compliments to the business and all that hard work around that. Ladies and gentlemen, thank you. This is my last, and certainly has been a privilege. I now hand over to Mary. Thank you.
Okay, I would like to take the opportunity to thank Alan and Harry for being great custodians of FirstRand Group. Harry, having spent 10 years as the Group CFO, having presented these results 20 times, is now going back to FNB to lead FNB into the next chapter, and I know he's deeply excited about that opportunity. Thanks, Harry. And I'd like to thank Alan for his 26 years with FirstRand and his stewardship and leadership of the group, particularly during the COVID-19 pandemic. In an unprecedented crisis, under his leadership, the group supported its customers, its employees, continued to grow franchise value, built a fortress balance sheet, and emerged faster and stronger than we could have imagined at the beginning of the crisis.
Despite the many macroeconomic shocks the group has had to navigate over the past six years with Alan at the helm, FirstRand has consistently delivered impressive economic profit growth and superior returns for its shareholders. Alan is a zealot about shareholder value creation, and that has been demonstrated during his tenure. Thank you very much, Al, for that. Alan hands over an institution that is in great shape and a portfolio of businesses that will continue to deliver outperformance to shareholders. The group has a strong franchise with compelling and competitive customer propositions, and this will ensure ongoing customer growth and activity. The group has built a deeply valuable deposit franchise, which continues to provide resilience to the group's funding strategies and is a significant underpin to the superior ROE.
The strategy to encourage customers to move to more rate-sensitive accounts has resulted in good customer outcomes and ongoing growth in the deposit franchise, even off such a high base. The group's diversified balance sheet by customer segment, assets, industries, geography, is well struck. The origination tilt post the pandemic recovery to lower and medium-risk customers has resulted in a relative advances mix that delivers high risk-adjusted margins and has created capacity that is supporting the current strong advances growth. The underwriting and pricing disciplines are well embedded in the business. In addition to growing and protecting the large transactional franchise, the group continues to execute on strategies to diversify sources of NIR. Great progress has been made in insurance, as Alan showed earlier on. There's significant runway for the insurance and investment management activities still.
The strategies around nav» , the fintech initiative that Jacques Celliers will be leading, also provide potentially and provides another potentially exciting opportunity to grow capital light revenue streams. The private equity franchise has a healthy portfolio with significant unrealized gains, which should provide the group with ongoing income from realizations. The group's FRM principles ensure a disciplined allocation of financial resources. The disciplines necessary to preserve the group return profile are well embedded in the business, and we have furthermore freed up Andries du Toit to dedicate his energy on FRM activities as the chief value officer of the group. The broader Africa portfolio has made encouraging progress and is now generating economic profit and economic profit. Both the broader Africa portfolio and the UK operations continue to present medium-term growth optionality with a continued focus on returns.
We will remain disciplined in the deployment of capital in pursuing growth from geographic diversification. Looking ahead to the rest of the financial year, after a significant increase in global interest rates over the last few years, we expect policymakers of the world's largest central banks, including the South African Reserve Bank, to start easing interest rates later in the year, in what is more likely to be a shallow cutting cycle. The gradual fall in inflation and in interest rates should provide some relief across the countries where FirstRand has the largest exposures. This excludes Nigeria, where inflation and policy rates are likely to continue to increase over the coming months as part of the structural reforms underway.
Macros for the period to June are expected to remain largely unchanged from the first half of the financial year, with elevated inflation and interest rates across the jurisdictions we operate in. We expect households to remain under pressure. The ongoing investment spend into energy capacity in South Africa should, however, remain supportive of corporate and commercial credit extension. The group anticipates softer advances growth for the remainder of the financial year, a continuation of the slower advances growth that Harry mentioned in H1, and the higher base from the second half of the prior year. This translates into similar or slightly lower advances growth, growth rates for most portfolios, with corporate advances growth rate normalizing to upper single digits, and UK advances flat in rand terms, despite a small increase expected in pound terms.
Deposit growth is also expected to be lower in the second half as households draw down on savings. Commercial deposit growth is expected to remain resilient, and deposit insurance in South Africa will be introduced from April. The capital portfolio will continue to benefit from higher interest rates, and the impact of the ALM strategy on the endowment portfolio should remain broadly neutral, as no rate cuts are expected before the end of the financial year. Offsetting the softer NII drivers, NIR growth will improve relative to the prior period, benefiting from ongoing customer growth and activity. This despite levels of fee reductions expected in the second half. The origination strategy will continue to result in higher risk-adjusted margins, and despite the cyclically elevated impairment charge in retail portfolios, credit losses will remain well below the midpoint of the group through the cycle range.
Annual expenses growth will move down to the upper single digits. Guidance for the full-year earnings remains intact. The group expects to generate earnings similar to the first half, and therefore in line with the longer-term target of nominal GDP plus a range of 0%-3%. Alan has previously stressed that the group was more likely to be at the bottom end of the range in the current financial year compared to the latter years.
... Given that the cyclical pressures unpacked by Alan earlier will remain for the rest of the year, the ROE is expected to be similar for the first half and well placed in the group's stated range of 18%-22%. It is management's expectation that the ROE will trend back to the upper end of the range. I would now like to hand over to Alan for closing remarks and to lead us through the Q&A session. Thank you.
Right. Wrapping this up, we are under pressure here on the clock. All right, thank you, Mary. Let me just end off here with some thank yous, as I do every reporting cycle. Firstly, to our regulators, and we have many, in South Africa and under all the jurisdictions that we operate. They provide plenty of support to our business. They make us and encourage us, to be a better business, a more sustainable business, a safer business. We really appreciate it. We know the intent is always coming from that perspective, and we try our best, but we really do appreciate the effort our regulators put into us. It improves this business, and that's good for shareholders. We also exist every...
because we have customers to serve, and of course, we are very grateful to have them. Of course, we want more, and we're very pleased to see the business growing their customer base. But we promise to look after you and to serve you into the future. So we don't take you for granted. Of course, we stand up, and we show these numbers, and it makes us look good, but the reality is, the 50,000-odd FirstRand group employees, okay, this is their efforts that you see here today, and you can see they've delivered once again, I think in a tough environment. There's no doubt. It isn't easy out there, and they've really run the business well. So thank you then to all of our employees.
Okay, so as you've heard, this is my final set of results. So you heard there from Mary. Thank you, Mary. Very kind words. Very generous with your words there. I mean, from my perspective, it's been an absolute honor and a privilege to be part of the FirstRand story. You know, I leave very confident in handing over the baton to Mary Vilakazi and her team. She mentioned some of them a little bit earlier. As FirstRand takes on the very exciting journey that lies ahead. You know, I tiptoe away from FirstRand, filled with a lot of pride in the FirstRand leadership team, some of whom are in the room here, but of course, there's some people that are out in other markets.
I'm super proud of that team. It's a formidable team. You know, so that's one thing our shareholders can take away from FirstRand, that the leadership team here is formidable. I was just one component of that, but I'm super grateful and proud of that team. I know they are going to do really well. That is a little secret. Of course, you know, they've made me look good, so let's just keep that between ourselves. Don't tell anybody. I like the impression everyone thinks it's me, but actually, it's not me. It's all about them and the FirstRand employees. So thank you very much for your attendance today. And we will now take questions.
So we will begin with questions in the room, and then we will go to the webcast, and then we will take any questions from the conference call. Right, so any, any questions from anybody here? We do have some roving microphones. I guess they're just here in the front.
Morning. I'm Clem Goemans, a private investor. Why do I not see a group summary of your business units and their contributions? Am I right?
I think there are some slides that we've pushed into the appendix. And the only reason, Clem, it's a good question. One of the reasons we did that is because investors can't invest in, for example, into RMB or into FNB, you know, FNB or WesBank. You have to buy the group. And so a lot of the slides that we put there trying to present group pictures, and then in the appendix, we're trying to unpack the operating businesses in more detail.
Thank you.
There's really good, there's really good information in the appendix. So, the important slides, we push a lot of stuff into the appendix only because the front part of the slide book gets overloaded. Right. Have we got any other questions? Yep.
Yeah, it's James Starke from RMB Morgan Stanley. Thanks for the presentation. 3 questions really. On fees and commissions, you've already flagged just under ZAR 500 million of fee cuts. What sort of further tempo do you expect to emerge on your fee and commission line from here? Similar level, not only to the rest of the year, but perhaps further on into 2025. Question on costs, the FNB cost growth impressed. Can you sustain that sub-inflation cost growth from here and perhaps even improve it? And maybe some color on what's actually driving that level of efficiency. And then lastly, on the UK, if you can perhaps give us a tighter steer on the proportion of MotoNovo's contracts that are the affected DRC contracts. I've read the commentary.
Any further color on that would be helpful. Thank you.
All right. Thanks, James. I'm going to hand some of these to Harry, as he's the incoming CFO at—CEO of FNB, so he's going to need to think about some of these. Just on the fee and commission, the fee give backs there in for real-time payments. Essentially, what we're talking about there is payments made, for example, from FNB to a customer account sitting in another bank.... payments made to an FNB account by an FNB customer clear real time. The issue then, the issue is about, you know, when are those funds available in that other bank? Now, the bank... Now, you will know as part of this, there was the intro—an industry introduction of something called PayShap, which dealt with low value payments, so payments below ZAR 3,000.
And there's, at a very sort of micro level, the payments are free, and then they scale up to 3,000 ZAR, but they're still cheap. The real volume and demand from customers for real-time clearing actually isn't in those small value payments. It's actually in the payments at a much higher level than 3,000. So when PayShap was introduced, FNB took the decision. They didn't have to do this, but they took the decision to look at real-time clearing and the charges that we charge customers, and they know that the demand's there, and they significantly reduced the pricing for all real-time clearing payments. Now, you can understand why that mat-- and we immediately saw that 30% pickup.
Now, the reason that matters is, particularly in an environment like this, when you need to pay a customer, the customer on the receiving end needs access to that money quickly. So there's huge demand for it, and we used the word. Harry referred to the word targeted. This isn't a general view that let's look at all fees. We think the fee construct is very competitive, relative to the industry and in absolute terms, but with respect to real-time payments, those fees did need to come down. And what's pleasing for us is we didn't just drop the fees, we've seen a massive pickup in volumes. So we think, okay, it's gonna position the business really well. So I think they've. They took it on the chin.
Of course, this sets us, sets us up really well for the next year. But annualized, you can see, I mean, that, that's cost us ZAR 1 billion, I guess, by the time we've done the year. On the operating costs in FNB, I'll let Harry deal with the operating costs in FNB. Let me just deal a little bit with this, this motor commission issue in the UK. We, we've covered it pretty much as extensively as we can in the sense that we put out. So there's not much more really than we wanna say there. I think we chose the wording in that sense very carefully. You know, personally, I'm going to say this is very different to PPI.
You know, here, customers certainly got value, and, and they walked away with a, with driving a secondhand vehicle or, or a new vehicle or whatever it is. I'm also gonna say that these practices that you've seen have been, not just in the UK, they're in, they're in many markets. Many markets have dealt with this differently. What you've got in the UK is you've kind of got this look-back risk, where, of course, they would like to go back, many, many years and, and seek customer redress. So we're doing a lot of work on our side. It's early, early days with the FCA. I mean, this has just been announced. They intend to give us clarity, I think, by September. We'll maybe we'll get some clarity over the next, couple of months.
We think we're gonna be in a better position come year-end to be able to give more guidance. But, yeah, but James, apart from that, I mean, there's not much more that we can share. But, I mean, we're very focused on this matter. And then, Harry, I don't know if you want to deal with the cost income at FNB.
So, James, I mean, the cost, if you look at in the booklet, you'll get some... You get high-level categories. But if you look at, clearly focused by the business without a doubt. Lots of moving parts in cost, but if you look at headcount, it was a marginal decline in headcount. So that's not your driver, actually, 'cause overall salary cost of the group was up 9%. I think FNB's was similar at 7% because the currency impact is not there. What you see is we've had number of years of investment in platform. Where you see that line is in the professional fee line. So you can see, despite RMB investing, Ultimo investing, in that fee line, in professional fees actually declined, if I'm not mistaken. Or in fact, it was subinflation growth. It was like flattish to about 1% or 2% growth.
Advertising and marketing spend, clearly, when you're leveraging your platform, you can be able to leverage on that spend as well. So you would have seen benefits around... And that one, I'm sorry, was down 4%. So you get a feel around that. Now, you ask the question: Is it sustainable? First question you asked. I would hope so. I think there's still momentum in the business. You have lots of focus on it, and if you look at it, it's about efficiency and how you service customers is the biggest focus line, and that in itself will bring efficiency as to what is business. Lower, I would suspect not. In a high inflation environment, I think if the business can give us just inflation growth, I think they've done well, in all fairness.
So yeah, and then, you know, you always got ups and down. I think we make a call-out in the book a little bit of some provisions, so that was no longer required for some of the events last year. But in all fairness, that was at the margin in the other cost line. Then on your question on fee and commission, James, the way we look at fee and commission is always we look at it from a customer lens perspective and saying: Okay, which are these fees, and what is the right level? You'll never have utopia in terms of all fees. The business continually looks at fees.
So you've heard us, I can't remember, but you've probably heard me mention, I can definitely tell you for the last 3, 4, 5 years, we've actually taken out pockets of fees from a customer level, and we see benefit definitely to customer, and that's about customer level. And you see some of the benefits in volumes, not always into the volume side. So not saying definitely, but without a doubt, if there are pockets of fees that we've got to effectively reduce and give back to customers, we will do the right thing, and we'll take it, we'll take it through the P&L, and again, it's the right thing to do. We'll always continue to do that. And that answer is like from me, from a CEO, not a CFO.
Right. Any other questions? Go ahead.
May I take you back to Africa? When you had your Ghana problem, I asked you about that. How do you feel about Ghana now and Nigeria and Africa further? And then, lower down on page 14, your reduction in fees, how much benefit for you as opposed to your customers?
Okay, Harry, I mean, I don't know, maybe Harry will-
So-
You can deal with the fees. I'll come back to the Africa.
Yeah. So actually, the 447 is the net benefit to the customers. So that's the reduction in what Alan called, real-time clearing fees. So customer level fee per transaction was dropped, all of that to customer. Yes, we do get some benefit in volume, but in all fairness, at the moment, the volume is early signs of volumes increases, but it's definitely at a lower rate. So majority, if not all of it, is all to customer.
Then just on that, you know, you spoke about Clem, you spoke about Ghana specifically. So yes, of course, you know, that sovereign debt restructure was painful for us. As I say, it was last year's story. But what the data shows and the evidence shows is that countries that go through this restructure. I don't want it to sound like this is something that a country should aspire to, but countries that go through an IMF restructure and the painful process that happens after that, typically emerge much better. So, you know, you take that medicine, it is painful medicine, but then typically you find a really good economic story that comes afterwards.
So we are, having taken our medicine, and having been an investor in the country, we actually remain quite optimistic about Ghana. You know, so much so that if there's an opportunity for us to increase our business there, we probably would look at that. So it's still early days. I think they. It's not as if the, you know, it's sunshine and rainbows there, but they certainly seem to be on the right track, so we're feeling better about Ghana. I think Nigeria, just to call out, you know, I suppose, you know, Nigeria's. They have embarked on, you know, they've had elections, they have got new people in leadership, and they have now embarked on these reforms themselves. And they knew they were gonna be painful, but they've done it, and they...
So far, they are delivering, you know, that the subsidy to the fuel levy, okay, that was taken away. You know, they've let the exchange rate move much closer to a market exchange rate for the currency. Now, to tame inflation, they're hiking interest rates. These are massively painful for people in country, and it's also very painful for people in government to do. But yet they're doing it, you know? So I'm gonna say give Nigeria some time with... Listen, they are in the throes of this. But hopefully it sets up the country, you know, on a much better footing. Right. I think we can... Can we go... Anything on the webcast? Just wanna see.
Yes. Can you hear me? I'm gonna try and strip out the questions that have already been answered in the room. I have two questions from Kabelo Moshesha, from Mazi. I think we've answered the Africa question. The second question is: Should the Ashburton FSCA fine be seen in isolation? Were the processes followed at Ashburton formed at their level with limited input from the group?
Okay, I will let Mary Vilakazi
Mary?
answer that. Yeah.
Yeah.
You okay there with the microphone? Yeah. Okay. All right, Mary.
Yeah, so the FSCA announced a fine post an inspection that took place last year. Obviously, we hold ourselves to a very high standard when it comes to complying with regulations. And I think the gaps that they found, we were also disappointed in ourselves. I can report that a lot of the gaps that they have identified, a lot of the remediation work is underway. And also maybe just to highlight that, you know, in their findings, none of their findings involve Ashburton having been involved in transaction where they facilitated money laundering or terrorist financing. So it's really compliance... It's, it's-- yeah, it's gaps just I think that we shouldn't really have had.
But we understand that the regulators also have to make sure that they are, they're seen to be taking these matters quite seriously. It is quite important as part of the FATF process, where they have to evidence that they are taking quite a harsh stance on findings and on what they are uncomfortable with supervising. But the remediation is underway, and it's regrettable, but I think there are lots of lessons that have been learned. And is it pervasive to the rest of the group? I would say no, because the group and the bank forms part and parcel of ongoing inspections.
But I think as we sit here today, we can understand why the gaps took place in Ashburton, and really largely through just changes internally that we've had, and I think not making sure that we've got people sufficiently paying attention to these. But yeah, I don't think you can take it to infer to the rest of the group, and a lot of the remediation to fix what they've identified is taking place.
There's a second question from Kabe lo. Any thoughts on the Capitec business banking fee cuts?
It's called competition, in all fairness. I couldn't comment further on our peers. But yes, I think it's a good thing, cutting fees for consumer. What you see is competition always ends up lifting the bar for the sector to the benefit of the customer. I think that's the only comments I could make.
But, Harry, maybe if I can just add. Okay, but I guess the part of the fee reductions that Alan explained earlier on, a lot of it has been in preparation, I think for competition. We believe a lot of our value propositions that we offer there are competitive. I think we've taken all the steps necessary on deposit. So I do think that that FNB Commercial has really been very focused on ensuring that it remains competitive.
Yeah, we're ready for them, Sam.
Okay.
We're ready.
There's quite a lot of questions on Africa expansion, so maybe I could just collapse those all into one question, which is, I can't find the question now. How, where, and when?
Okay. Definitely one for the new leadership team to cover. Okay, who wants to go there? Mary.
Should I take a stab?
Yeah.
Okay. So the how, I do think that we will continue to make sure that our portfolio, I think is at scale. In some of the markets, we are still subscale. Ghana, Zambia, Mozambique, and Nigeria present opportunities, so I think the team continues to be on the lookout for opportunities. There's always lots of ideas and opportunities that are being looked at, so we will continue to do that. When? I mean, I think that's just really... You know, as Alan said, we were hoping the restructure in Ghana resulted in some banks that became available. Nothing has come to date as yet, but yeah, we really are- we're quite clear on what we're looking for.
But I guess it's all up to the opportunity, and also whether we also are confident that we are going to get the return, and be able to extract the returns that we need from the deployment of capital in those markets. But we're looking. If there are any thoughts, always welcome.
A question from Charles Russell: Please comment on components of NIM outlook and expected impact of hedging on the margin.
Okay, so we're talking about the ALM margin. Now, the hedging piece, you could see when Alan showed in his slides, and I think there's detail per annum in the big, thick booklet that shows you that impact. And this is page 74, what Andries is saying. So that's on the ALM side. So it's effectively, you think about it, and that's where you have the opportunity cost. It's invested, and you're taking the yield of what you invest rather than the overnight, and that's where you see the opportunity cost. You'll see that still flow in because rates have now stopped hiking, so you'll see that impact across, and then I think it stabilized at that level. Sorry, Sam, the other piece was?
No, that was really the question around the impact-
Okay.
- of the ALM strategy.
Then the look of margin. If you consider an asset margin, I think you'll still see pressure as that book builds. You can see corporate book growing faster than what you have seen in the retail book. You see commercial book growing faster than what you see in the retail book. You can see that mix alone on the asset side will give you pressure, marginally on, on margins. So that's the, the clear impact. Bulk of the uninvested piece of endowment is in the base. I think there's an incremental piece still to come, so that'll be giving you a little bit of the benefit. So net-net, and it sounds like I'm a broken record, but maybe Markos will change it, it is probably a couple of basis points up or down.
I would suspect marginally up on the endowment piece because you can see the slowdown in asset growth. So that's where we think you'll see the print of net margins to June.
There's another question from Charles Russell. Can you comment on the UK credit risk outlook, specifically for Aldermore?
So if you look at the period now, so I think the expectation of the business when we finished off in June was much more severe credit outlook they had. You can see now substantial piece, I think for the second half, it's GBP 25 million, so they're getting a benefit of releases in that period. I think it will normalize. It'll be more- it will be higher than the 25, but where you see the resiliency in the book, and we don't see that build up significantly, I think it's a unwind some of the releases. It'll be higher than 25 for the next six months run rate, but it's not, not to the level that we had anticipated, say, 12 months ago when we expect cost of living crisis as, as well as inflation.
What you have seen is salary print in that market actually keeping pace with inflation. So that actually benefits effectively the flow on that. In the buy-to-let book, very resilient, and hence the increase in that book. That salary print increase supporting rental income growth as well. So yes, we're not expecting severe strain, but continuation of origination strength going from that book.
Harry Botha has a question on the UK: Is there any update or change to the strategy to diversify further the UK operations?
... Yeah, I think we've been consistently saying, we wouldn't, as a first choice, look at simply bulking up. So if there was an opportunity to add capability, to that business, you may wish to call that diversification, but capability which the business doesn't have. Or, you know, maybe accelerate some of the, the platform investment, that we're embarking on, and that, I suppose, would also bring capability. I mean, that's something we would look at. But simply bulking up, getting more of what we've already got, we probably would not really be interested in that, I mean, unless, it's an opportunity we can't turn away. I think just with respect to the UK, I mean, it, you know, we are not looking at anything.
We are not searching for anything. There's a lot going on in the business, and the teams are very focused on focusing on kind of the as is in Aldermore. What I can say, which is very pleasing to see. You know, we spoke about sort of slow loan growth in Aldermore over the last couple of months, but it has recently picked up. And production now in Aldermore is probably the best it's ever been since we've owned it. So things are really looking up for us there. So let's see how long that can be sustained, but we're very pleased that growth is coming back.
I have a question from Citi. Can you please comment on drivers of the strong performance in broader Africa earnings, and how should we be thinking about that performance going forward?
Key driver you'll see is two components. One is the endowment impact, so we don't have an ALM strategy there. So in fact, it's all relatively on an overnight basis, so you can see the benefit on the NII. But two, and probably more importantly, is the resiliency of the advances book across the portfolio base. So the NPL build-up, better than expected, hence the impairment charge, better than expected. And three, I think you can see, especially in the growth subs, customer acquisition actually getting more embedded into the economy, and you can see that benefit flow.
I know it's smaller relative to the volume, but if you look at our large subs, Botswana, Eswatini, if you look at Namibia, those franchises are still doing customer acquisition in an environment in which they are actually quite significant in terms of their size. And that, again, shows leveraging what we have in platform and customer propositions.
Harry B next?
I think that's right. So, Harry, I know you covered FNB costs. Harry, both these questions are slightly different in terms of, the nature of the efficiencies and the time period for them to come through. And then a second question about what is the outlook for new product investment spend in FNB?
Can I just do—I just want to add on the costs, Harry, and then maybe you come with the new products that you are going to be launching. Yeah, just, just, Sam, just to answer Harry there, we've got. I think the way to think about the cost base in FNB is not in terms of a step change down, but the mindset for us is if we can see a cost growth which is shy of inflation on a multi-year basis, you know, so, you know, similar to what we've got now. You know, and hopefully, we can even see, in the running into June, but some improvement on this cost, cost growth in FNB just to, just to June.
But if we can see multiple years of that, I mean, I think the contribution it opens up is staggering. Now, you know, the question to ask is, I mean, but how is it possible in an inflationary environment, in an environment where a lot of the expenditure we've got has also got an FX component, you know, how are we managing to do it? And this issue of kind of... We refer to kind of work items, moving work items onto platform. We talk about harvesting, dealing with all of the legacy stuff. They are ongoing programs that are now well embedded, find their way all the way into the performance management framework. Under Jacques' leadership, they've done a massive amount of work here, in the story. It's not new.
This stuff has been going on for three, four years already, but it now really is starting to show. So I think we are for the fuck you know, we, I think we've been hopeful in the past around efficiencies coming from platform, but now we really we're starting to feel now that this is starting to get tangible. So we're seeing customer growth, we're seeing significant volume, and yet we're managing with the headcount we've got. So that load is kind of being taken on and processed and managed. I guess through a lot of this is through the technology investment. So a big shout-out to FNB for that. And then, Harry, I don't know, new products.
So, Harry, I'll interpret your question, i.e., with the costs being at 5%, have we throttled the business from a capacity to spend on new product innovation or, or effectively looking at to invest? The answer is no. So if you look at the investment base that FNB has, I think it's... That investment base hasn't materially grown, but it doesn't mean it has materially cut back. Then I'm very excited what the business is showing in terms of... And the efficiency is coming at different levels, not just new products. It's new products. It's new products on how to, how to service customers on the platform and a far more efficient way of getting that product set delivered. Take, for example, a simple thing as delivering a card to customers.
If you look at that, this period versus what you see last period, there's a substantial innovation in that alone, and that isn't new product, but it's product service delivery. So just to reiterate, the cost did not come at the expense of cutting budgets on platform spend or platform innovation or product innovation.
There's no more questions from the webcast.
Okay. And then, and then anything from the conference call? Anyone who's managing that? Conference call?
There are no questions on the conference call.
Okay, good. And then any last takers? Clem, another one? No. All right. Thank you very much for your attendance. I hope you have a good day. Much appreciated. Thank you.