Good morning, everyone, and welcome to FirstRand's results presentation for the six months ended 31st of December. I'll start with a quick recap of the macroeconomic environment and the operating conditions we were navigating in this period. Geopolitical headwinds and uncertainty characterized the period under review, resulting in a shallower cycle than initially expected. The U.S. Fed cut interest rates by one percentage point, which created room for smaller open economies to follow suit where domestic inflation conditions allowed. Global growth also slowed, particularly in China and the Euro area. South Africa was one of the countries that had the headroom to cut rates, with the repo rates falling by 75 basis points. This was due to a relatively stable rand, still weak domestic demand, and lower global price pressures, which allowed inflation to fall towards the lower end of the SARB inflation target range.
The low inflation reduction in the repo rate and the two-pot pension withdrawals resulted in an improvement in household income evident towards the end of the 2024 calendar year. While it's still early days, there were signs of a pickup in real private sector credit growth towards the end of 2024, as both household and corporate affordability improved. Real credit growth in the business sector is encouraging, but a much higher growth rate is required given the importance of credit extension for productive capital formation in the economy. More promising, however, is that confidence is showing early signs of improving, seen in the right-hand graph, which reflects a tentative increase in the RMB-BR business confidence index. South Africa's government bond yield spreads above that of the U.S. have also narrowed to pre-COVID levels.
We ascribe this lift in confidence to the political stability achieved with the formation of the Government of National Unity, the ongoing fiscal discipline maintained by National Treasury, and the implementation of reforms underway through Operation Vulindlela. Consistent with the global trends, the macroeconomic environment in the U.K. was characterized by declining inflation and interest rates. Underlying inflation, unfortunately, remains sticky and still higher than expected, resulting in only mild interest rate easing, with economic activity also remaining lackluster. Encouragingly, the U.K. government has acknowledged the lower than potential growth rate as a priority to address. The macros in the broader Africa portfolio presented a somewhat challenging picture, with inflation in the economies of Nigeria, Zambia, and Ghana remaining high. Drought conditions, tight monetary policies, and high fiscal debt kept economic activity subdued across countries.
The inflation profiles of the group's largest subsidiaries are largely aligned to South Africa, with inflation providing headroom for further rate cuts. I'll now unpack the performance for the six months. Despite the macro backdrops I have just covered, the group delivered a robust set of numbers. The callouts from this slide include the six basis points improvement in return on assets, reflecting the quality of these earnings. The cost-to-income ratio below 50%, mainly driven by excellent cost management at FNB, is pleasing to see. The credit loss ratio that has remained at the bottom end of the group TTC range further evidences the quality of earnings generated over this period, with ZAR 6.2 billion of economic profits or NIACC generation. Normalized earnings grew 10%, allowing the group to increase the ordinary dividend per share by 10%.
Compared to expectations in September, when we presented the year-end results, in these six months, the business has performed slightly better, delivering 10% growth in normalized earnings despite some significant non-repeats of private equity and principal investment realizations in the comparative base. Top-line growth, improved operational leverage, and better-than-expected credit outcomes were the main drivers. Despite navigating some tough externalities, including the interest rate and inflationary pressures I mentioned earlier, these two key outcomes, two key measures, ROE and growth in economic profits, demonstrate the group's ability to deliver superior shareholder value on an ongoing basis. The group's return on equity remains well placed within our stated range of 18% to 22%, and pleasingly, this translated into economic profits growing faster than earnings.
The group's high ROE also resulted in healthy capital accretion and a solid 9% growth in net asset value over the period, bringing the compound annual growth rate to 9% over the four years. This slide unpacks the operational performances of the group's operating businesses and some of the key callouts. Despite the prevailing tough retail cycle, FNB delivered a better-than-expected credit performance, and given top-line pressures, particularly in NII, FNB demonstrated its ability to flex costs. Retail lending remained muted, although the commercial business delivered double-digit advances growth, and the total FNB deposit franchise continued to generate good growth. This, combined with the strength of its transactional franchise and the scaling insurance business, resulted in an ROE of 39%, which remains impressive. WesBank continued to deliver excellent results despite fierce competition in the retail vehicle space, growing earnings by 12%.
The business managed to exercise disciplined pricing to protect margins, delivering a strong ROE of 21% while growing advances. Disciplined origination and collection efforts resulted also in a good credit outcome for WesBank. RMB's performance mainly reflects the strength of the IBD and the private equity businesses. IBD delivered an ongoing good momentum in lending, which in turn produced excellent growth in knowledge-based fees of over 50%. Private equity grew off a demanding base given the realizations in the comparative period. Some of this benefit to RMB's NIR was unfortunately offset by a weaker performance from the global markets business. Aldermore delivered strong performance helped by healthy new business origination in the property and business product lines. Operational leverage also improved due to good cost management. Credit also outperformed, although this is now normalizing.
The ROE improved from 9.6% in the prior year to 10% upon terms, and this ROE normalized for the excess capital in the business above the target CT1 level is 12%. This unpack of the ROE provides more detail on the six basis point improvement in ROA. Key drivers are quality of earnings through growth in NIR, well-managed costs, and credit, demonstrating the group's ability to dynamically manage the portfolio to support the return profile. ROE growth of 20 basis points to 20.8% was achieved despite a reduction in gearing. At a similar level of gearing to last year, ROE would have been 21.2%. Origination strategies, underwriting for risk, adjusted returns, NIR diversification, and cost management are all key to appropriate returns through the cycle. I'm now going to unpack how the results for the period link back to some of the thematic calls I covered in the September presentation.
It will provide insight on how these calls and the adjustments we make as we move through the cycle support the operational performance. I'll begin with the group's approach to origination. FirstRand has a consistent philosophy on origination, which is operationalized through our FRM process. While the ultimate aim is to meet the credit needs of our customers, this must be balanced with the deliberate shaping of the balance sheet to achieve appropriate risk-adjusted returns, and this has to be executed on a through-the-cycle basis as macroeconomic conditions change. Therefore, origination conviction combined with agility is key. Our post-COVID origination thesis is playing out as we have seen, as we have consistently lent to low to medium-risk customers in retail and commercial.
In a persistently high inflation, high-rate environment, we tilted resources to corporate and commercial lending, also aligned to our macro view on where the growth opportunities were expected to emerge in the cycle. Both these strategies naturally came at a relatively lower margin, but an acceptable overall risk-adjusted margin taking into account the credit experience. As the cycle plays out, we continually refine the origination thesis. In the past six months, we have made a deliberate decision to increase lending to SMEs as we believe they will most likely benefit from economic reforms and activity. Our decision was enabled by data and digital capabilities to underwrite and improve service experience for these SMEs. Towards the end of the calendar year, we also started to ease credit criteria in both retail secured and unsecured on the back of improving customer affordability.
Strong wholesale origination opportunities resulted in the increased focus on activities to create more balance sheet capacity and protect the client franchise origination. Active balance sheet management includes, among others, use of securitizations, syndication, and distribution. This is an area of focus for RMB in particular due to the strong origination pipelines. RMB's origination franchise has continued to perform strongly. The structural reform progress in South Africa and investment needs across Africa are expected to result in further demands for credit as large-scale investment from the private sector is required. We think banks can play a meaningful role here in facilitating this investment, and RMB, as a preeminent investment bank, is well positioned. RMB's distribution and syndication teams have delivered an excellent performance, illustrating strong capabilities to participate in responding to the continent's needs.
These capabilities not only generate significant fee revenue, but also place RMB in the value chain of capital flows due to its ability to execute large client transactions, given bespoke structuring skill set and wider investment reach. These capabilities will need to be further leveraged in order to service clients' needs beyond the bank's balance sheet capacity. We don't only assess progress against lending. FNB's approach of servicing the customer value chain through deep integration into the ecosystem, it shows up in lending, deposits, and the transactional franchises. The origination engines of FNB and WesBank run hard, demonstrated by the gross origination volumes, which were in excess of 200 billion in the six months alone. The strong repayment profile also illustrates the healthy velocity of this portfolio, indicative of healthy credit outcomes.
You can see from this slide that new business risk distribution for retail and commercial has been consistently anchored to our thesis to originate to low to medium-risk customers. The U.K. has also become more focused on risk-adjusted returns, with strong production across all asset classes. Strong origination in property finance has been further enabled by the ongoing technology spend, resulting in the business being more agile and responsive to market conditions. There have been good and a positive credit outcome from this origination approach and thesis, with better-than-expected credit loss ratios across most of the portfolio. Of relevance to these results is the positive retail credit performance. Credit losses have now peaked and are trending down faster than we initially expected. Commercial is trending in line with expectation, given the ongoing growth strategy to be focused on specific sectors and also SMEs.
Also, of relevance to this period's credit performance has been the strong outperformance from the U.K. operations. I want to spend some time on the deposit franchise and the growth in capital light NII, which has structurally reduced our cost of funds and continues to be supportive of the ROE. The group's deep thinking on the benefits of a large and stable funding source resulted in a strategy to provide compelling savings products anchored to an overall customer proposition to properly reward savers. Deposits are gathered from within the value chain of customer activities, a key benefit of the main bank strategy. This has, over time, resulted in FNB being South Africa's leading retail and commercial deposit franchises. Combined with the growing deposit franchises in RMB and broader Africa, deposits in the group now represent ZAR 1.3 trillion of trust vested in our franchises.
FirstRand's approach to managing the endowment profile, what we refer to as the ALM strategy, is designed to optimize through-the-cycle returns to shareholders and is a cornerstone of our FRM process. Rather than take a passive position with regards to the impact of the rate cycle on the endowment profile, we took the decision to actively manage the profile to protect and enhance earnings through the cycle and end the structural term premium for shareholders by investing along the yield curve over and above the repo rate, aligned to our natural risk profile. What this slide shows is that in previous periods, when rates were lower, significant endowment NII outperformance occurred. In financial years 2021 and 2022, ZAR 12.3 billion of additional NII was earned when interest rates were low.
This year, given the reducing rates in the period, the opportunity cost reduced to ZAR 400 million compared to the ZAR 700 million opportunity cost in the prior year. This demonstrates how the strategy reduces endowment volatility and further contributes to the stability in our NIM. As the rate-cutting cycle matures, the group's NII will outperform. Ultimately, our approach to origination, focus on growth in liabilities, and the ALM strategy have a margin outcome. The overall Flat NIM is, in our view, a pleasing outcome, given that lending was tilted to lower margin products and segments, given the expected lower credit loss ratios, and also, the competition has moved aggressively into these customer cohorts, resulting in some margin pressure.
The UK lending business's margin is accretive, but this benefit is offset by the limited diversification in funding sources, resulting in a higher cost of funds, exacerbated by the prudent approach to operating with a surplus to ensure funding resilience. FNB deposit margins were also impacted by customers shifting to better rate customers. The margin compression that may occur is offset by lower funding costs, and all in line with group strategy. Markos will provide a clear unpack of NIM and NII growth in his presentation. Turning now to non-interest revenue and how our strategies to diversify and grow sources of capital-like revenues have played out in these six months. FNB's fee and commission income has remained resilient, thanks to the continued growth in customers and volumes, and this is despite the ZAR 3.3 billion of fee reductions since 2022.
Our insurance business continues to grow strongly, and with a high ROE compared to traditional banking, and is now contributing 10% of total NIR. FNB's RMB's NIR benefited from significant growth in IBD structuring and advisory fees and private equities annuity income growth, although this was offset, as I mentioned earlier, by weaker performance from the markets business, which again, Markos will unpack. The next two slides cover FNB's NIR in more detail. Slide 30 unpacks the drivers of FNB's fee and commission income in more detail, which again demonstrates the benefits that arise from the customer's full value chain of activities. Slide 31 provides insight on the progress on the insurance strategy, which is now delivering a broad range of products to the FNB customer base. Overall, insurance profit before tax in FNB is up 21% in the period if we exclude the impact of the MotoVantage transaction.
As you would expect, the live business has achieved good penetration in the retail base, but we still see incremental runway with short-term and underwritten life. We are pleased with the traction achieved in commercial and the significant runway there. What this demonstrates is that we have a right to win with insurance offerings to our customers and that this is not just a credit life or a funeral life business. Here, you can see the level of diversification increasing, with non-credit life, non-funeral life business now representing 21% of the in-force APE. The total in-force APE now stands at ZAR 8.9 billion. We are also encouraged by how our distribution capabilities to provide, ensure, and invest advice are expanding. Already, 36% of live customer sales APE are via the advisory channel, with total retail advice sales up 42% year on year.
This advisory infrastructure will enable the group's invest strategy as well to grow faster. We are already seeing traction in assets under management and the inflows that we are seeing from advisors. Moving on to RMB's NIR, this is more detail on IBD's knowledge-based fees, which has consistently been growing since 2021 and in line with increased levels of origination in targeted sectors. While lending margins have remained tight, the absolute level of fees has mitigated this margin pressure and provided some underpin to NIR and ROE. And pleasing to see a meaningful contribution from corporate finance advisory activity as well. RMB's private equity business is a consistent contributor to NIR, and despite a very demanding base last year from realizations, the portfolio still delivered 24% growth in annuity income.
The business invested ZAR 1.8 billion in new counters in the period, and the unrealized value of the portfolio now sits at ZAR 7.5 billion, ripe for a pipeline of realizations over the next few years. This completes the thematic unpack of the performance. I will now cover how activities outside of South Africa performed in the period under review. So starting with broader Africa, I think you can see that the consolidated broader Africa performance is an aggregation of the success of FNB and RMB strategies. We continue to believe that despite a relatively small in-country footprint, our focus on building sustainable and profitable franchises is paying off. You can see here that the absolute NIAC C has reduced period on period.
We are still pleased with the level of economic profits generated, which has normalized as expected, given the impact of rate cuts and the reduced endowment, the stronger Rand, higher credit charge. And by the end of June, Nigeria had moved from an assessed loss position to a taxable position, thereby reducing the earnings relative to PBT. But pleased with our broader Africa performance. The U.K. operations continue to perform well. Lending markets remain subdued, given U.K. macros, but Aldermore managed to grow advances faster than its competitors, and there was a particular focus on buy-to-let and business finance, given the better risk-adjusted returns in these product sets. Credit outcome outperformed initial expectations, and pleasingly, operational benefits are beginning to emerge from the investment in the technology, which supported new business production, which increased 76% for property finance over this period.
Sustained top-line growth, improving operational leverage, combined with the focus to lift margins, will contribute to the group's ambition of improving all-the-more returns to between 14% and 15% in pound terms over the next two and a half years. The headline ROE is already within this range, with improvements expected in motor, where progress is being made. Capital optimization activities are also key to this ROE ambition, and those are underway to reduce the excess capital beyond the business needs. While on the topic of the U.K., we did provide an update to the U.K. legal developments in the results that we released last year, but just to recap. In June 2024, the group recognized the ZAR 3 billion accounting provision for the potential impact of the FCA's review into discretionary commission agreements, DCAs.
Approximately 90% of the agreements reviewed for our provision are DCAs. In October 2024, the U.K. Court of Appeal issued a judgment which went beyond the original FCA motor finance commission review and set a higher bar than the regulations in place at the time. We strongly disagreed with the judgment and immediately sought permission to appeal to the U.K. Supreme Court, and we received permission to appeal on all six grounds in December. The appeal will be heard from the 1st to the 3rd of April, and we have appointed an eminent King's counsel to argue our case, supported by a very strong U.K.-based legal team. It's also helpful that the FCA and the national franchise dealers will submit both written and oral arguments.
Given the prevailing legal uncertainty and the complexity of the scenarios that could emerge, the group has disclosed a contingent liability in its notes to interim statements, which Markos will cover in more detail. The group has, however, not raised a further provision, which is appropriate given the fact that we are going to the Supreme Court, and we think we have a strong legal case. Following the Supreme Court hearing and the FCA's update, the group may gain some greater insights, and particularly with regards to the potential remedy scenarios, and it's at that point that we may revisit the need to raise a further provision for the year to June 2025. Back to the group. This slide demonstrates the group's strong capital position, which remains solidly above the upper end of our internal target range of 11% to 12%.
The CT1 position provides ample resources to support our growth ambitions and pay a dividend in line with earnings growth at a payout ratio of 59% and a cover range of 1.7 times, well within our range. I think it's at this point that I hand over to Markos.
Thank you, Mary, and good morning, ladies and gentlemen. I will now present the financial highlights of the FirstRand Group for the six months ending 31 December 2024. Mary has already summarized the key performance metrics, and what this slide again reiterates is that most are trending positively. I will do a quick recap of these metrics and unpack them further throughout the presentation. The group improved its ROE to 20.8%, driven by normalized earnings growth of 10% and coupled with net asset value accretion of 9%.
This resulted in strong economic profit growth, or NIACC, ahead of earnings at 12%. Margins remain stable at 4.47%, with the group's credit loss ratio broadly similar at 84 basis points, with an improved cost-to-income ratio of 48.9%. This resulted in an improved return on assets of 1.71%, which Mary covered earlier. The group remains well capitalized to support economic and customer growth requirements, delivering advances and deposit growth of 7% and 9%, respectively. This slide decomposes the earnings growth of 10%, and let me start by unpacking the drivers of the 4% growth in NII. Overall funding liabilities growth of 9% continues to reflect the strong deposit gathering capabilities and focused strategies of the operating businesses. FNB and RMB continue to deliver good growth off a high base in retail, commercial, and corporate deposits.
Broader Africa's growth of 6% in local currency reflects a mixed outcome, with FNB continuing to deliver good deposit growth from a growing customer base and product suite across the portfolio, whilst RMB operational deposit growth was impacted by some key clients in Namibia increasing utilization of their funds for their own business opportunities, coupled with the liquidity shortage emerging in Botswana due to pressure in the mining sector. Aldermore's strategy to diversify liabilities continues, and the deposit growth of 5% included good growth of 8% in personal savings, driven by strong demand and the introduction of new products. U.K.. business savings contracted against the backdrop of price-led pressure. In addition, this growth in deposits results in sufficient capacity for the U.K. operations balance sheet requirements.
Group treasuries funding growth of 17% is mainly cyclical off the back of timing of DFI funding inflows and increased deposits from National Treasury as part of their usual cash management process. And lastly, in line with the group's capital planning process, the bank issued fresh AT1 capital instruments, taking advantage of pricing and timing of support to support strong volume and growth. This period resulted in FirstRand Bank redeeming capital instruments with a spread of 440 basis points and replacing them with a fresh issuance at 284 basis points. Turning to advances, as Mary covered, the group's origination approach resulted in a change in mix of the 7% advances growth, mainly tilted to the commercial and corporate books, which are up 10% and 9%, respectively.
The more muted growth outcome from retail advances is due to ongoing customer affordability pressures weighing on demand, particularly for home loans, although WesBank VAF has shown stronger momentum towards the back end of the year. Customer cash flow pressure resulted in higher demand and utilization of unsecured credit products, and the business has remained disciplined on its credit appetite and origination strategy, managing risk as it emerges. This has resulted in slower than expected growth in unsecured of 4% over the period. Commercial and corporate lending remains buoyant with targeted sector-specific origination strategies and focused growth in the SME segment, as Mary mentioned, with unsecured SME loans up 19% period on period to ZAR 17 billion, with a large portion of the growth coming in the first half of the period.
The broader Africa portfolio continued to deliver good local currency growth in advances up 10%, reflecting the continued focus on lending to main bank customers on the continent, with the growth predominantly coming from Zambia, Namibia, and Botswana. U.K. operations advances growth of 4% is ahead of expectations and showing continued momentum as the macros gradually become more supportive and cost of living pressures ease. This growth came predominantly from both the specialist buy-to-let segment, with balances up 12% and business finance up 6%. Motor advances have, however, contracted 1% due to subdued U.K. motor market and a deliberate focus on pricing for better risk-adjusted returns from this segment.
Turning to margins, group margins have remained stable at 4.47%, and starting in the middle of the section of the graph, absolute NII, excluding U.K. operations, is up 6% to just under ZAR 38 billion, with net margins declining two basis points to 494 basis points. Drivers of this outcome relate predominantly to partially offsetting impacts across the group's net lending, deposit, and capital endowment margins. Unpacking these further, the lending margin impact of three basis points is driven by a combination of lower overall pricing, mixed changes, and increased suspended interest off the back of higher NPLs. Deposit margins declined 11 basis points, driven predominantly by net endowment of five basis points and a six basis points impact from pricing pressure and deposit mixed changes. In addition, the introduction of deposit insurance had a marginal impact of less than a basis point to group margins.
Offsetting these was a positive impact to margins from the group's capital investment strategies, up 11 basis points for the period, despite a 19 basis points reduction in average interest rates over the six-month period. This result was driven by higher average investment balances and the group's proactive ALM portfolio management strategies, which led to higher capital portfolio investment rates. U.K. operation margins have compressed six basis points to 2.93%, mainly due to deposit pricing pressure, coupled with a partial offset from improved motor finance margins, largely as a result of interest not previously recognized due to the NASIO event that we now can recognize. In overall, the total group NII, including U.K. operations, is up 4% to ZAR 44.7 billion, with the group NIM benefiting from a relatively lower overall contribution from U.K. operations to total NII.
If we translate this margin outcome into an activity view of NII, most of the group's interest-bearing activities have seen solid NII growth, except for lower deposit endowment, down 2% for the period, and U.K. operations down 1% in pound terms, mainly due to the six basis points margin contraction called out on the previous slide. Lending NII growth was driven by term advances growth, offset by lower margins from the front book pricing, including origination mixed pressure, arising from faster growth in lower margin commercial and corporate advances. Transactional NII includes the group's transactional short-term lending activities, such as overdrafts and credit cards, and this has grown 16% for the period as a result of the combination of increased average utilization by customers as well as margin expansion. RMB's transactional NII benefited from increased product volumes and new customer acquisition, with good growth of 11%.
The only additional data point to note relates to the fact that without the ALM structural hedge, deposit endowment would have reduced 5% as opposed to 2%, in alignment with the directional message Mary made earlier that the current relative opportunity cost of the hedge continues to reduce. Investment deposit NII is up 8%, in line with average investment deposit growth, as customers continue to benefit from FNB's higher yielding investment and savings product offerings. Group treasury delivered a good net outcome driven by capital endowment, as outlined in the previous slide, and broader Africa NII benefited from growth in average advances and deposit balances during the period at higher overall margins, offset by lower endowment as the rate cutting cycle gained momentum across the portfolio. The group's institutional funding contribution to total funding has remained relatively stable between 25% and 28% again, highlighting the strength of the deposit franchise.
The group's overall LCR and NSFR remain above regulatory requirements at 127% and 122%, respectively, and the weighted average remaining term of institutional funding has increased to 37 months in line with group treasury strategy to lengthen the group's funding portfolio duration. Now turning to the group's credit performance, while impairments increased 8% for the period, they are trending better than expected. The CLR of 84 basis points continues to remain below the midpoint of the through-the-cycle range of 80 to 110 basis points, and excluding the benefit of the NASIO remediation outcome in the prior period, the group CLR has peaked at 92 basis points, just below the midpoint of the TTC range, and over this six-month reporting period has trended back to the bottom end of the range.
In addition, despite book growth, the group has also seen a lower trend in the six-monthly charge to ZAR 6.9 billion. This improvement is primarily due to an improved retail, corporate, and U.K. operations impairment outcome for the period, partially offset by commercial and broader Africa. The group continues to benefit from having a diversified portfolio with deliberate, focused, and consistent credit strategies, as well as a very mature financial resource allocation framework. I will unpack the underlying segment credit outcomes shortly. Final call out on this slide is that the group's impairment coverage remains broadly in line with June 2024, with an overall improvement in total performing coverage to 1.51% due mainly to book growth and a few migrations of stage two higher coverage property exposures in RMB to stage three.
Unpacking NPLs further, this slide shows the slowing retail NPL formation on a rolling six-month basis, while both commercial and corporate NPLs have seen some acceleration due to a few watchlist property counterparties migrating from stage two to three during the period. In RMB, these property exposures have sufficient collateral, and the group's proactive provisioning methodology resulted in these migrating from stage two with sufficient coverage already in place. FNB commercial NPL and impairment charge has been impacted by a single large property exposure migrating from stage one to NPL over the period, driven by specific circumstances related to the underlying client only. Broader Africa and U.K. operations NPL formation also shows a slowing trend in line with expectations as macros slowly recover.
Turning to an overview of credit performance of the underlying customer segments, the overall retail credit charge of 1.99% has trended back into the top end of the TTC range and off the peak six-month charge experienced to June 2024. Whilst it remains elevated, it is better than management expected, with an ongoing gradual improvement expected as the shallow rate cutting cycle and lower inflation offer some customer relief. The current retail credit loss ratio also reaffirms the group's view that retail credit, whilst still elevated, has peaked. In addition, in the year-end results presentation, I called out a significant increase in debt counseling inflows and concerns related to some debt counseling behavior.
As a positive update, whilst the total debt counseling portfolio remains structurally higher than in the past, the management actions to date have stabilized the rate of debt counseling inflows back to normal levels, and there has been an improvement in the overall debt counseling process and general behavior. Focusing on the retail secured portfolios that comprise of both FNB home loans and WesBank VAF, let me start by noting the continued good performance by the WesBank credit origination strategy to focus on FNB main bank customers and lending to low to medium risk customers, with its credit performance remaining well ahead of expectations. Residential mortgages CLR has normalized from the strain seen in the six-month period to June, which was driven by debt counseling concerns noted earlier and lower house price trends.
As mentioned in the September results in the September results presentation, the group has observed a downward trend in its internal house price index data, particularly in Gauteng, and this had a significant impact to the retail secured charge to June 2024. In line with guidance at the time, this six-month period has seen an overall stabilization in house prices across the country, but the results per province do still show pockets of muted growth, particularly still in Gauteng. As house prices continue to recover, the group expects a better outcome in stage three coverage levels, but this will require house price growth to exceed NPL repayment roll-up rates. Turning to retail unsecured, comprising personal loans, credit cards, overdrafts, and revolving facilities. Overall unsecured advances growth has been muted over the period, resulting in lower front book strain than the previous six months, especially from personal loans.
This coupled with lower debt counseling inflows resulted in an improving credit trend in the unsecured portfolios. As an overall closing remark on retail credit, the improved macros have also resulted in lower FLI stock requirements for the period. Turning to commercial, our previous guidance highlighted that commercial credit performance usually lags retail, and management expected a normalization of its CLR back towards the bottom end of its TTC range. This has played out in the 83 basis points charge, with general credit performance remaining ahead of base case and the significant increase a function of the base effect of previous load shedding and COVID-19 releases in the December 2023 period.
The current six-month charge has been impacted mainly by front book strain from the significant growth in SME unsecured advances and the property NPL that I mentioned earlier, which required an additional provision that had a 10 basis points impact to the current commercial CLR and accounting for most of the 14% six-monthly increase in the actual impairment charge. Management has noted some strain in vintages in the SME portfolio, and hence, as previously mentioned, growth in this portfolio has slowed in the second half of the period as risk cuts were required. RMB overall credit performance has been better than expected, with total coverage remaining similar to prior periods. The U.K. operating environment remains tough. The credit loss ratio has seen some volatility on a rolling six-month basis, mainly driven by cost of living pressures.
In addition, the resolution of the NASIO remediation process resulted in significant provision releases in the six months to June, creating further distortions to the trend line. That said, the current period includes a relatively normalized view of credit performance, with some one-off model enhancement benefits and cost of living FLI overlay releases partially offsetting additional provisioning required for both the front book strain and affordability pressures reflecting in the REOS trends. In addition, the motor finance credit charge benefited from better than expected collection outcomes related to the NASIO credit exposure collections. Broader Africa has seen an increase in the six-month charge, driven mainly by potential event risk related to Mozambique unrest and a change to NPL write-off periods in Namibia. NIR has seen a solid 8% growth for the period, with most NIR activity showing strong growth other than trading income from global markets.
Net fee and commission income is up 8% for the period. The growth in transactional fees results from a combination of customer and transactional volume growth, coupled with inflationary increases. Variable fee and commission-related expenses remained at elevated levels, up 13% period on period, and there are several factors that impact this growth, including negotiated inflation, related volume discounts, currency impacts, and the mix of activities driving the transactional volumes. Mary highlighted the very strong performance in RMB knowledge-based fee growth, up 55%, highlighting the strength of RMB's market-leading structuring, arranging, and advisory capabilities. Turning to fair value income, which is disappointingly down 13% for the period. Global markets experienced a difficult first half performance, where trading income came under pressure and is down 19%, primarily impacted by lower structuring and market-making opportunities and negative currency translation impacts of around ZAR 161 million.
In addition, client flows and activity were lower, and forex trading income levels were also impacted by a management decision to proactively de-risk and diversify foreign currency trades related to broader Africa sovereign risk. The fixed income trading desks were impacted by lower overall client flow and hedging opportunities, particularly in inflation. Lower inflation prints and real rates also impacted the unrealized mark-to-market of the portfolio. These negative impacts were partially offset by a much stronger credit note facilitation due to increased volumes and corporate activity. Turning to RMB's fair value income growth, it was impacted by lower principal investment realization income compared to the prior period, which included a significant single realization of over ZAR 500 million. This impact was pleasingly partially offset by current period portfolio dividend flows and a single smaller exit.
As a final note on the slide, the U.K. operations fair value interest rate hedge portfolio outcome is in line with management expectations, with the remaining unwind of prior period accounting gains related to hedged exposures now at more normalized levels. In addition, Aldermore management have implemented a new dynamic hedge accounting process and continue to improve the insights and management of the volatility related to this economic interest rate hedge position. However, it must be noted that some accounting volatility remains, albeit at significantly lower levels than experienced in the past. Mary has done a detailed unpack of the drivers of the insurance portfolio performance, the outcome of which has resulted in a 10% growth in net insurance income.
The only additional point I'd like to highlight is that the group has decided to restructure WesBank's existing partnership related to MotoVantage, resulting in the investment being disclosed as an available for sale asset and impacting the current period insurance income recognized compared to the base. Normalizing for this accounting impact, insurance income would have been up 21%. A further update on this transaction will be included as part of the June year-end reporting, as it is expected to be concluded by then. Investment income delivered an impressive growth of 37%, driven by an improved performance in underlying earnings and the group's associates and joint ventures. Private equity's portfolio earnings grew strongly, up 24%, and this good performance mitigated to some degree the impact of lower private equity realizations than in the comparative period.
The annuity base reflects the quality of the portfolio and earnings generation from the underlying investing companies, offering ongoing earnings support for the capital deployed and is the key driver of the unrealized value of ZAR 7.5 billion that Mary referred to earlier. RMB Morgan Stanley benefited from improved JSC trading volumes and higher levels of equity capital market activity, albeit off a very low base, with the WesBank Motor JVs performance reflecting good book growth, with production volumes normalizing for some of the event risk in the OEMs in the base period. The credit outcome in both JVs also trended similar to that of the WesBank VAF portfolios, with support from macros resulting in FLI stock also being released. Overall group costs increased 4% for the period, slightly below average inflation.
The outcome was predominantly driven by a 3% increase in staff costs, which comprised 63% of the group's cost base, and I will unpack this outcome on the next slide. In addition, amortization costs were significantly lower due to the Aldermore acquisition intangible being fully amortized in June 2024. Computer expenses continued to grow well above inflation, up 10% for the period, driven mainly by higher average technology inflation, currency devaluation, and increased software licensing costs and requirements. Other expenses' growth of 9% was driven by double-digit increases in frontline customer and revenue-related expenses, including marketing, advertising, and business travel. In addition, the group has invested in additional cyber-related insurance cover, which has resulted in a significant increase in insurance costs during the period.
Turning to staff costs, the group staff cost growth of 3% was primarily a function of lower permanent and contractor headcount for the period, albeit the permanent headcount has normalized for vacancies replaced since June reporting. Lower variable staff costs are mainly due to timing and base impacts, with longer-term incentives impacted by higher-than-usual forfeitures. If we look at the group's ETR trend, it's tracking slightly ahead of management expectations at 48.9%. Positive draws of 2.2% reflects the group's continued focus on managing operational leverage. Right then, before I hand you back to Mary, we've added two slides that summarize the two key UK motor commission processes. Firstly, the regulatory review process of the Financial Conduct Authority, or FCA, which maps out a summary of the key processes to date.
This review is primarily to understand if the past use of discretionary commission arrangements may have led to poor customer outcomes and whether a potential address for any identified outcomes is required. To date, the FCA has indicated that firms should ensure they have sufficient financial resources related to the matter and that a remediation process is probable. This informed the group's decision to raise an accounting provision of GBP 127.4 million at 30 June 2024. The provision approach adopted by management has been summarized on the slide, whereby multiple potential redress scenarios for various customer outcomes were built, including judgments related to potential compensatory interest rates, costs to remediate, and the probability weightings of the likelihood of each scenario outcome for redress.
Management has concluded that no further provision is required for this process, as there's not been any material new information related to this particular review, and the FCA has indicated a further update is expected in May 2025. The second slide offers a summary of the points Mary highlighted earlier on the current U.K. Court of Appeal judgment and subsequent Supreme Court of Appeal process. It aims to highlight that this matter is different to the FCA regulatory review in that it is a legal matter concerning a backward-looking clarity on the interpretation of U.K. common law with regards to motor dealer credit broker duties to customers, including all types of commission arrangements and not just DCAs.
An important additional data point that we have added and disclosed relates to the fact that 90% of the pre-2021 motor commissions were DCAs and therefore have a direct overlap between the FCA regulatory review customer population and the U.K. Supreme Court of Appeal process, but only for scenarios where potential poor customer outcomes may exist. The matter is in a legal process, and therefore we have shared what we can with shareholders to date, and on this basis, and as Mary explained earlier, we have disclosed the matter as a contingent liability for the interim reporting period. Let me close off by thanking you all and handing you back to Mary to cover the group's forward-looking prospects.
Thank you, Markos. I'll conclude with a few comments on our prospects looking forward.
We are, however, optimistic about the prospect of further improvements in the country's reform efforts as the government and the private sector continues to build and execute on the ambitions expressed through Operation Vulindlela, as stable electricity supplies, improved logistical services, telecommunications, and access to global skills should contribute to increased economic activity. While we acknowledge that there may only be one or two more interest rate cuts left in the cycle and that inflation has largely run its course, the lagged impacts of the easing in affordability conditions should still filter through the South African economy. We expect inflation to remain contained, and we are mindful that the global challenges pose meaningful risks to the operating environment for the rest of the financial year and beyond, as the countries that first-run operations cannot insulate themselves from the global macroeconomic and geopolitical environment.
Despite these macro challenges, the group still expects its customer franchises and businesses to continue to deliver good growth and strong operational performances. This guidance excludes any financial impacts that may follow from the UK Motor Commission matter. We expect balance sheet growth to remain healthy, driven by similar advances and deposits growth in the second half compared to the first six months. NI growth is expected to be slightly weaker in the second half as the endowment impact from the current rate cutting cycle continues to fully materialize. This is despite some mitigation from the ALM strategy. Growth in fee and commission, insurance, and fair value income will be broadly similar to the first half. However, investment income could benefit from a material private equity realization in the second half, resulting in overall higher NIR growth.
The group's overall credit performance should trend better than the first half, resulting in a credit loss ratio at the lower end of the group's stated TTC range, driven by continued improvement in retail, with corporate and commercial showing a similar picture to the first half. The U.K. operations credit loss ratio is expected to normalize closer to the bottom end of its TTC range, as the one-off benefits in the previous periods unwind. With the motor commission based in the FY24 cost base, operating expenses will continue to increase below inflation. Excluding the motor commission, just so that we are clear, expenses will be slightly ahead of inflation.
Also, with the motor commission in the base, improving credit outcomes and good cost management, it means the group now expects to deliver full year earnings growth above its long-term stated target range, as second half earnings will be marginally higher than the first half. The ROE will remain well within the group's target of 18% to 22%. This brings us to an end of our presentation. To thank our employees who every day put in all the hard work to ensure that we deliver shared prosperity for our customers, for each other and the societies we serve. Thank our customers for their loyalty and support, and thank all the stakeholders that contribute every day to making sure that FirstRand is a bigger and stronger business. Thank you.
I think we can now go to any Q&A, any questions that we have in the room and with the people joining us online.
It's James Starke from RMB Morgan Stanley. Afternoon, Mary and Markos. Congratulations on a strong operating result. Three questions from me. The first on OPEX, if you could please comment further on the structural and cyclical factors underpinning the excellent cost containment and how that may persist into 2025 and beyond. The second set of questions relate to RMB, some impressive performance on the knowledge-based fees, some color on how you expect that to fold out into the rest of 2025 and on into 2026. And the last question, if you could perhaps help us think a bit more clearly around PE realizations into the second half in relation to the more than GBP 7 billion of unrealized value. Thank you.
Okay, thank you, James.
I do have my executives in the room as well, but Markos, you want to start with the cost, and I think, Em, you can also just in the meantime think about sustainability of the knowledge-based fees and also when are the private equity realizations going to come to light? Markos?
Thank you, Mary, and thanks, James, for the questions, so the first point to make on OPEX, I think this round benefited from the vacancy run-up into June, so there was lower headcount that I showed of down 1% that has normalized somewhat in the second half, so that piece will normalize and annualize in, but outside of that, the rest of the cost base, particularly the step change in the amortization of the intangible from Aldermore, is structural and will remain, and that has a second-half impact as well.
Mary also in her guidance noted that we'll be slightly above inflation without the Aldermore, the U.K. operations provision that we took. And therefore, if you take that into account, there is some normalization that comes through the staff cost line. All the other lines, I think, will be similar.
Yeah, but James, I think it's fair to say that FNB has run hard over the last year to deliver that cost print. I think there's the ongoing opportunities for us to structurally keep extracting some efficiencies in our cost base. So that will be ongoing. But I think we're not yet at the stage where we can pencil in more promising future lower structural costs. Although I have to say that I do like that print of cost-to-income ratio in the 40s. So I think that's what we need to continue delivering. Some nervous giggles from the team.
Thanks, Mary. Good morning, James. First of all, on the knowledge-based fees, I mean, a big part of the outperformance in the six months was corporate finance, lots of strong momentum in M&A activity in South Africa. I think that outlook remains, sorry, the corporate finance and then the origination engine is also very strong, as Mary referred to in her section. We see that momentum continuing for the rest of the year. I think that, as you know, these knowledge-based fees are quite volatile, so difficult to predict into 2026. But I think just given the momentum in the business at the moment, we are feeling positive. On private equity, yes, there's, I think that was also mentioned by Mary in her outlook. There are some large transactions that we're working on.
Once again, these outcomes are quite binary, but we're feeling quite confident that I would say over the next 12 months, we'll see some significant realizations from the private equity portfolio. I think we, as a business, are focusing a lot on making sure that there's good capital velocity in that portfolio, and that means both realizations, but also ongoing investments. Thanks.
Thanks, Em. Okay, can we move on to other questions? There's a question here in the front from Clem. Clem, they'll bring the mic to you. Over here. I think we'll go with yeah, that was first, and then we'll come back.
Thank you. Please, can we look at slide 56 on page 28? I'm interested in the 19% increase in the trading income in the UK, if I read that correctly. Is that sustainable, and are you able to elaborate on it?
Thank you.
I think it's the 19% was a down, that was markets. The U.K. was 87% up. As I mentioned previously, we had an interest rate hedge gain from an accounting perspective. So economically, it was neutral, but accounting recognized the gain. That unwound over a two-year period and is now at a normalized level. So we expect this to be within a range similar to where the levels are going forward, but there's no new impact. But to June, its run rate will be similar to what you see in the back.
Thank you. Okay.
Hi, morning. It's Harry Botha from Bank of America Securities. Just two questions, please. On the retail lending side, I'd like to get a sense when you'd expect things to pick up in terms of.
Sorry, just on the.
On the retail lending side, I'd like to get a sense when you'd expect to see things pick up in terms of growth. You noted easing your appetite slightly. And then in terms of the margin pressures in the second half, is it mostly about slower interest rates or any other factors to consider?
Okay. And let Harry also comment on the retail side. I think retail will be predominantly dependent on affordability by households. I think that's a big factor for where we are. So we've had 75 basis points cut to January. Okay, lower inflation should be slightly more supportive. Okay, but I think our caution is always that rates, you know, that repo rate remains quite high. So I think it's going to be a while before we can see real credit extension for households become impressive.
It's a lot more promising on the commercial side, but I mean, I think that we've been capturing over a while. But I think Harry can talk about the aspirations of the business and also just where they're focusing.
Mary, thank you very much. Harry, Mary's covered bulk of it. If you look at, yes, there is positive momentum in the environment, the macro environment, that'll definitely give you a little bit of tailwinds, but it's a little bit of tailwinds. Because I think Mary's right. The affordability levels, consumers are still strained, so you've got the backbook strained still there. So we will definitely support customers as the cycle turns. But I don't think you would expect, as Mary was saying, a dramatic change in terms of run rate. I think it's similar run rate in terms of the originations that Mary has included in the slides.
I think that'll be a fair basis. And I think marginal uplift, but not significant.
And I think it would be, yeah, I think it would be good to see some margin improvements, particularly on the home loan side, as prices in the market stabilize compared to where we've been. I mean, I think there's a lot of competition in that segment, but hopefully improved conditions will also result in, I suppose, a fair share of the business that we write at an improved margin going forward. So, but I mean, that's nothing too drastic to what the team have been doing so far.
So yeah, so I think interest rates will be the big factor, but I guess for retail, but on commercial and corporate, we continue to focus on those businesses that we think are going to capture any upside from the economy, both from RMB commercial, RMB and FNB commercial. And I mean, globally, we all know what's happening. Okay, that I don't think we can really comment on what happens, but our big job is to really focus on the resilience of FirstRand ability to generate returns.
Those of us with longer memories will remember the days when your ROE was in the range of 24 to 25. What would you say has happened to drop it? Is it capital structure? Was it competition or a combination of all? Thank you.
Yeah, so I'll go back and first say that, you know, I think those days, if you look at where the South African sovereign rating was, okay, that correlated with periods where the country's investment grade was higher. Okay, so what that does is that it increases the cost of capital, impacts lending and everything else that we do. So that's number one, is that structurally, I think we are in a different environment. I think we did take decisions that we highlighted earlier on, focusing on low to medium-risk customers. You know, I think that changes the shape of the balance sheet and I suppose the returns that gets generated.
Those periods where ROE was over 22%, I'm also looking forward to that because we should be able to achieve those in periods where we have significant private equity realization or some of those in some of those strategies. So the portfolio has got that. What we need to do is make sure that we are generating stable earnings and returns and then sticking within that 18% to 22% range. So yeah, so in summary, I think it's, you know, those were the better days of South Africa, but perhaps over time they'll come back. But our portfolio certainly has an ability to have periods where we can get that outperformance. But I guess what we make as a promise to shareholders is something we think we can sustain on an ongoing basis with that 18% to 22% range. Any other questions, Sam? Anything on the line?
Yeah, I've got some questions from the webcast, Mary. First question is from Chris Steward from Ninety One. Given your CT1 ratio of 13.6%, 1.6% ahead of the top of your target range, and ROE of 20.8% and risk-weighted asset growth above 8%, you are continuing to accumulate capital with Aldermore also overcapitalized. Once the motor finance issue is finalized, what are your plans to manage the group's surplus capital balances in South Africa and in the U.K.?
Okay, thank you for that question, Chris. I'll say in terms of priorities or in the rankings, I would first say that we will deploy it in the growth opportunities that we are finally seeing in the business in South Africa. Okay, so hopefully we can generate better returns with the deployment of that capital than what we've been able to do.
So the first one would be the business in South Africa is seeing opportunities that we should deploy growth. Okay, that's a different position to where we've been the last two years. And okay, thank you for noting the fact that at this point in time, it's prudent for us to hold on to all the buffers in the capital that we have in the business until we've got the motor commission behind us. And I think, Chris, if we don't have sufficient growth opportunities to deploy the capital into, we will not hold on to the capital. We know what to do, which is return it to shareholders. But I think we'll first try hard to generate a higher return from that.
I think, yeah, I mean, that Aldermore was actually on track for starting to get into a dividend cycle, but I think we just have to pause that until we've got the legal uncertainty behind us. Thank you.
Okay, moving on, Warren Riley from Bateleur Capital. In second half 2024, you took a provision which negatively impacted normalized earnings by ZAR 2.4 billion. Adding this provision back gives an adjusted normalized earnings base of ZAR 21 billion. Your full year guidance implies limited growth of this adjusted base in the second half. Please, could you explain the drivers of this muted performance?
Okay, I don't quite know how, yeah, how those calculations are working out. We had the ZAR 3 billion Rand provision in the base. And we said with that in the base, looking forward, we will do our best to generate earnings at nominal GDP plus 0 to 3%.
That's the guidance we gave in September. And now we're saying, given the fact that we think that there's good momentum, it will be more nominal GDP plus over 3%, okay, without being specific. So first half earnings growth of 10%, a slightly better half, a slightly better second half, okay, should give you what we think will be decent growth under the circumstances. So I'm not quite sure what the calcs are implying on your side, but slightly better performance than we've had in the six months outside of the U.K. provision would be what we would consider respectable.
I can also just give an additional comment. So on the ZAR 2.4 billion post-tax, it was split in two. ZAR 200 million of it was some of the legal costs we incurred. We expect to incur some significant legal costs in the build-up to this Court of Appeal process.
Those you can see as part of this year's base. The second, there was the NASIO release in the second half of about GBP 46 million. That also is in that base of the second half. And some of that, if you think about the 10% growth versus original guidance, has been made up in the first half. And we're hoping to make up some of that in the second half as well. Those are the two big impacts that impact into that ZAR 21 billion versus what you've seen play out in the current guidance.
Cool. Thanks, Markos.
Okay, question from Ross from Investec. On the risk of the potential need for further U.K. legal-related provisioning, at what level of provisioning would you need to think about conserving or raising capital?
Look, Ross, I think the one thing we don't know is the outcome of the legal case and I think the conclusion of this FCA investigation. There are different scenarios, different permutations. You know, so if we knew that number, okay, I think we certainly would have communicated or put it forward. But I think as Chris pointed out, you know, I think at this point in time, we've got adequate financial resources to deal with what we think may be a reasonable, under the circumstances, outcome from these proceedings. So yeah, beyond that, Ross, I think we just have to wait for a couple of months now.
Okay, I've got a number of questions from Charles Russell. His first question, actually, a number of people have asked it, but I'm only going to ask it once. A few questions.
One, if the U.K. Supreme Court outcome is severely unfavorable, would you consider walking away from that business?
Okay, do you want to do them and then should I take them one by one?
I think one by one.
Okay, that's fine.
There's a lot.
Yeah. Yeah, look, I mean, again, we know what we know today, which is that we've got the Supreme Court case that's going to be heard. We've received a lot of support in actually getting permission to appeal, including from the HMT, the policymakers, I think, who could see that the adverse impact of this case could have on the U.K. business environment. So we are hoping that some sanity will prevail somewhere along the line when it comes to remediation.
If that's not the case, of course, we have to review alongside with a lot of other issues that we will be dealing with in time, but our business in the U.K. and Aldermore is doing well. The management team is focusing. You know, the trading results are pleasing and they're executing according to strategy, so I think, yeah, the court case will determine how the U.K. is shaped going forward, and that's something we'll consider in time.
Second question. When do you expect stage three loans to start to lower? How did the 5% growth compare to your own expectations for the first half?
Do you want to take that? Give me a breath.
Thanks, Charles, so as indicated, I think by Harry earlier, it does take a bit of time, even for retail customers, new retail customers and growth to see the cycle out.
We expect not in the next quarter period to June, but thereafter there will be an improvement in that stage three outcome for retail. Commercial and corporate have been driven more by adverse items in property, as I called out. The U.K. definitely is going to start seeing benefit as it walks through the 12-month curing period of some of the motor NASIO stage three portfolio that should start recovering. Those are kind of three anchors to the portfolio. Then if you look at the performance therefrom, I think from a coverage perspective, we have built up prudent coverage on that portfolio. The two should walk in the same direction as the two lower cuts play out.
Okay. Two cost questions.
What are some of the other cost management measures in FNB or other divisions that will continue to bear fruit in the second half of the year? And are there any one-off benefits in the low 3% year-on-year IT function cost growth? Surely this will normalize upwards in years to come.
Okay, Chris, you've pretty answered the first one, Ilya.
Yeah, so I mean, the cost benefit measure, so I mean, in the first half, I've answered partially through James question earlier that we will see a benefit, particularly from the Aldermore acquisition amortization of the base. And if you look at the IT costs as well, some of the platform costs have normalized in the period because we have a base in base and we're spending on that. Also, depreciation, interestingly, has stayed relatively constant.
So I think those are kind of two components that are going to play out all the way through to June, so are more permanent. And then we do have obviously the variable levers around the other costs. If you think about travel, marketing, advertising that have grown a bit faster in the first half, but at this stage, they're bearing fruit if you look at the top line outcome. So there's no need to pull back on those. In fact, we see them as positive cost growth effectively. So I think that sort of covers the bulk of the question.
And I think maybe just also to add that I think in how we are achieving the cost outcome, the business is still investing in the necessary technology and platforms to support growth. So this is not coming at the expense of sacrificing investment required for the future.
And hence, it's a fine balancing act around how quickly costs can come down because sustainability and resilience are increasingly important.
Okay, last question from Charles. Does slide 26 imply that you expect NIM to increase to full year 28?
Okay, you can answer that one, Markos. You don't need to look at the slide.
Yeah, I mean, so on NIMs, I guess some of the rate cuts will still have to annualize in. So that will be something that will play out. But we expect NIMs to be similarish, probably one or two basis points lower off the back of that. And depending on where the advances growth comes at this stage, it's still looking like it's more from corporate and commercial. You should see a similar trend in that lending interest margin.
But we don't expect NIMs to have a dramatic move, but there will have some lower outcome. And obviously, the U.K. contraction, we expect to continue to June. So that will still play out into the June numbers at this point. If you look at Mary's graph on the LMH, that opportunity cost will continue to unwind. And really, you can see where the gray part started to feature in that graph. That will start to play out in the 2026 period and thereafter.
Question from J.P. Morgan. Please unpack the strong life insurance APE sales growth of 10% and whether you believe this is sustainable over the next few years.
Okay, I'm going to give Lee Bromfield, who's sitting there. He's the CEO of our insurance business. Lee, you can quickly just unpack that strong growth and whether it's sustainable.
Thanks, Mary.
Strong growth is predominantly driven by our underwritten book and our commercial portfolios. You can see the numbers in the pack, but growing well into the double digits, plus continued good growth in our funeral book, with credit life being a function of how our credit book is growing at the moment. We expect our insurance revenues to carry on growing, particularly out of our underwritten commercial and our short-term business, which are showing great growth.
Thank you, Lee. And I think it is in line with what we expected the growth trajectory of this business. And I think we've demonstrated that penetration into that commercial segment is still, it's still early days for it. So I think there should be good growth coming from insurance continuing. Thanks, Sam.
No more questions from the webcast. I don't know if there are any questions on the audio call.
Are there any questions from the conference call?
Thank you. We have no questions on the conference lines.
Okay, then I think what's left is for me to thank everybody who attended and online. You are welcome to join us for lunch after the presentation. Thank you.