Good afternoon. Welcome to everyone on the webcast, those dialing in via the telephone lines and via LinkedIn. Today, we are sharing the Nedbank Group's annual results to 31 December 2022, which we believe demonstrate that Nedbank has done well in what is an increasingly difficult environment, particularly here in South Africa.
The agenda of today's presentation, as shown on the right of the slide, will start with me sharing a few thoughts on the operating environment, then reflecting on the progress we have made on our strategic growth drivers, and also providing an update on our recent board and leadership changes before handing over to Mfundo Nkuhlu, our Chief Operating Officer, who will share in more detail the progress we've made on our technology strategy and how this is increasingly evident in what we call our strategic value unlocks.
Mike Davis, our Chief Financial Officer, will follow Mfundu with an analysis of the group's financial performance. Thereafter, as we usually do at year-end, each of our frontline managing executives will cover the financial performance, strategic drivers, and outlook of the respective business clusters. I will return at the end to close off the presentation with our outlook, including our 2023 short-term guidance, as well as highlight new targets we have set ourselves for both the medium and long term. As usual, some slides are marked booklet slide in the top right-hand corner, these slides are additional information for investors that we will not speak to directly in the presentation today. Starting with a high-level overview of the key aspects of our performance and results all on one page.
The external operating environment in 2022 remained very challenging for us and our clients, both globally and more so here in South Africa, as is evident in the weak GDP growth numbers, severe electricity shortages, higher interest rates, higher levels of inflation, and the muted performance across both equity and bond markets. From a strategy perspective, our delivery remains on track. We continued to see the benefits of digitization delivered through the substantial completion of what has become known as our Managed Evolution IT Build program. This is driving continued improvements in client experiences, main bank clients, and household transactional deposit gains, as well as improved efficiencies, all while we continue to lead on ESG matters.
Operational metrics are also pleasing, evident in pre-provisioning operating profit growth of 15%, a positive jaws ratio, and a cost-to-income ratio that is still too high but declined to 56.5%. From a financial point of view, the group delivered a strong set of results across all key metrics, with headline earnings up 20% and ROE increasing to 14%, driven by an 11% growth in revenues and good expense management. At the end of December, borrowing from the terminology that JP Morgan often uses, we have built a fortress balance sheet with all key capital, liquidity, and coverage metrics at all-time highs. Off this foundation, the total 2022 dividend increased by 38% to ZAR 16.49, the highest dividend in the history of Nedbank.
Reflecting at the bottom of the slide on our published targets to the end of 2023, in these results, we have now met our diluted headline earnings per share target and Net Promoter Score targets, both a year earlier than initially planned. We continue our good momentum towards achieving the 2023 ROE and cost-to-income targets. As you will see in my closing slides, beyond 2023, we still have much hard work ahead to achieve our ambitious new medium and long-term targets. Reflecting now on the external operating environment in a little more detail. From a global perspective, the Russian war in Ukraine, supply chain constraints in China, rising inflationary pressures, particularly energy and food prices. As a result, monetary policy tightening ahead of expectations all impacted on the South African economy.
Despite the impact of these global developments, as well as domestic challenges, such as the severe electricity shortages and floods in KwaZulu-Natal, the South African economy has demonstrated relatively high levels of resilience. South Africa's GDP is expected to have increased by around 2.3% in 2022, as shown in the first graph. Looking at the top right, inflation remained above the top end of the SARB's 3%-6% target range. Does appear to have peaked. Interest rates in the bottom left graph increased by 325 basis points.
As we have said many times before, energy supply remains the key risk facing the South African economy, and the graph on the bottom right starkly illustrates the escalation in this crisis, with the number of days that we have had electricity load shedding increasing in 2022 to 208 in comparison to 75 in 2021. While South Africa's economic potential remains compelling, and I will come back to this later, South Africa is fast reaching a tipping point in a number of key areas. Our failing state-owned monopolies, and in particular, those responsible for electricity generation and transmission, transport and logistics, and water combined with poor crime prevention and prosecution remain binding constraints on much needed investment and, as a result, higher levels of economic growth and job creation.
The destruction of important infrastructure that is vital for economic growth and fiscal sustainability simply cannot be allowed to continue. This requires urgent and decisive action by government, labor, civil society and business. Nedbank remains committed to working with all like-minded South Africans to accelerate delivery of the structural reforms in these key areas that are necessary to achieve higher levels of economic growth and job creation, as well as underpin our longer-term fiscal sustainability.
The reality of failures of many state-owned monopolies and poor service delivery in key network industries has led to very disappointing outcomes that are making South Africa an increasingly unattractive investment destination and, as a result, limiting economic growth and job creation. This slide highlights the extent of these issues. Notwithstanding massive investment, electricity production is down 16% compared to 10 years ago, leading to increasingly severe electricity shortages or load shedding.
A rail transport system where the weight of goods and number of passengers transported by rail have declined by 30% and 97% respectively over the same 10-year period, putting immense pressure on our road infrastructure, contributing to large losses in export earnings and to the fiscus. Water supply being constrained because of poor maintenance and lack of adequate investment, things that are particularly important in a water-scarce region such as ours as the impact of climate change increases. In addition, high levels of municipal audit outcomes remain unsatisfactory, and insufficient progress has been made in the fight against serious crime and corruption, all evidenced by the data on this slide.
This is one of the key reasons for the FATF grey listing of South Africa being, and I quote, "The lack of effective ability to successfully investigate and prosecute cases of corruption and money laundering." While the grey listing was not unexpected and pleasingly there were no findings against the financial sector, we are committed to work with all the relevant authorities to ensure we exit this list as quickly as possible as the economic damage from this will escalate over time. The unfortunate combined outcome of all of these is increased unemployment and a 13% decline in SA GDP per capita in dollar terms since 2012, showing how, on average, South Africans are becoming even poorer. This simply cannot continue, and more urgent and decisive leadership action is required.
The ranking by the World Economic Forum of the top five risks they see in South Africa, as shown on this slide, is a stark reminder of the global view on these risks and therefore the extent of the crisis we face in South Africa. Corporate South Africa has the skills, resources and capabilities to help address many of these issues. The will of the political and public sector to make meaningful change remains uneven and actual delivery is poor. As a result, progress on structural reform is far too slow. Looking at the electricity crisis in a little more detail, we believe that South Africa's path to net zero is over time, also our path to energy security. Calculations show that on average seven gigawatts of new renewable energy generation is needed per annum to 2030.
While we support the NECOM plan that includes improving Eskom's own electricity generation, procuring new generation, private power generation, and business and rooftop solar solutions, based on our analysis, the timelines are ambitious. However, electricity production will not solve the country's energy crisis unless grid allocation and capacity constraints are also resolved, as we saw in the failure of Bid Window 6, and this also requires urgent attention.
Unfortunately, this crisis cannot be solved in the short term, and even the private energy generation projects of 9 gigawatts that have been registered to date will only start benefiting generation in late 2024 and into 2025. Many investors are also interested in the impact of load shedding on our business. In the booklet slide, we provide more detail, but I would like to highlight the following on the right of this slide.
By far the largest impact for us as a bank is on the decline in economic activity experienced by our clients, which is reflected in our economic unit recently downgrading their 2023 GDP growth forecasts from 1.4% to 0.7%. There is downside risk to this, as this forecast assumes load shedding at around stage four throughout the year. The experience, certainly in the first two months of 2023, suggests more persistent levels at around stages five and six. Operationally, the impact on Nedbank and our clients' ability to use our products and services is very limited on the back of measures that we have taken over the years.
At just under ZAR 60 million, annual diesel costs are escalating. From a client point of view, on the one hand, we see strong and increasing demand for renewable energy-related finance, which Anél Bosman will expand on later. Also the risk that corporates will become more cautious in other areas of investment until more demonstrable progress is evident on the NECOM plan. From a credit quality point of view, we can see high levels of stress emerging, specifically in the SME segments of the market. However, as I said earlier, notwithstanding these challenges, South Africa's potential as a long-term investment destination remains compelling. As highlighted on this slide, South Africa has abundant natural resources, being a top 10 producer of many scarce minerals as well as agricultural products. We are a very attractive tourist destination.
Our financial markets are sophisticated and among the best and most liquid among emerging markets globally. Our banking sector is very well-regulated, profitable, and strong, evidenced in how well we have navigated both the global financial crisis and the COVID-19 crisis. Lastly, our corporate sector is generally well-managed and resilient, with strong balance sheets and low levels of debt, while South Africa remains a key gateway into the rest of Africa, providing both economic connections into the continent and being a large trade partner, with the benefits of the African Continental Free Trade Agreement likely to emerge more strongly over time.
Turning now to strategy, our strategy on one page, and a slide investors should be very familiar with. We have, since 2021, been focusing on the three strategic value drivers you see here: growth, productivity, and risk and capital management.
We believe that by delivering on these, they will enable us to reach our financial targets, which I will discuss in more detail at the end of the presentation. Underpinning the delivery of these three are five strategic value unlocks, or more simply, programs of action enabled by our Managed Evolution IT strategy. You can see these towards the bottom of the slide. Mfundo Nkuhlu will cover our progress on these in more detail right after I finish. Let's look now at the progress we've made on the strategic value drivers of growth, productivity, and then risk and capital management. Starting firstly with growth. This graph shows how growth trends across net interest income, non-interest revenue, and advances have continued to improve from the COVID-19 pandemic lows.
The structural benefits from higher interest rates have been favorable for net interest income. We forecast continued strong net interest income growth into 2023 as the benefits from interest rate increases run rate even more strongly. Revenue growth was further supported by client-driven activity. CIB recorded 25 primary client wins, RB grew, BB grew main bank clients by 6%. Nedbank Africa Regions grew their client base by 6%. All digital metrics also continued to grow strongly with app volumes, the key retail channel, up 34% year-over-year. Up by more than 250% since 2019. Insurance income was up 18% and remains a large growth opportunity for us as we work on embedding new digital products and deepening cross-sell across the group.
In contrast, weak financial markets negatively impacted assets under management, which was down 7% to ZAR 393 billion, slightly less than the 9% decline we reported in the first half. Trading income decreased 7%, also slightly less than the 10% decline we reported in the first half. From a productivity point of view, we continue to see the outcomes of our optimization efforts becoming more evident. Our cost-to-income ratio is high but reduced to 56.5% on our way to our short, medium, and long-term targets of 54%, 52%, and 50% respectively.
These productivity improvements have, in large part, been driven by the emerging benefits from rolling out our Managed Evolution IT build that is now at 91% completion and which has enabled increased client use of our more cost-efficient digital channels as well as ongoing process improvements alongside headcount reduction, mainly through natural attrition and real estate optimization, amongst others. Our key risk and capital management metrics are evidence of a fortress balance sheet, as I said earlier. Starting at the top left of this slide. Given our strong financial performance and a slight reduction in risk-weighted assets, our CET1 ratio at 14% ended the period well above the 12% top end of our board target range for this metric.
Mike Davis will reflect later on this strong capital position, as well as our approach to capital optimization and the board-approved share buyback program of up to ZAR 5 billion over 12 months that we announced today. On the bottom left, liquidity metrics such as the LCR and NSFR are very strong and much higher than pre-crisis levels. As a result, the full year dividend is up 38% and, as I said earlier, a record level for the group. On the bottom right, looking at credit, our credit loss ratio increased to 89 basis points, still within our through the cycle target range.
While overall impairment coverage remained high at 3.37%, highlighting ongoing prudency in balance sheet provisioning in a difficult economic environment. Lastly, during February, we announced a number of board and Group Exco changes. Starting with the board, as previously announced, Mpho Makwana, our Board Chairperson, will retire from the board at the conclusion of our AGM in early June this year, and will be succeeded by Daniel Mminele, who joins us as an independent non-executive director from May and thereafter as Chairperson from June.
We are pleased to have attracted someone of Daniel's undoubted skills and experience to the role of Nedbank Chairperson. Trevor Adams, our Chief Risk Officer, will retire at the end of March and will be succeeded by David Crewe-Brown. While Fred Swanepoel, our Chief Information Officer, will retire in June and be succeeded by Ray Naicker.
These appointments evidence good succession planning and bench strength and handovers of both portfolios are already well underway. I would like to express our gratitude to both Trevor and Fred, who have played an instrumental part in the success of Nedbank, and we welcome Dave and Ray onto the Group Exco. We will formally thank Mpho at the AGM in June. I will now hand over to Mfundo Nkuhlu, our chief operating officer, to share our successes and the progress we have made on our five strategic value unlocks.
Thank you, Mike. Good afternoon, everyone. I'm pleased to report that delivery on the group's strategic value unlocks is progressing well in delivering financial benefits, as Mike has noted. It is particularly pleasing that the result is underpinned by strong execution of our strategic priorities and good operational performance. Today, I will cover the group's five strategic value unlocks. I will start with an update on the progress we have made on our Managed Evolution technology strategy, and then move on to each of the strategic value unlocks in more detail. Our Managed Evolution technology program to build a world-class technology platform is nearing completion and delivering benefits as per plan. The final IT components will be delivered over the next 12-18 months, including the refactoring of core banking, such as deposit and transactional products.
As shown in the graph on the left, to date we have completed 91% of our IT cash flow spend. If you look to the right, we have realized 58% of the run rate benefits. Importantly for us, it means the risk of material overspend is behind us, as IT cash flow spend peaked in 2017, and we now see a more normalized spend of around ZAR 16 billion going forward, as shown in the booklet slides. In addition, the IT asset on our balance sheet has also peaked and reduced from ZAR 8.9 billion in 2021 to ZAR 8.3 billion in 2022. This implies a slowing of the rate of increase in the depreciation of the IT asset through the income statement.
The following slide highlights the multiple benefits that have been derived from our world-class technology platform and the enhanced digital innovation processes that we have put in place over the past few years. With regard to benefits for our clients, starting on the left, client onboarding is now mostly done digitally via our Eclipse platform for 99% of our retail clients. More than 75% of our juristic clients currently use the Nedbank Business Hub, and we aim to reach almost 100% by the end of 2023. Digital services have also been automated, and today more than 170 retail client services and more than 280 juristic services are available digitally on apps and electronic platforms, enabling our clients to self-service.
From a product sales perspective, 53% of retail sales are done digitally, up from 12% in 2019. Client experiences continue to improve, with Nedbank recently ranked the number one SA bank on Net Promoter Score, which Ciko will talk to later. Benefits for Nedbank are shown on the right. As systems became more simplified and we adopted agile work practices, the number of IT changes put into production increased by 63%. At the same time, we are reporting some of the best systems availability in the SAP group, enabled by IT system downtime that decreased by 75%, resulting in 99.3% uptime.
From an operational efficiency perspective, we have adopted digital practices and since 2019, managed to unlock a 24% reduction in floor space and an 11% decrease in headcount, mainly through natural attrition. We have also seen revenue benefits as evident in an increase in retail cross-sell ratios. The new digital capabilities also allow us to provide value-added services, which grew by 159%. The most noteworthy point for me has to be the ZAR 3.5 billion derived from our Target Operating Model benefits to date. Expanding further on the highlights, digital uptake and usage continued to accelerate as evident in the multiple metrics shown on this slide. Digitally active retail clients increased further to 68% of active clients. The sales of products through our digital channels increased as noted before.
Digital transactional volumes and values have increased by 76% and 40% respectively since 2019. The trend towards usage of Nedbank banking apps is even more pronounced with a 142% increase in active app users and an almost two and a half times increase in volumes and values transacted. The efficiency benefits from the Managed Evolution IT investments and digitization are also evident in our Target Operating Model program. TOM 2.0, which was launched in 2021, is aimed at optimizing the shape of our physical infrastructure and organizational design in a more digital world, including Projects Phoenix and Imagine that Ciko will cover later. Optimizing our shared services functions across the group, all as a direct result of the digital benefits from Managed Evolution.
In 2022, TOM 2.0 realized cumulative benefits of ZAR 1.5 billion, well on our way to a target of ZAR 2.5 billion by the end of 2023. The benefits of our TOM program are evident in improvements in key operational metrics as we show on the right-hand side of this slide. As more products and processes are digitized and customer behavior changes, we have been able to reduce headcount over the past few years, while commercial real estate square meterage is also reducing. Turning to our focus on growing in attractive areas for value creation, our Strategic Portfolio Tilt 2.0. The outcomes have been mixed in 2022. Our overall aim is to target profitable market share gains over time and increase cross-sell while being prudent in the prevailing difficult credit environment.
The growth opportunities in infrastructure and SDG related financing, particularly in wholesale lending, remain, and we're pleased with the increase in advances growth rates in our CIB business in the second half of last year. We have, however, been more selective in areas where we have strong market share, such as commercial property finance and vehicle finance, and therefore comfortable with the small declines in market share. Given the increasing risks in the environment, we have been more prudent in granting personal loans. As a result, market share has decreased slightly, although we still aim to grow share over time. We increased market share in retail overdrafts, home loans, household transactional deposits, and non-transactional deposits as management actions start to yield results.
Through our fifth and final strategic value unlock, we focus on creating positive impacts by delivering on our purpose of using our financial expertise to do good for all our stakeholders. Our contribution to social matters is viewed through the lens of the Sustainable Development Goals is one of the measures we track. In 2022, we provided SDG related finance to the value of ZAR 123 billion as exposures on our balance sheet. This represents 14% of the group's gross loans and advances. By 2025, we aim to increase this to around 20% through the support of projects and initiatives of more than ZAR 150 billion in areas of sustainable development financing.
On the right, we highlight some of the impact we have made, including the ZAR 26 billion in support of farmers, ZAR 3.5 billion towards new affordable housing loans, supporting 5,500 homes, and the provision of ZAR 500 million funding for water. In the middle row, we highlight our increased lending to SMEs to ZAR 21 billion, as well as ZAR 27 billion of renewable energy exposures, and ZAR 12 billion in sustainable finance in our CIB business. Turning to the highlights of our ESG achievements in 2022.
In recognition of good ESG practices and outcomes, our MSCI ESG rating improved from double A to triple A, ranking Nedbank among the top 5% of global banks, an achievement we are most proud of. From a human capital perspective, we rank high on diversity indices as both our diversity and gender metrics continued to improve, and our employee best place to work Net Promoter Score increased to 22, a multi-year high. We have also retained our level one triple BEE status for 5 years in a row, and provided cumulatively more than 7,000 first time job opportunities to Youth Employment Service participants. We remain one of the largest corporate participants and the largest bank on the YES Programme.
From a shareholder perspective, we listed on A2X Markets in 2022, offering investors choice. As a result, the Nedbank share has regularly ranked as a top 10 most traded stock. In October, we announced the next step in our mandatory audit firm rotation journey with the appointment of KPMG to replace Deloitte effective from 1st January 2024. In conclusion, Mike discussed the challenging macro and operating environment that we have encountered. From my slides, it should be clear that in contrast, we have made great progress on our own strategic and operational delivery. At the same time, we have also created value for our stakeholders and play a key role in the countries in which we operate.
I spoke about the positive outcomes on employee matters. This shows the significant investment we have made in employee development, retention and wellness to be an employer of choice at a time when there are material skill shortages and the fight for talent has escalated. We are proud of our leading position on the YES Programme to help address youth unemployment. I've demonstrated the value we created for our clients with higher Net Promoter Score and ZAR 341 billion in new loan payouts.
For our shareholders, these results, the declaration of a record dividend and two years of share price appreciation ahead of the bank's index have been value accretive. From a regulatory perspective, we continue to work with the Prudential Authority of the South African Reserve Bank and the Financial Sector Conduct Authority to keep the financial system sound and healthy.
Through structures such as the Banking Association of South Africa, we engage constructively on industry matters. Lastly, I have covered in my slides the value we are creating as a result of the financing of infrastructure, renewable energy and sustainable development finance, to name a few. We are also active members of organizations like Business Leadership South Africa, working to improve economic environment for business and society in our country. It is therefore pleasing that in addition to our strong earnings growth and fortress balance sheet, we have also created value for all our stakeholders, and in so doing, for the communities and countries we operate in. Thank you, and I will now hand over to Mike Davis, our CFO, to take us through the details of this strong financial performance.
Thank you Mfundo. Good afternoon, everyone. I'm pleased to report strong revenue growth experienced in 2022 has supported a 20% increase in the group's headline earnings to ZAR 14 billion, a higher ROE at 14% and a CET1 ratio that reached an all-time high of 14%. I will unpack the underlying drivers of this trio of 14s in the next few slides. The strong financial performance of the group needs to be considered in the context of both the operating environment, as Mike discussed earlier, and the progress made on delivering our strategy, as Mfundo has just demonstrated. While we benefited from rising interest rates as a result of endowment income, the balance of the macroeconomic drivers have created headwinds for us and our clients.
Delivering on our strategy, on the other hand, has been supportive of our financial performance, driving both revenue growth and cost optimization, and the impact will continue into 2023 and beyond. Looking at the key drivers of value creation in Nedbank, 2022 was a good year for us and our shareholders. Net asset value per share increased by 5% to just over ZAR 215 per share, implying a price to book ratio of around 1 times at 31 December. The group's ROE improved from 12.5% to 14%, but is still below our estimated cost of equity of just under 15%. As Mike mentioned earlier, we declared a record high dividend.
All of the group's profitability metrics have improved, as seen in very strong headline earnings, DHEPS and EPS growth. These double-digit growths were in line with the trading statement we released last week. Importantly, earnings metrics are now above the pre-crisis levels, with DHEPS above 2019 levels a year earlier than we initially expected. Our balance sheet remained extremely strong, with higher liquidity and capital positions well above regulatory requirements and our own internal targets. Our credit loss ratio increased to 89 basis points, which was in line with the guidance we provided. Our total coverage increased further to 3.37%, another multi-year high. Turning to our usual waterfall graph, where we show the key drivers of the 20% headline earnings increase.
On the revenue side, NII increased by 12%, NIR by 10%, and associate income also by 10%, including a ZAR 175 million estimate of the anticipated impact of our share of the Ghana debt restructuring on ETI. Impairments increased by 13% and expenses were well managed, growing at 8%. Our effective tax rate declined to around 22%, including the effect of profits taxed in different jurisdictions. Turning to the balance sheet, gross banking advances increased by 7%. At a cluster level, CIB banking advances growth accelerated in the second half of the year to 8% on the back of stronger credit demand and the execution of deals in our pipeline. In RBB, the growth momentum continued with strong growth seen in our SME and commercial banking segments, as well as in secured lending products.
Advances growth in Wealth and NAR was muted. On the opposing side of the balance sheet, deposits also increased by 7%, with underlying behavioral shifts clearly evident as clients shifted from savings and cash management deposits to longer tenored term and fixed deposits to take advantage of the rising interest rate environment. Current accounts within CASA showed solid growth, supporting our transactional household deposit market share gains. Pleasingly, as shown on the right, the wholesale funding contribution to the bank's funding mix continues to decline, now at 31.5%, while household funding increased to more than 19%. Turning to the income statement, NII increased by 12%, driven by a 20 basis point increase in the net interest margin to 393 basis points, with our Q4 NIM now above 4%.
Endowment benefited from higher interest rates added a further 23 basis points, while liability mix and pricing added a further 8 basis points. These increases were partially offset by asset mix changes as lower margin wholesale advances grew at a faster pace in the second half and as we slowed growth in higher margin unsecured lending during the period. The reclassification of the foreign loan portfolio previously held in the trading book diluted NIM by 7 basis points, as we discussed at the half year. Importantly for Nedbank, in a rising interest rate cycle, we are positively positioned as NII benefits by approximately ZAR 1.6 billion for each 100 basis point interest rate increase over a 12-month period, which is clearly evident in the widening quarterly NIM numbers shown above the graph. This benefit will continue into 2023.
Turning to NIR, growth increased by 10%. The key drivers include commission and fees increased by 7%, primarily as clients transactional activity recovers, as main bank client growth accelerates, and as we increased levels of cross-sell. Ciko will unpack these later. Trading income decreased by 7% given unfavorable debt and interest rate markets in South Africa. Insurance income increased by 18%, driven by lower claims in our life portfolio, partially offset by an increase in non-life claims and the impact of the Cat event in half 1 as a result of the flooding in KwaZulu-Natal. Equity revaluations increased 25%, driven by higher revaluations in our commercial property portfolio as the sector recovers post-COVID. Anél and Iolanda will provide more detail on these later. Lastly, the fair value losses in 2021 did not repeat as we had expected.
During the period, we reclassified the net monetary loss into NIR as an offset against the FX gains as a result of hyperinflationary conditions in Zimbabwe. The FX gains realized on hard currency assets acts as a natural hedge against the net monetary loss. Our impairment charge increased by 13% to ZAR 7.4 billion, driven by the 7% growth in banking advances, the higher impairments in interest rate sensitive products such as home loans and vehicle finance, as well as a few large corporate clients that migrated to Stage 3.
These increases were partially offset by overlay releases previously held against anticipated defaults. During the year, almost ZAR 2 billion of overlays were catered for in model, with ZAR 1.3 billion of new overlays raised through the income statement, offset by ZAR 900 million of existing overlays that were released through the income statement.
This resulted in total overlays at the end of the period declining to ZAR 1.4 billion. No COVID-19 related overlays now remain within our portfolio. From a credit loss ratio or cost of risk perspective, our group credit loss ratio increased to 89 basis points within our through the cycle target range of 60-100 basis points, and now in the middle of the guidance we provided. CIB's credit loss ratio was well within its through the cycle target range of 15-45 basis points, notwithstanding us providing for a few specific counters that have moved into business rescue.
RBB's credit loss ratio increased to 161 basis points, also within its 120-175 basis points through the cycle target range, mainly as a result of the normalization of the home loans credit loss ratio and the impact of a more difficult environment on vehicle finance. Wealth recorded recoveries and NAR returned to within its through the cycle target range. Our balance sheet ECL increased to ZAR 27.9 billion, driven by the ZAR 7.4 billion impairment charge, as well as the impact of higher write-offs and post write-off recoveries, both at multi-year highs. Our total ECL coverage increased to 3.37%. Unpacking the ECL coverage in more detail, stage one loans grew 7% in line with the growth in gross loans and advances.
While stage one coverage declined as a result of lower coverage on new loans. Stage two loans declined by 21%, with coverage increasing to 7% as stage two loans migrated into stage one or stage three. Overall, stage one and stage two coverage remains well above pre-COVID levels of 0.48% and 5.3% respectively. Stage three loans increased by 31% as a few large specific CIB clients migrated from stage two into stage three. Because they had high levels of collateral, stage three coverage declined slightly to 34.3%. Turning our focus to costs. Expenses increased by 8%, primarily impacted by an increase in incentives and the post-COVID normalization of discretionary spend. Excluding incentives and other staff costs, expenses increased by 5%.
Salaries and wages increased by 4%, reflecting the impacts of an average annual salary increase of 4.6% and a decline in headcount of 3%, largely through natural attrition. Incentives increased by 23% aligned to the improved profitability. Other staff costs increased as a result of lower returns on employee benefit assets, and as we expense more IT staff costs instead of capitalizing for smaller projects. Computer processing costs increased by just 3%. Importantly, the rate of growth in the amortization charge is slowing as our Managed Evolution journey matures and we leverage cloud-based solutions. Marketing and travel costs increased as business activity normalized. This was offset to some extent as we continue to see optimization benefits coming through in areas like accommodation due to hybrid ways of work.
With respect to capital, our CET1 ratio increased to an all-time high of 14%, driven by higher levels of profitability and slightly lower risk-weighted assets, partially offset by the payment of dividends during the period. The RWA decrease, as we show on the booklet slide, was driven primarily by lower counterparty credit risk and lower market risk, while credit risk increased. Our 2022 interim and final dividends were both declared at the bottom end of the board approved dividend cover range of 1.75-2.25 times, or at the top end of our payout ratio.
Given the Group's strong capital adequacy at 31 December reflected in the average ZAR 11.8 billion excess capital position, the Board has reviewed the level of the structural capital surplus as well as the expected future capital requirements of the Group, including strategic initiatives, operational requirements, and to support strong levels of client growth. This culminated in the Board approving a share repurchase program of up to ZAR 5 billion to be executed over the next 12 months, subject to all legal and regulatory approvals and requirements being met. The proposed repurchase program is expected to be accretive to BHEPS, optimize capital levels and associated returns on equity, and in so doing, deliver value to our shareholders. Lastly, before I hand over to the managing execs, a quick overview from me on our cluster performance on a page.
The group's headline earnings growth was driven by strong performances across all our business clusters, as shown on the left of the slide with CIB, RBB, and Wealth reporting ROEs above the group's cost of equity. Nedbank Africa Regions ROE improved but was adversely impacted by estimated impact of the Ghanaian debt restructures on ETI. Excluding this event, ROE would have been above the group's cost of equity. With that, thank you, and I will now hand over to Anél, who is dialing in from her boardroom at 135 Rivonia Road.
Thank you, Mike. Good afternoon. 2022 was a challenging year, characterized by a global inflationary backdrop and geopolitical uncertainty, coupled with the local energy crisis and the events like the flooding in KwaZulu-Natal. Despite this, CIB delivered good results, focusing on our purpose, partnering with our clients, and executing our strategy. Headline earnings increased by 14%, driven by solid revenue growth and prudent risk management. ROE increased to 17.7%. Net interest income grew by 10% to ZAR 8.8 billion as the net interest margin increased by 7 basis points, benefiting from deposit margins and endowment despite transfers from the trading book narrowing the margin by 13 basis points. Non-interest revenue is up by 5%, supported by a 13% growth in commission and fees and a strong performance in the equity portfolio up 38%.
Commission and fees income reflected good activity levels in investment banking on new and existing transactions. The increase in private equity was predominantly in Property Partners. Trading income declined by 9%, partially offsetting these gains. The strong performance in foreign exchange trading was dampened by debt securities, particularly in interest rate derivatives. The impact of the excess liquidity driven by the SARB monetary policy implementation framework lowered our margins. Notwithstanding the increase in expenses, we maintained a market-leading efficiency ratio of 44.6%. Impairments decreased by 43%, resulting in a CLR of 22 basis points. The impairment decrease was driven by the curing and migration of various exposures in Stage 2 and Stage 3 loans, and the overlays previously held for this potential risk migration now incorporated in the models.
Focus on risk management and the raising of adequate impairments on stage three exposures reduced the total risk coverage ratio to 1.29% from 1.35%. I will touch on the high-risk sectors in the next slide. Optimizing our existing balance sheet is key to improving our returns. We deliberately direct the balance sheet towards value-accretive, long-term client relationships. Economic capital usage and risk-weighted assets declined by 1% and 7% respectively. Counterparty credit risk decreased due to methodology refinement and lower derivative exposure. Market risk capital was also lower. Banking advances accelerated in the second half of 2022, with investment banking increasing by 8%, driven by the mining and resources as well as leverage in diversified businesses. Transactional services grew by 34%, specifically towards the end of the year, as demand for short-term credit increased.
Africa grew 22% across CIB. Banking advances also benefited from placements of excess liquidity and changes in accounting treatment of certain portfolios in anticipation of the Fundamental Review of the Trading Book. The high-risk sectors improved over the year. We have seen an absolute reduction in the exposure to state-owned entities and municipalities as some highly stressed and defaulted exposures repaid. From a balance sheet extension perspective, we remain cautious on both these sectors and continue to focus on performing or systemically important entities.
We have reduced our unguaranteed exposures to defaulted construction clients. Demand for used aircraft has increased, and the higher activity may further reduce stage three exposures during 2023. The risk migration impact of load shedding is very much client specific and only experienced by some. Clients are reducing their reliance on the electricity grid where possible, and any load-shedding impairments have not been material.
With the recent events in Ghana, it is important to highlight that CIB exposures in this country are to key strategic infrastructure projects and commodities that generate foreign currency are well secured and with external insurance. The property finance business continues to perform well despite the challenging market conditions mirroring the South African economy.
Our portfolio is collateralized by a high quality and well-diversified security pool and overall gearing remains low with a portfolio LTV of 53%. Arrears are at ZAR 6 million on the performing book. Low, especially when considered against its size at ZAR 161 billion. The CLR for the year was 28 basis points, an increase from the first to the second half, but was below the 2021 figure of 30 basis points. The CLR was driven by large single name exposures rather than general stress in the portfolio.
We incorporated overlays into the models at the half year as we saw risk emerge, clients migrate to stage three, and the remaining portfolio re-rated. Overall, our risk remains well managed and the performance of the business over the last few years reflects this sentiment. CIB, as a purpose-led organization, is focused on creating positive impacts. Our innovative approach to sustainable fundraising has assisted in significantly growing this funding, and we raised an additional ZAR 11 billion in the foreign-denominated sustainable loans in 2022. We've also grown our sustainable finance lending book with credit facilities at ZAR 11.7 billion, up from ZAR 1.2 billion last year.
Our early support for government's energy program established us as a market-leading renewable energy business, and we will continue to support this program. In addition, private power generation continues to expand rapidly, with numerous projects moving towards financial close.
In 2022, we closed the first wheeling deals in South Africa, both being solar PV projects. We are mandated on projects totaling just under 1 gigawatt. In addition, we see a strong drive by our clients to implement wheeled or self-generation projects supporting the continued growth of our energy transition financing. We remain committed to supporting and enabling sustainable positive impacts. Building on our history of climate and environmental leadership, Nedbank released its energy policy in 2021, including a commitment to have zero upstream fossil fuels exposure by 2045.
The policy recognizes the need for a zero carbon energy system by 2050 and importantly, an orderly exit from fossil fuel financing well before then. On behalf of Nedbank, CIB is working on a fossil fuel and power generation glide paths, and we intend to release these in our 2023 reporting.
We are piloting the glide paths internally this year, integrating the tool into our business, credit, and risk processes. In line with our energy policy, our reduction targets will initially focus on the emissions related to our lending in the upstream fossil fuel and power generation sectors. Our strategic levers unlock and enable growth in a deeply constrained operating environment. Clients remain central to our strategy. We adopted a focused sector approach in 2019 and will continue to leverage this to deliver impactful client value. While the CIB market remains relationship driven, we recognize that clients expect responsive digital experiences. This is our warm digital approach.
Since launching our integrated business platform, NBH, we have continuously added new client functionality while maintaining a rapid pace of migration. Growing our transactional business ties in closely with our digital approach as we create the building blocks required to improve client experience.
Our portfolio optimization contributed to our ROE recovery path and will continue to focus on identifying the right clients and products in the right sectors. We focus on accelerated growth to position our business to expand in a challenging operating climate. Equally important is walking the path to sustainability with our clients by providing the required financial and advisory solutions.
Our people are the key source of capability and competitiveness, and we have made significant progress on our diversity, equity, and inclusion journey. We continue to invest in our people to compete effectively for talent. Turning to outlook. Our key priority remains to better serve our clients through insights and solutions, and to enhance revenue synergies across the business. We drive NIR growth through transactional banking, trading, and advisory, and leverage our diversified business portfolio. We emphasize proactive risk management and focus on resolution in stressed sectors.
We have a robust pipeline across all sectors, notably energy, telcos, and related infrastructure. We expect strong growth in the energy business as the renewable programs delayed into 2023 and various commercial and industrial projects close. We will continue to focus on sustainable development finance activities, where we play a crucial role in leading, structuring, and coordinating these transactions. Though the South African growth outlook remains challenging, we remain confident to deliver growth through leadership in various sectors, delivering great digital customer experiences, and focusing on enhancing our returns. Thank you. I will now hand over to you, Xolisa.
Thank you, Anél, good afternoon, everyone. 2022 was a year of continued commitment to growth for RBB in a challenging environment, punctuated by material financial pressures and strongly emerging competitive headwinds impacting both individuals and SMEs. Retail and Business Banking continues on its path to post-pandemic recovery, with HE for the year increasing by 12% to ZAR 5.1 billion, with ROE increasing to 16% above the group's cost of equity. The main drivers of the growth in headline earnings were an 11% increase in revenue and expense growth capped at only 5%. The positive contribution to headline earnings was offset, however, to an extent by a 28% increase in the impairments charge. Half of this increase in the charge was due to the low base from 2021, a period in which releases of COVID-related conservatism took place.
The balance of the growth in the charge is ascribable to the deteriorating macro environment in evidence throughout 2022. Growth in revenue was driven largely by strong NIR as all sectors of the economy opened in earnest, as well as strong NII growth, which benefited from an improved NIM due in part to increased endowment revenue. The expense increase, capped at only 5%, was driven by judicious management of discretionary spend and ongoing optimization of operations through Project Phoenix, Project Imagine, and other target operating model two initiatives. Turning now to segment franchises. The commercial banking and RBB segments delivered strong growth, with headline earnings increasing by 29% and 42% respectively. Consumer banking headline earnings decreased by 8% as the 22% higher impairment charges offset the pleasing revenue growth.
Commercial banking increased its market share in the mid corporate segment to 24% and saw an improvement in the status of single bank Nedbank clients from 27% in 2020 to 36% in 2022. Commercial banking also continued its positive momentum in its digital journey, with Nedbank Business Hub now achieving critical scale. RBB maintained market share across both the affluent as well as SME segments and continues to outperform with good growth in clients stemming from a highly competitive offering. Consumer banking achieved strong pre-provisioning profit growth of 11%. This off gains in main bank clients improved cross-sell and good growth in transactional activity. Client satisfaction is seen as an increasingly strong differentiator for Nedbank.
We were therefore very pleased with the outcome of the recent Kantar NPS survey amongst consumers that ranked Nedbank number one amongst SA banks on Net Promoter scores, up from our number two position in the 2021 Consulta survey. We shall continue to focus strong efforts in investing in our people and our service excellence program to continuously seek to improve the experience clients have with us as a bank. In addition, our social media net sentiment score also improved, and in 2022 it ranked number one amongst SA banks from a number two position in 2021.
Other achievements in 2022 that support our leadership include a number one ranking on brand sentiment and number one amongst large banks in the Ask Afrika Orange Index, as well as high NPS scores on our digital channels and in our new imagined branches.
These graphs and outcomes demonstrate how we have consistently improved our client satisfaction matrix over time and are differentiating ourselves in a very competitive environment. Client satisfaction outcomes, we believe, are a key driver in client growth and improved cross-sell. The number of retail main bank clients was up 6% to 3.2 million. This increase, along with generally increased transactional activity, recovery in card spend, strong growth in value-added selling products, as well as the digitization of our client base, have all driven the NIR recovery this year. We'll also continue to scale several key growth vector initiatives to supplement our value proposition and to support sustainable growth in NIR. All segments grew their main bank clients, including the youth segment that registered growth for the first time since 2019.
Retail cross-sell is now at 1.94, up from 1.71 in 2019, driven by several purposeful strategies, including Core Plus, as well as the use of artificial intelligence to enable next best action recommendations to clients. A key highlight for RBB in 2022 was the 23% increase in the number of active Money app users, up to over 2 million. In addition to our traditional digital products and solutions, we have also been innovating in the platform or ecosystem space in the form of ongoing disruptive market activities, this being our second strategic value unlock. Our ecosystem play is underpinned by Avo. Our Avo super app has signed up more than 2 million users since its launch in 2020, with active members up almost five times.
Avo Auto, which we launched in 2021, now hosts over 200 MFC accredited dealerships with more than 8,000 vehicles available on the platform. During the year, we launched Avo B2B Marketplace, making it easier for business buyers and sellers to connect anywhere, anytime on the platform. We continue to build our partnership network with our newest being Apple, Dell, as well as Uber Direct. The number of businesses that have registered and are offering their products and services on this e-commerce platform was up 15% year-on-year to over 20,000. From an operational perspective, Avo has access to over 12,000 drivers in its delivery fleet nationwide as product orders continue to grow exponentially, as seen in a seven-fold increase in gross merchandise value.
Through our 2 target operating model aligned projects, Project Phoenix and Project Imagine, we are shifting our RBB organizational structure so that it is more client-centered and optimizing our branch infrastructure to deliver great client experiences to enhance sales as well as improve productivity. Our physical footprint shows both the increased drive towards client self-service as well as the diverse South African consumer base that still appreciates face-to-face assistance. In response to shifts in client behavior and preferences that were fast-tracked by COVID-19, we continued to optimize our branch footprint whilst also investing in more mobile and self-service channels.
The transition of the frontline business to an agile operating model is strongly underway, the adoption of these practices as well as values have positively impacted frontline sales force productivity. We have achieved actual floor space reduction of nearly 84,000 sq m since 2014.
For our newly modeled branches, we have seen an uplift in NIR per square meter. Significant progress also has been made in enhancing functionality across self-service and online channels, providing our clients with much improved convenience. Turning now to credit quality. In home loans, higher interest rates, rising unemployment, and escalating inflation resulted in an overall decline in market application volumes. To combat this, we launched a first-time homebuyer CVP. Credit risk appetite and quality of returns remain consistent through the cycle while supporting market share growth aspirations. In MFC, the increase in the credit loss ratio was driven by the deteriorating macro environment and the cumulative impact of interest rate hikes. MFC still remains a dominant player in the vehicle finance market, with market share north of 35%.
We continue to work with our dealer partners to gain momentum in growing their reach and efficacy while providing a superior client experience. In personal loans, the credit loss ratio is high. However, there is evidence of a reduction trend which was achieved through proactive credit risk management as well as DebiCheck operational improvements.
Growth is expected to remain subdued in the short term, is anticipated to improve as macroeconomic conditions recover and new digital solutions are commercialized. In card, the reduction in credit loss ratio was driven off the back of improved risk and collection processes. We continue to focus on book growth through targeted sales and improving customer experiences through the digital channels. Overall, we continue to be pleased with the early evidence in market share turnaround in home loans. We, however, remain wary of the credit loss pressures we continue to see impacting, in particular MFC.
Lastly, we have developed leading client innovations, including Avo, which I've spoken about before. Our vast offering includes digitally enabled Lotto, as well as cardless cash out and money transfer on the app. On the insurance side, we are focusing on life, funeral, as well as personal lines. The manufacturing CVP in commercial banking is aimed at improving clients' administrative efficiencies through e-commerce and digitally based self-service solutioning.
We have also introduced a solar energy finance offering that will assist our clients, both individual and SMEs, to secure financing for the capital outlay. We look forward to working with National Treasury on the Bounce-Back Scheme to further accelerate this initiative. Through our focus on the township economy, we successfully provided relevant solutions to 12 mega townships in 2022. These growth vectors unlock alternative revenue generation opportunities and help pave the future for the bank.
Turning to prospects into 2023. We expect RBB to continue showing performance resilience with a solid post-COVID-19 recovery amidst an expected toughening macro environment. Rising levels of household debt, inflation-fueled prices of basic goods and services, persistent unemployment levels, as well as the adverse effects of load shedding, are all unfortunately expected to persist in 2023 and make it tougher to operate. We do, however, expect continued momentum in advances, with margins continuing to benefit from the higher interest rates.
The credit loss ratio is expected to remain within the top half of our through-the-cycle target range due to this tough macro environment. We aim to grow NIR by diversifying our revenue base and scaling key growth vector strategy whilst we continue to optimize expenses and deliver positive jaws. Our client-centered growth strategy as well as execution plans will also help us achieve these aspirations.
Our long-term focus continues to be to reduce the cost-to-income ratio and increase return on equity. Thank you. I now hand over to my colleague, Iolanda Ruggiero.
Thank you, Ciko. Good afternoon. Nedbank Wealth has shown a strong financial recovery with headline earnings of ZAR 1.1 billion, up 18%. This performance was driven mainly by an increase in revenue, net credit impairment releases, and well-managed expenses. ROE increased to 26.1%, remaining above the group's cost of equity, with both headline earnings and ROE pleasingly ahead of pre-COVID-19 levels. NII increased by 43% to ZAR 1.2 billion, driven by a widening of NIM from 1.44% to 2.09% due to higher interest rates in SA, the U.S., E.U., and the U.K. NIR decreased by 3% to ZAR 3.7 billion due to revenue lost from the sale of the International Nedgroup Trust business.
In accordance with the group's accounting policies, the profit of ZAR 177 million from the sale was excluded from headline earnings and reported under other comprehensive income. NIR was further impacted by negative local and international market performance, impacting asset management fees, advice fees in Wealth Management, and shareholder returns in insurance. Higher non-life claims due to the KZN cat event also impacted NIR, which was partially offset by reduced life claims.
Turning to insurance. Despite lower investment returns and an increase in non-life claims, insurance delivered a resilient financial performance with headline earnings of ZAR 499 million. Pleasingly, life claims volumes returned to pre-COVID levels. Nedbank Insurance has made good progress in diversifying and digitizing client solutions and distribution channels. The expanded suite of MyCover solution continues to see growth in sales due to channel expansion and increased awareness in the market.
The business has also enhanced its quoting, fulfillment, and claims functionality with 10 product offerings across 6 digital channels. Insurance offers a massive growth opportunity for Nedbank and will continue to focus efforts on collaborating with partners across the group to increase penetration while providing a holistic proposition for clients. Moving on to asset management. Asset management continued to experience pressure on fees and was significantly impacted by negative local and international market performance, with headline earnings declining 7% to ZAR 351 million. This was due to a decrease in NIR as a result of lower AUM, which declined by 7% to ZAR 393 billion, driven by negative market performance and net outflows, more particularly in the low margin cash portfolio.
Nedgroup Investments is ranked sixth largest in total AUM locally, and third largest internationally, with a market share of 7% and 12% respectively. Turning to Wealth Management. Wealth Management delivered exceptional financial results, with headline earnings increasing by more than 100% to ZAR 281 million, driven mainly by an increase in NII and net credit impairment releases. Total average deposits remained largely steady, with average deposit balances in Wealth Management South Africa growing by 7% as clients favored on-balance sheet investments in the rising interest rate environment.
In Wealth Management International, average deposit balances reported in ZAR were impacted by exchange rates, however, in GBP terms remained steady. Average loans and advances decreased marginally as high net worth clients, both locally and internationally, opted to pay down debt in the higher interest rate cycle. Finally, looking to the outlook.
Our 2023 performance will be impacted by higher NII and the continued expansion of NIM due to an increase in interest rates both locally and internationally. The credit loss ratio is expected to increase post net recoveries in 2022, but will remain below the through the cycle target range. NIR is likely to increase due to growth in the MyCover portfolio in insurance, normalized life and non-life claims trends, increased cross-sell opportunities through greater penetration into the group, and AUM growth as a result of net inflows. We expect an increase in expenses due to investment in strategic growth opportunities and optimization through automation. The new IFRS 17 accounting standards for insurance contracts came into effect 1 January 2023. This transition is not expected to have a material impact on the Nedbank Insurance legal entity or group reserves.
We do, however, anticipate an improvement in the wealth cost-to-income ratio as a result of IFRS 17 recognizing expenses related to insurance products in NIR. Lastly, from a medium and long term outlook perspective, we expect to maintain a strong ROE of greater or equal to 10% above the group's cost of equity and a reduced cost-to-income ratio of less than or equal to 67%. Thank you. I now hand over to Terence.
Thank you, Iolanda, good afternoon, everyone. I'm pleased to report an overall improved performance from the Nedbank Africa Regions business, with headline earnings up 64% to ZAR 975 million and an ROE of 13.8%. Although positive, our returns are short of our ambition to achieve greater returns over time. If we take a closer look at our segmental performance that make up the ZAR 975 million of HE, which is on the right-hand side of this slide, our SADC operations, which we manage and own, achieved an HE of ZAR 365 million, a significant improvement on the ZAR 71 million from the prior year, up more than 100%. This generated returns of 5.9%, we are working tirelessly on improving the quality of earnings and growing this ROE.
The main drivers of the performance was an increase in revenue with NII up 15% and NIR up 23% respectively. The increase in NII was mainly due to improved margins from higher interest rates and NIR that was driven mainly by unrealized FX gains in US dollar denominated capital in Zimbabwe and increased transaction volumes. This was offset by the net monetary loss in the same subsidiary. Our impairments increased 31%, driven by ECL model reviews incorporating the high interest rate and inflation cycle. Turning to our ETI associate investment. ETI continues to deliver strong performance with HE of ZAR 610 million and attributable associate income of ZAR 779 million, up by 17% and 14% respectively. This includes the ZAR 175 million estimated impact of the Ghanaian sovereign debt restructure, which we will continue to monitor.
What is pleasing is that the Ecobank Nigeria performance has improved, although still suboptimal, and as a shareholder, we will continue to contribute towards resolving the challenges in that key market. Taking a closer look at our SADC operations. Our focus across our operations remains to deliver on our Pan-African digital growth strategy as we look to build scale and be more efficient. In 2022, we pushed further in becoming a more digitized business and grew clients by 7% to over 360,000. Our digitally active clients now make up 57% of the base, up from 54% in 2021. Our apps across the regions continue to be the channel of choice, with app users increasing 29% year-on-year.
This all comes on the back of some exciting digital CVPs and solutions landed across the region, which include enablement of clients to apply for various insurance products and fixed deposits via our app and online banking. Our business clients are now able to perform bulk send money and payments to clients with mobile numbers. Loan applications are now enabled via our digital channels in Mozambique. Overall, good progress was made in achieving our digital growth ambitions, and going forward, we will migrate the subsidiaries onto the group's technology stack and deliver more product to the regions. Taking a closer look at our ETI investment. On the graph on the top left of this slide, associate income relating to the group's 21% shareholding and based on their 9-month results increased by 14%.
This includes the ZAR 175 million estimated impact of the Ghanaian sovereign debt restructure. Excluding this, associate income would have been up 39%. On the graph below, the carrying value was ZAR 1.3 billion against the market value of ZAR 2.1 billion as of December 2022. The ROI on the original investment has improved to 12.4% from 11% in 2021 based on associate income. ETI continues to be a strong franchise, ranked in the top 3 banks across 14 African countries, number 1 in 7 countries, and number 2 in 3 countries, and number 3 in 4 countries. ETI's return on tangible equity increased to 21% from 17.9%, with the 3 core regions achieving ROEs above 23%. We now turn to the outlook for the Africa regions business.
In 2023, we will continue to build on the improved performance of SADC, and as a shareholder, drive the value unlock agenda relating to ETI. In the SADC operations, our key focus areas will remain transforming the business and operating model in line with achieving scale, better efficiencies, and market share growth, acceleration of our Pan-African digital growth strategy, continuing to unlock further value in Mozambique, and we will also amplify the focus on improving our quality of earnings from both SADC and ETI, while continuing to work together with the other shareholders to unlock value. In the medium to long term, we will remain focused on achieving our ambition of consistently generating returns that are above cost of equity and cost-to-income ratio of below 60%, and unlocking value to achieve ROI of greater than 20% relating to our associate investment in ETI.
Thank you, back to you, Mike.
Thank you. In closing, I will provide our current macroeconomic outlook, in the context of this and delivery of our strategy, provide our usual short-term guidance for 2023. I will also share our new medium-term or 2025 targets and long-term targets. Starting with our current macroeconomic outlook that informs our guidance and targets. In a world with so much volatility, both globally and here in South Africa, it is important to note that these forecasts do have more risk than would usually be the case, we will review them again at interims like we usually do. Our group economic units forecast reflect that our forecast for the 2023 GDP growth has reduced from 1.8% a year ago to 0.7%, largely as a result of the negative impact of unreliable electricity supply.
Thereafter, GDP growth is expected to remain muted at around 1.5%. Global inflationary pressures appear to be easing slowly, and we expect inflation in South Africa to return to within the SARB's target band of 3%-6% during 2023. After the 25 basis point increase in January and a likely further 25 basis point increase in March, we expect the prime interest rate to remain flat from here at around about 11%, and then to start a slow decline in 2024. Industry level credit growth is expected to slow to around 5% in 2023 and remain around 5%-6% thereafter. While South Africa's fiscal position is currently better than previously expected, debt to GDP still remains elevated, and the February 2023 national budget has execution risk on both the revenue and cost front.
Using our economic outlook as a base and ongoing delivery of our strategy as an input, this slide shows our usual format of shorter term guidance for the full year 2023. Net interest income or NII growth is expected to accelerate into 2023 as we see the full run rate benefit of higher interest rates through endowment income and margin expansion. While credit growth is expected to remain at similar levels to 2022. Our credit loss ratio, which was 89 basis points in 2022, is expected to remain in the top half of our through the cycle target range into 2023. That is somewhere between 80 and 100 basis points as we continue to actively manage our portfolio through what is a difficult environment for our clients of higher electricity outages, higher interest rates, and higher inflation.
Non-interest revenue growth is expected to increase by mid-single digits. Driven by ongoing solid commission and fees growth and an improvement in trading revenues. Expenses, as always, will remain tightly under control, but are expected to grow by mid to upper single digits. Primarily, as a result of the introduction of new regulatory costs, such as the Twin Peaks levy, higher incentive costs aligned to our expected financial performance, all partially offset by ongoing cost optimization. Our average salary increase has been settled at around 6%, with bargaining unit staff receiving 7% and management around 5%, in line with our ongoing and conscious decision to give higher increases to those who need them the most. Minorities and associates are expected to grow more strongly in 2023 on the back of 81 issuances and higher JIBAR related pricing on these instruments given the higher interest rate cycle.
Capital levels, including the impact of our optimization initiatives that we announced today, are expected to remain strong and above the top end of our board-approved target range, and dividend declarations at the lower end of our target range of 1.75-2.25 times cover, subject, of course, to board approval at each reporting period. Given the strong performance in 2022, we have already achieved our 2023 DHEPS target of above ZAR 25.65, as well as our NPS target of being ranked number 1 amongst SA banks. Achieving our end of year 2023 ROE target of above 15% and a cost-to-income ratio target of less than 54% remain a key focus of the management team.
Looking beyond 2023, we have set ourselves new medium-term and long-term targets that when achieved, we believe will support ongoing shareholder value creation. The medium-term targets set now for the end of 2025 include compound annual growth in DHEPS from that 2022 base of more than nominal GDP plus 5%, an ROE of more than 17% or around cost of equity plus 2, and a cost-to-income ratio of less than 52%. Simultaneously, we aim to retain our number one Net Promoter Score rankings. The financial corporate performance targets in our long-term incentive schemes will be aligned to delivering on these medium-term targets for DHEPS, ROE, and cost-to-income, alongside other strategic and ESG related targets.
Our long-term targets are to sustain average DHEPS growth above nominal GDP plus 5%, an ROE of greater than 18% or around cost of equity plus 3, and to achieve a cost-to-income ratio of less than 50%. In closing, despite the challenges in the environment around us, we are starting 2023 with a fortress balance sheet and are progressing well on our strategic delivery with tangible proof points on how we deliver value. Whether it is in our technology IT build, digital growth, client satisfaction metrics, cost optimization, cross-sell metrics, targeted market share gains, and active capital management, or through us making a purposeful impact in the countries and the communities where we operate.
We have good momentum towards our 2023 targets with our DHEPS and Net Promoter Score targets already achieved, and we are on our way to meeting our ROE and cost-to-income targets, as well as retaining our Net Promoter Score position. In conclusion, in this complex and volatile world, our focus at Nedbank will remain on what we can control and delivering on targets that create shareholder value in the short, medium, and long term. Thank you, and we will now proceed to Q&A.
Thank you. Ladies and gentlemen.
Right. Thank you.
If you want to ask a question.
We will now take questions, firstly on the telephone and then on the webcast. I can see we currently have 6 questions on the webcast. While we're taking telephone questions, if anybody else wants to type any in, please do so. If we can just open up and see if there are any questions on the telephone lines.
Thank you. For participants that have dialed in on the telephone lines, if you'd like to ask a question, please press star and then one. The first question comes from James Starke from RMB Morgan Stanley. Please proceed with your question, James.
Hi, good afternoon, Mike and team. Thanks for the opportunity. Just 2 questions for me really. Within NIR, can you give us a sense on a bit more detail on what happened in the trading income? I know you guided to it improving, but is that an improvement back to, say, 2020 levels or 2019 levels or what you're thinking there. Also, within NIR, if we look at some of your equity revaluations, I mean, what you're expecting for the year ahead. Lastly, just on asset quality and in particular with respect to the CIB exposures that are in business rescue, do you expect any further provisioning to be raised in 2023? Thank you.
Okay. Thanks, James. Are we gonna take more questions or should we answer them one by one? One by one. Okay. We do have Anél Bosman on the line from CIB. Anél, if I could ask you to take those three questions on trading revenues, equity revals, and the exposures in stage 3 and business rescue.
Perfect. Thanks, Mike. On NIR, specifically trading income, we saw the foreign exchange markets doing particularly well, that is in line with what has been reported by the markets in general. We saw significant pressure on our interest rates and debt securities, specifically in the derivatives world. Two reasons for that. The first one is lower volume and client flow. You can see that also as it translates into the balance sheet. Secondly, also the markets had to adjust to the monetary policy framework, where we've gone from a deficit to a surplus, and that actually changed the margin that we could make on the different asset classes across the market. On equity revaluations, we do see that some of our clients are impacted by load shedding.
We still positive on what we can generate from those portfolios, and it is quite a diversified book, so we are satisfied with what we see. Just to come back to trading, because I didn't answer your question on how I see it recover. Probably by 2023, 2024, we will recover to previous levels, but it all depends on the economic activity, hedging and corporate flows. Lastly, on stage three, I'm just gonna ask Carli Bredekamp to answer that for you.
Yes. Our current impairment levels that we've got on the stage three review is adequate based on the information that we have, and that we added their end of 2022. As we mentioned, those are related mostly to large entities that's been that went into business rescue, and those business rescue plans are currently being formulated and will be published in the first half of this year.
Okay, thanks. Can we see if there are any other questions on the telephone lines?
Yes, there are. The next question comes from Harry Botha from Anchor Stockbrokers. Please proceed with your question, Harry.
Good day, everyone. Thanks very much for the opportunity. Just to follow up on that, Stage 3 exposure in commercial property finance, can you possibly give us a sense of the buffer that's included compared to the valuations you have on the portfolio, and the risks obviously around a potential slowdown in the economy and deal flow in commercial property finance? Can you possibly also give us more detail around the Ghanaian impairment that you've raised, what kind of government debt securities you've assumed in that and any new risks of further provisions that Ecobank might report? Thanks.
Okay, thanks. We're just gonna start back with Anel on the same issue around CPF stage 3s.
Perfect. Thanks, Mike.
On the revaluation of the valuations for that specific client, we feel that we've been adequately prudent in terms of those valuations and adequately prepared. I don't think we can disclose the actual % in terms of what the buffer is to our valuations.
Yeah.
Thank you. Mfundo, if you would like to talk to, the Ghanaian matter, which is slightly different to our competitors, and I'm sure you'll reflect on that.
Yes, indeed, Mike. I suppose point number 1 is that we do not have direct exposures on Ghana debt securities on our South African balance sheet. At best, our exposure to the extent we can refer to such, is indirect through our 21% equity holding in ETI. In a sense, ETI itself has equity holding of 69% in Ecobank Ghana. What we've done was to proactively take an estimate of what we would consider to be the likely impact of provisions on the ETI income statement, that then translates to the 21% impact that would come through the Nedbank financials. That said, of course, we took cognizance that in the Ghanaian environment, there's now a dispensation in place in respect of the local bonds.
The Eurobonds have not been concluded yet, but the Ghanaian operation has taken provision in relation to both the local bond program as well as their estimation of the impact of the Eurobond once those negotiations are concluded. Consequence to all of this, our own view is that there is no capital issue that would arise in the Ghanaian environment for the Ecobank operation there. Partly because the conclusion of that scheme also provides for capital relief for participating entities, and in that sense, the minimum capital requirements have now been reduced to 10% over the next four years. We do not anticipate that there will be a capital call on ETI, which indirectly brings us into the equation in that respect.
The provisions raised on our side, therefore, take account of the provisions raised by Ghana itself, as well as movements with respect to impairments in the context of the ETI Group as a whole. We're comfortable that at the current levels that we've booked, we've estimated very well what we consider to be the impact. In terms of the mechanics of this, of course, you do know that we report ETI numbers according to arrears, which means that when the.
Q4 numbers for ETI come through in terms of open reporting to market, we would make the necessary adjustments. We think that we should be good for the period ahead of us.
Thanks, Mfundo. Right. Any other questions on the telephone lines?
Yes. The next question comes from Kamogelo Konopi from Citi. Please proceed with your question.
Thank you. Afternoon, Mike and team. Thank you for the opportunity. Two questions from my side.
Sorry, could I just ask you to speak up a bit? It's very. You're very soft.
Am I better now?
Yeah, slightly. Let's have a go.
Okay. Sure. Can you please provide color on the drivers for IT related stock costs in Group Technology, which are up 28%. How do you see IT related spend evolving as you enter the last phase of the Managed Evolution? Additionally, can you please unpack the reduction in RWA? Is there any more optimization that's possible? What is the outlook for RWA density, which now stands at 52%, down from 54% last year and 56% back in 2018. Thanks.
Okay, thanks. I'm gonna take those questions in reverse order. If we could ask Mike Davis to talk to RWA and the RWA outlook.
Yeah. Thanks, Mike. Thanks for the question. Again, in terms of RWA, you'll see that RWA is down this period as a result of two issues. One, as a result of lower trading activity that Anel referred to earlier. In fact, you can see a direct correlation to the reduction in the derivative positions on balance sheet as a result of two things: lower activity and the fact that far higher proportion of the portfolio is actually collateralized in line with international markets. Secondly, you can see a reduction in counterparty credit risk, which includes a reduction in CVA that is as a result of a change in methodology in the measurement of CVA. Then you can see a reduction in the absolute level of counterparty credit risk in our disclosures.
In terms of those reductions, you'll see that the density has reduced to 52%. We believe, looking at our portfolio, we probably should be around 50%, 51%. I think there is a bit more to go. We run an active optimization initiative through our Group ALCO process. Remember, as Anel indicated, through 2023, 2024, we would look to resume potentially higher levels of trading activity and therefore return to higher levels of market RWA. Yeah, we are looking for further optimization initiatives. Probably the density around 51% is where we would look to settle.
Thanks. If I come back to the staff costs within IT, I would need to dig a little bit. My understanding is that that's, that increase of 28 is being driven by two things, essentially. Firstly, I think there are some transfers between retail and group technology, and that causes some base implications. Clearly the number's not necessarily a like for like. As we have completed more and more of our large technology build, more and more of our smaller programs are being expensed and those staff costs are no longer being capitalized, and that does cause a disproportionate increase in staff expenses.
Yeah, Mike, I can add to that. I mean, I think that number is about ZAR 276 million that's being expensed as opposed to capitalized. That would be driving that 28% growth.
Thanks, Mike. Right. More questions on the telephones.
Yes. The next question comes from Ross Krige from Investec. Please proceed with your question, Ross.
Thanks. Afternoon, everyone. Just two from me. On the... and within RBB on the solar deals, that's a pretty significant increase in the deals. I think it's 250% odd. I was wondering if you could maybe quantify or give us some idea on the number of those deals and the impact, the financial impact on your, on growth lines, just to put it into perspective. Secondly, just on the Managed Evolution and the benefits from that, on slide 22, I'm just trying to understand that chart on the right, spend versus benefits. If you could just help me understand that. Are those lines on the same axis? Are those benefits, maybe you can just explain those.
Are those just the cost benefits or total benefits? wondering what the timeline for the rest of that the remaining 42% of those benefits might look like. Thanks very much.
Okay, thanks. Ciko, if you are online, can I ask you to pick up the question on solar?
Yeah, I will, Mike. Thank you. Thanks, Ross. The numbers are still small, Ross. I mean, we launched these initiatives no more than four, five months ago. The numbers themselves are relatively small. What we've seen, though, relatively high approval rates on the applications that we've received compared to other asset classes. That's hugely encouraging for us because it speaks to the quality of the potential lender that is sitting behind these applications. The other issue, of course, here is that has impacted heavily on the numbers, disproportionately so actually, is the relatively slow lack of stock. There is just no or very slow availability of the component stocks that go behind these applications.
We'll process an application for a full kit, and you'll find that there's a shortage of batteries, for instance, and the waiting time for those is anything up to 3 to 5 months in some instances. That's hampered the ability to ratchet this up. As I say, in relative numbers, absolutely they're still tiny. Continue to monitor them.
Thank you.
Okay, thank you. Mfundu, if you could pick up the graph on the bottom right of slide 22.
Yes, indeed. The 53% of run rate benefits that were referred to there for from Managed Evolution, those actually, those are the run rate benefits to 2025. You would expect that once they are in place, some of those benefits are mature and perpetual. Certainly, there are two components to this. IT programs of this scale, internationally, they are benchmarked on cost savings that they bring through. The drive for efficiency and the ability then to run your operations on a lower cost curve. We certainly have modeled this program on that basis.
In addition to that, the exactly revenue benefits linked to the growth of digital services in our businesses, those are reflected in the growth in the frontline businesses that we actually have spoken to. In assessing the value created by the investment, we look at both the cost savings as well as the run rate of revenue benefits coming through. Really the test that has to be met is that the saving benefits have to come through, and that the revenue benefits that are perpetual feed through on the bottom line of the business on the front end of client service.
Thanks. Any other questions on the telephone lines?
Thank you. At this time, there are no further questions on the phone lines.
Great. Thank you. I'm going to then move us on to the questions on the web. The first question is from, I think it's Ntando Tukwana, and it's around percentage of clients on the loan book that are distressed, and how does this compare to two years ago. Perhaps if I just pick that up, in our booklet, if you go to page 139, you'll see we disclose our loans bucketed into Stage 1, Stage 2, and Stage 3. Clearly, it's those Stage 3 loans that would be, qualify as distressed. You can see the progression of that. In 2019 it was around about 3.5%. 2020, 5.9%. 2021, it reduced to 5.1%, and it's now sitting at just over 6%.
Within that, the largest increase has been in CIB, that's gone from just over 3% to just over 5%. You heard Anel speak about those stressed counters that are in business rescue adequately provided sitting in stage 3. In RBB, on page 104, you can see the tick up from 6.7% to 7%. Definitely increasing, that gives you that lens. Your second question is around the ZAR 5 billion buyback, and does that point to a lack of investment opportunities? Certainly not. You know, as an organization, if you look at our capital, CET1 at 14%, we said that even after the buyback and dividends at the low end of the cover range, it's still going to remain well above the top end of the board-approved target range.
That absolutely gives us more than sufficient capital to support all growth opportunities, and we have a structural surplus above and beyond that we are returning to shareholders in what we think is the most efficient means. The third question from Matthew Pouncett at Laurium. Your commentary refers to NPL formation in home loans and VAF. Are these from any specific vintages or cohorts, or is this a general migration across the board? Ciko, if I could ask you to pick that up, please.
Thanks, Mike. Yes, thanks, Matthew, for that question. It's, it's generally across the book, Matthew. Slightly more elevated, where deals originated at the bottom of the cycle, relatively, because they're bigger relative to the installment effects, although we do cater for those buffers. Also, we see some stress in the lower end of the middle-income bands in our book. It shows a slightly higher relative strain, because again, this is understandable because this is probably where the impact of interest rate increases as well as the inflationary pressures would have probably manifested themselves more severely across the book. Generally, it's right across the book.
Okay, thanks.
Yes, Mike.
If I move on to the next question then from, I think it's Kunal Kalyan, from Risk Insights. Risk Insights rates Nedbank on our ESG disclosures that have been good over the years, so thank you for that. My question is regarding your carbon emissions. Typically, stage three emissions account for over 80% of total emissions. Currently, yours are only approximately 15%. What steps have been put in place to measure and disclose Scope 3 emissions more effectively? Mike Davis, if I could ask you to pick that one up, please.
Yeah. Again, thanks for the question, and thanks for the recognition in terms of ESG disclosures to date. I mean, in a nutshell, our current Scope 1, 2, and 3 emissions disclosures in our TCFD report up to 2021 referred to own operations. That should explain why Scope 3 sits at 15% versus something typically higher as you effectively measure your Scope 3 emissions across your entire lending portfolio. Our plans this year is to effectively include Scope 1, 2, and 3 emissions as they relate to upstream fossil fuel-related lending into those disclosures. We will continue to build on that as we continue to build appropriate glide paths across our different lending portfolios.
Great. Thanks, Mike. There's also a question on the web from Matthew Pouncett, it's again at Laurium, around risk-weighted asset density reducing and has that played out. I think, Mike, you covered that earlier, Matthew, hopefully on the answering the call on the telephone lines. There's a question from Charles Russell at SBG. Thank you for the presentation. Two questions, in fact. The 91% completion of the technology build suggests a slowdown in cost growth for IT and an acceleration of revenue and savings benefits. Is IT investment ever complete at a bank? Surely this is just a above inflation item ongoing into perpetuity. Mfundo, if you'd like to pick that one up.
Thanks, Charles, for the question. The 91% completion we referred to is in relation to the cost spend on the Managed Evolution IT upgrade. This is how the business case was built. In a sense, you're correct in observation that IT investment never ends, but what we're referring to here is that this specific program, which is Managed Evolution, is at 91% completion at this point. It did peak in 2017 at a cash flow spend of ZAR 2.3 billion per annum. Our projections is that the cash flow in the period ahead will be of the order of magnitude of ZAR 1.6 billion, which is materially lower than the peak at which we are spending in terms of cash flow.
We do think that, going forward, we will continuously do smaller upgrades to make sure that we remain competitive. We look at IT spend as an important category of expenditure in terms of value creation for the business. Sure, indeed, Charles, we will continue to invest in our IT landscape, but at materially lower levels than we've seen at the peak of our Managed Evolution spend program.
Great. Thank you. The second question I'm going to ask Mike Davis to pick up. Do we not expect the current electricity crisis, now permanent load shedding, will need to materially higher loan growth for household SME and corporate self-generation in 2023 versus the guidance that we've given of similar levels of overall growth to 2022?
I mean, in a nutshell, I suppose the answer is yes, Charles. I think you've heard Ciko talk to the fact that there are supply constraints. There are also constraints around being able to effectively install solar solutions, battery inverter solutions into households. The demand is certainly there. We're seeing and experiencing it across both the products that Ciko's business offers. Whether it's a short-dated asset-based finance deal or whether it's a re-advance on your home loan, there is strong appetite, albeit off a low base. We're starting to see it in small businesses. We're seeing a strong potential private generation pipeline in our CIB business. I think the demand is certainly there. It's whether we can match demand with supply and installation. We're obviously guiding for growth of around 7%-8%.
If you look at the expectations around GDP 0.7%, possibly lower, inflation 5.5%. You grow the book at above 7%-8%, you're already exceeding nominal GDP. But yeah, I think there is potential for banks to see over time, material growth through this particular avenue of growth.
I think that's exactly right. Of course, clearly that avenue and vector of very strong growth is likely to be offset by slower growth elsewhere, largely as a result of that load shedding. Many, new business and new business investments people will choose to wait until they see more security of energy supply becoming more, more certain. I do think you have some offset, but that's certainly a very strong growth opportunity. We absolutely agree, and one that Nedbank aims to continue to lead in. There are 3 more questions on the web from Pakisi. The first one is: can management share their thoughts on stage 3 loan trends going forward? You know, perhaps I'll pick that up. Again, I would expect that we will see a divergent trend during 2023.
I would hope that, we will make progress on those loans in CIB that are in business rescue, knowing of course that those do take a long time to exit. I would hope we'd make progress there and see a reduction in stage three loans and advances in CIB. I would expect we would continue to see a cyclical uptrend in stage three loans and advances in RBB as a consequence of the historic interest rate rises, and that would be likely to continue to be the case until such time as interest rates begin to trend back down again, which is currently our view in 2024. Perhaps I'll just stay with Pakisi's other question and ask Anel to answer that. Do management expect continued growth in CIB gross banking advances from these levels?
I think similar to the growth sectors that the Mikes have identified, yes, we do see strong growth, and we have a strong pipeline, especially in mining telcos and energy. We do see growth re-rates at this level. However, the caveat to that, as Mike Brown has said, is the general levels of activity in South Africa and how we can resolve load shedding to restore confidence in the economy.
Thanks, Anél. Then the final question currently on the web is from Lebogang Kubeka, and that is: Do you have further expansion plans into Africa outside of ETI? I would ask Terence, if you're on the line, if you could pick up on how we think about that.
Thanks, Mike. Thanks, Lebogang. Our strategy on the continent still remains to own, manage, and control banking operations predominantly in SADC and East Africa. Obviously, you will recall that in Mozambique, we recently increased our shareholding from 50 plus 1 share to 87.5%. That showed some indication of our growth in Mozambique, close to home, and also taking advantage of the opportunities there. We've always held the position that with our alliance on ETI, we still can offer the widest banking platform to our clients that expand from South Africa onto the continent, and then also locally leveraging local knowledge also from ETI in specific markets where Nedbank is not represented. At the moment, we have no immediate plans, but should opportunities at the right price emerge, we'll definitely have a look.
At the moment, we want to grow our market share in our SADC regions, improve the returns in what we own and manage, and then of course, continue working with fellow shareholders at ETI to improve the performance of Nigeria and obviously carefully monitor the developments in Ghana.
Great. Thanks, Terence. I'm just checking if there are any other questions on the web. I'm refreshing madly here. I don't see any. If there are no more questions, can I just say thank you, everybody.