Please welcome Nedbank Group Chief Executive, Mike Brown.
Good afternoon, and welcome to everybody online via the telephone lines, and for the first time via LinkedIn. I would like to start off by thanking all our committed Nedbank employees for remaining resilient and serving our clients so well during the challenges we've all experienced over the past two years. I would also like to extend our deepest condolences to the families, friends, and communities of employees and clients who have been impacted by COVID-related deaths during this time. 2021 was also a year that saw the sad passing of our Chairman, Vassi Naidoo, after a long and brave battle with cancer. At Nedbank, he led the board with both integrity and passion, and he loved our Nedbank brand and what it stood for. We will be forever grateful for his contribution during his tenure.
Mpho Makwana, who was previously the lead independent director, has seamlessly stepped into the Chairman role. Turning now to the format of today's presentation as shown on this agenda slide. In my overview section, I will start by covering the operating environment in 2021, which while being difficult, was materially better than 2020. Key highlights from our financial performance, some data highlighting our strong operational performance, and then an update on the progress we continue to make in key areas of strategic focus, particularly the important areas of digital and ESG. After my overview, Mike Davis, our CFO, will follow me with a more detailed analysis of the group's financial performance in 2021. After which, each of our frontline managing executives will cover the financial performance and strategic drivers for each of their respective business clusters.
I will then come back at the close to review the outlook for 2022, as well as the good progress that we've made towards our medium-term targets through to the end of 2023. You will notice, as usual, that some of the slides are marked booklet slide in the top right-hand corner, and these are additional information slides for investors, and we will not speak to any of these directly. 2021 was a more supportive environment for banks and our clients as GDP recovered off the low 2020 base. Overall, demand for corporate credit was muted, and excess cash generated by our clients, in particular in the commodity sector, was generally used to repay debt. We did, however, see some growth returning towards the end of the year, evidenced by our wholesale advances portfolio in December, finishing above June levels.
On the retail side, demand for credit was more robust as clients benefited from the lower interest rates. Pleasingly, we saw less negative economic impact from COVID-related lockdowns than we had expected in the fourth quarter, and this was beneficial to us and our clients as transactional volumes improved faster than we had expected. We delivered a strong financial performance with headline earnings up 115%, but they are still 7% below 2019 levels. The turnaround at ETI continued in terms of both earnings, liquidity, and capital, demonstrated by a resumption of ETI dividend payments, and these all taken together resulted in a strong improvement in the ETI share price from a low base.
As I noted in our interim results, a standout feature of our performance in 2021 was the excellent outcomes achieved on closing out the resilience phase of the COVID-related strategic pivot we introduced in March 2020. All measures of balance sheet strength that we refer to as resilience metrics are now not only above 2020 levels, but back above pre-crisis levels, all much faster than we had expected. With our CET1 ratio at 12.8% being above the top end of our board target range, enabling the H2 dividend declaration at the low end of our cover range. Operational metrics improved into the second half and were also better than we had expected, evidenced in pre-provisioning operating profit growth of 9% and a positive jaws ratio.
From a strategic point of view, we continued to see the benefits of digitization delivered through what is known as our Managed Evolution IT program. This is driving continued improvements in client experience metrics, market share gains in a number of key areas, including main bank clients, as well as improved productivity metrics. We also maintained our focus on leading in ESG matters. Reflecting on the operating environment and in particular, COVID-19 infection rates and lockdown levels in a little more detail. Following the Delta variant that started in June, the start of the Omicron or fourth wave at the end of November initially created significant uncertainty. While Omicron has proven to be more contagious, thankfully, the reduced viral load alongside increasing vaccination and other immunity levels has resulted in less hospitalizations and deaths, and therefore reduced pressure for hard lockdowns.
As a result, South Africa stayed at lockdown level 1 during the fourth wave compared to our shift to lockdown level 3 during the third wave. This is evident in the graph on the right, being our position at the lower end of the Oxford Stringency Index versus other selected emerging markets. Turning now to a chart that you will all be familiar with. Nedbank's own high-frequency data from turnover on our point of sale devices and through our digital channels over time. The graph on the left shows how the COVID pandemic played out in this view of client activity levels over the last two years, with gray bars representing the months in 2019, the dark green bars, months in 2020, brighter green bars, months in 2021, and the violet bars, months in 2022 to date.
Previously, we have discussed with investors the large decline evident in April 2020 during the very strict lockdown levels as COVID first hit South Africa, as well as the recovery that we saw into the second half of 2020. We now see this continuation into the first half of 2021. Pleasingly, we saw turnover levels accelerate even further in the second half of 2021, evidence of the continuous opening up of the economy. By way of example, transactional turnover volumes in the fourth quarter of 2021 were 23% higher than the fourth quarter of 2020 and 35% higher than the pre-COVID levels of the fourth quarter of 2019. The recovery has not been even across industries, as we can see on the right-hand side. While all industries now exceed the pre-COVID March 2020 level, hotels and airlines are still below average 2019 levels.
From a corporate banking point of view, activity remains constrained and business confidence levels remained below 50. Although pleasingly, some green shoots are emerging. We've seen some positive progress, albeit slower than we would have liked, on structural economic reform. The focus in the recent State of the Nation Address and budget on aspiring to both higher levels of economic growth and fiscal sustainability is welcomed. Some of the important reforms as we see them are listed on the right of this slide. In the context of renewable energy, Nedbank, as the green bank, continues to be well-positioned, participating and co-leading four of the emergency energy projects. We did, however, secure a smaller than usual participation in renewable energy round 5, largely due to very competitive pricing. Round 6 bids are expected to be open soon.
While we remain appropriately cautious, it is pleasing to see the emergence of a number of green shoots in the wholesale environment. From a retail or household perspective, the operating environment continued to be more supportive. On the left, we show how households have delevered, allowing them to take advantage of the lower interest rates over the past 24 months, and this is evidenced in solid demand for prime-linked credit products. The lower interest rates have also been beneficial to clients as debt servicing costs reduced, and this improvement in client cash flows, for those who have remained employed, is evident in lower credit loss ratios across all our businesses. Lastly, while impairments in 2021 were below our initial expectations, there are some early signs of increasing pressure on some consumer segments from increases in transport costs, electricity, and food prices, and we are monitoring this carefully.
Turning now to our strategy and targets to 2023 that we announced after COVID hit and shortly after we withdrew previous targets that were no longer appropriate given the material changes in both global and South African macroeconomic outlook post March 2020. I will provide an update on our progress on our medium-term targets in my concluding remarks. Just as a reminder, we set ourselves key medium-term targets that we wanted to achieve by the end of 2023, as shown in the top row of this slide. Getting back to the 2019 levels for diluted headline earnings per share and ROE, reducing our cost income ratio to below 54%, and to rank number one on Consulta net promoter scores.
We identified three strategic value drivers as shown in the middle of the slide, and we believe that delivering on these three will enable us to meet our financial targets. These drivers are growth, productivity, and risk and capital management. Underpinning the delivery of these are five strategic value unlocks or programs of action that you can see listed at the bottom of the slide. In the next few slides, I'm going to step off from this foundation and track our progress on these three strategic value drivers and five unlocks. Starting now with the first two of the three strategic value drivers. On growth, we have made good progress, as you can see on the graph at the top left. NII, NIR, and advances growth have all turned positive, and we would expect these trends to continue into 2022.
On the bottom left, from a client growth perspective, we recorded ongoing CIB primary client gains, growth in retail main bank clients, growth in clients in Nedbank Africa Regions, and a 13% growth in assets under management. On the productivity side, on the top right, pre-provisioning operating profit increased 9%, and in the second half was up 21%. While our cost to income ratio decreased, both including and even more so excluding fair value movements that are not reflective of underlying operational activity. On the third strategic value driver, risk and capital management, we believe this is best represented in the excellent delivery of our resilience metrics to close out this phase of our post-COVID strategy. These provide a very strong balance sheet base for Nedbank to support both future business growth as well as attractive growth in dividend payments. Starting at the top left of the slide.
Given our strong financial performance and successful focus on RWA optimization and margin expansion, particularly in CIB, our CET1 capital ratio at 12.8% ended the period higher than pre-crisis levels and also above the top end of our board target range. On the top right, these strong capital metrics have enabled us to declare a final dividend of ZAR 7.58 a share at 1.75 x cover at the low end of our 1.75-2.25 target range. This brings the cover range for the full year to 2.02 x. Moving to the bottom left, liquidity metrics such as LCR and NSFR are strong and higher than pre-crisis levels.
On the bottom right, from a credit point of view, our credit loss ratio declined to within our through the cycle target range faster than we had previously expected it to, and our ECL coverage is at a multi-year high of 3.32%, highlighting ongoing prudency in provisioning, which is appropriate in uncertain times. Turning now to our five strategic value unlocks. I'm gonna start with a reflection on our digital strategy that is delivered through what is known as our Managed Evolution technology journey that is an enabler of many of these unlocks. We continue to make good progress on our goal of digital leadership, underpinned by our Managed Evolution tech strategy to build a modern and modular IT stack. Investors will be very familiar with this from previous reporting.
We've now reached 85% completion, and in the first half of 2021, completed an independent external benchmarking review of our ME program and its business case with very pleasing outcomes that underpin our ability to compete and win in digital financial services. On our new client onboarding platforms, individual digital onboarding through Eclipse is fully in place, and we have completed the build of juristic onboarding through the Nedbank Business Hub in our wholesale business, and client rollout is well underway with excellent feedback. Anél Bosman will refer to this later. We have digitized 6 retail products or client journeys, as we call them, being transactional accounts, personal loans, card investments, overdrafts, and home loans.
Importantly, from a cost point of view, we have seen the annual IT cash flow spend peak in 2017 at ZAR 2.3 billion, and in 2021, cash flow spend was ZAR 1.6 billion. The 85% maturity of the ME program also gives us comfort that the intangible software asset on our balance sheet is likely to have peaked in 2021 at around ZAR 9 billion, with little risk of material overspends remaining in the program. Lastly, it's always good to get some independent acknowledgement, and we were pleased to have won various awards for our digital journey and its impact on client experiences, and you can see a number of these in the center of the slide. Turning to the key trends on digital uptake and usage that evidence our ability to use the Managed Evolution technology platform to deliver market-leading client solutions.
We continue to see pleasing acceleration of digital uptake and usage across multiple metrics, including active clients, product sales, as well as digital volumes and values. Digitally active clients increased further on both a total and main bank client basis. Digital sales increased over the past few years to now reach 32% of total sales. Digital transaction volumes and values have increased by 50% and 21%, respectively, since 2019. The trend towards usage of Nedbank banking apps is even more pronounced, with a 96% increase in active app users, a 159% increase in app volumes, and a 163% increase in app value transacted. In addition to our traditional digital products and solutions, we are also innovating in the so-called platform or ecosystem space in the form of ongoing disruptive market activities, this being our second strategic value unlock.
Over the past two years, we've highlighted to investors some of our platform and beyond banking initiatives built off those foundations of the Managed Evolution. Some of these are shown in the middle of the circle, including Avo, our super app. In respect of Avo, starting on the left, registered clients on Avo increased in 2021 to more than 675,000, up almost 5 x from 2020 levels, while gross merchandise value increased 3 x. Our initial aim was to exceed 1 million Avo users in 2022, but given the progress we've made to date, we are well-positioned to exceed this. As of last week, we had already achieved 1 million users on Avo.
The number of merchants and partners on the Avo app also continued to increase, making Avo an attractive digital store with more than 20,000 business partners, providing more than 250,000 products across 11 different vertical categories. The benefits from our Managed Evolution tech investments and digitization are driving both digital customer experience, as we've just seen, as well as a more efficient execution, and these benefits are being unlocked through our target operating model programs. In 2020, we concluded TOM 1, which unlocked ZAR 2 billion of benefits, primarily derived from moving to an agile methodology to build these IT assets, as well as from onboarding and innovation methodologies in our digital fast lane. TOM 2, which we launched in 2021, is led by our Chief Operating Officer, Mfundo Nkuhlu, and primarily focuses on what happens after our digital platforms are in place.
Optimizing the shape of our physical infrastructure in a more digital world. You'll hear Ciko Thomas talk of Project Imagine, as well as embedding a more client-centered and efficient operating structure in RBB. Here, you will hear Ciko talk of Project Phoenix. In addition, we are also optimizing group-wide shared services to be fit for purpose to support our more digital client-facing operations. TOM two benefits of ZAR 967 million were unlocked in 2021, and we are well on our way to a target of ZAR 2.5 billion by the end of 2023. The benefits of our TOM programs are evident in improvements in key operational metrics that you can see on the slide.
As more products and processes are digitized and our customer behavior changes, over the past two years, we've been able to reduce headcount by 8%, largely through natural attrition and branches by 9%. On the bottom right, we're also now seeing a slowdown in the growth in the IT amortization charge, driven by slightly lower levels of IT cash flow spend, as I highlighted earlier. Turning to our focus of growing in attractive areas for value creation, our Strategic Portfolio Tilt 2.0, where we target growth in key lending categories as a foundation for growing our transactional banking franchise by focusing on main bank client gains and cross-sell. Notwithstanding tighter credit criteria and generally lower approval rates, we've seen increases in market share in personal loans and retail overdrafts, enabled, amongst others, by our digital innovation and channel expansion.
We would aim to continue to grow our personal loan market share over time while operating within appropriate risk appetite metrics. In home loans, we grew slightly below the industry, but still plan to increase our share over time. We increased our share in vehicle finance, where our unique MFC business model positions us well to benefit from consumers focusing on lower cost and secondhand vehicles. We reduced market share in wholesale term loans and commercial property finance, where we have been deliberately selective in origination and focused on optimizing the portfolio, evidenced in the strong increase in CIB margins.
On the deposit side, outcomes were mixed as we increased market share in commercial transactional deposits, but disappointingly, we lost some share in retail transactional deposits, although we have seen some more positive trends in the fourth quarter of 2021, and Ciko Thomas will talk to this in his presentation. At Nedbank, our purpose is to use our financial expertise to do good for all our stakeholders. Through our fifth and final strategic value unlock, we focus on creating positive impacts and driving sustainable socioeconomic development wherever we operate. One aspect of our purpose is demonstrated through our market-leading energy policy that seeks to guide a just transition away from fossil fuels while deliberately accelerating efforts to finance non-fossil fuel energy solutions that are needed to support socioeconomic development and build resilience to climate change.
For South Africa to achieve our ambitious carbon targets will require a significant amount of investment in energy-related innovation, and this is a large and exciting opportunity for Nedbank to lead on into the future. Ongoing progress on this includes Nedbank's issuance of Africa's first Green AT1 instrument, and Anél Bosman will expand on some other initiatives in CIB later. The total amount of sustainable funding that has been raised by Nedbank has increased more than 3.5 x since 2019 to just shy of ZAR 10 billion.
On the lending side, at the end of 2021, our renewable energy portfolio linked to REAP was ZAR 29 billion, and we have a ZAR 50 billion board limit in place to accommodate much more future client lending support and a strong embedded energy generation pipeline is also in place, in particular, following the recent lift to 100 MW of capacity. Turning to our contribution to social matters as viewed through the lens of SDGs, this slide shows various highlights of our progress. I'm not gonna talk to all of them, but we'll highlight a few. On the financing side, on the left, to date, we have provided more than ZAR 5 billion for student accommodation, ZAR 57 billion for loans to SMEs, ZAR 5 billion for affordable housing, and ZAR 25 billion for the construction of buildings that conform with green building standards.
In our own operations and through corporate social investment, in 2021, we spent ZAR 121 million on philanthropy, of which 47% was allocated to education. We have 87% of our own buildings Green Star rated and have been carbon neutral since 2009. After a COVID-related pause, we restarted our participation in the Youth Employment Service in 2021 by providing more than 1,900 one-year job opportunities to unemployed youth, and we encourage all South African corporates to do the same. We have continued to improve diversity metrics across the group and have maintained our level 1 B-BBEE status for four years in a row. Turning to governance, board-related independence and diversity metrics have all tracked positively. From a culture point of view, our workforce sentiment continues to improve, and attrition levels remain low.
Lastly, with increasing focus on ESG matters, the progress we have made on these continues to be reflected in Nedbank's scores across all ESG ratings being towards the top end of our local and international peer group. In closing, in 2021, two corporate transactions were also concluded. On the left, following the unbundling in 2018 by Old Mutual of 32% of Nedbank, on the eighth of November 2021, Old Mutual concluded the unbundling of a further 12.2% of Nedbank to its shareholders. With Old Mutual at the thirty-first of December 2021 now owning just over 5% of Nedbank.
Pleasingly, notwithstanding the unbundling of around 221 million Nedbank shares by Old Mutual since 2018, we did not see any material negative impact on the share price resulting from this, as a large increase in our free float resulted in an increase in index-classified shareholders as well as foreign shareholdings. On the right-hand side, we also successfully concluded the repurchase of 100% of the Nedbank Limited preference shares that no longer count as regulatory capital and had therefore become expensive debt. I will now hand over to Mike Davis, our CFO, to take us through a more detailed review of the group's financial performance.
Thank you, Mike, and good afternoon, everyone. I'm pleased to report that the group delivered a strong headline earnings recovery, which was ahead of expectations, while our ROE increased to 12.5%. I will unpack the underlying drivers in the next few slides. 2021 was a much better period for banks and our shareholders. Looking at the key drivers of value creation, net asset value per share increased by 11% to just below ZAR 205 per share, implying a price to book ratio of around 0.9 x at the 31st of December, 2021. The group's ROE improved to 12.5%, but is still below the estimated cost of equity. As Mike mentioned earlier, we paid a final dividend of ZAR 7.58.
All of the group's profitability metrics improved, as seen in the very strong headline earnings, DHEPS and EPS growth. This was in line with the trading statement we released on the fourteenth of February. Our balance sheet remained resilient, with stronger liquidity and capital positions well above regulatory requirements. Our credit loss ratio decreased to 83 basis points, with total coverage increasing to 3.32%, a multi-year high. Turning to our usual waterfall graph, where we show the key drivers of the headline earnings increase. NII increased by 8% and NIR by 4%, the latter improving from the decline of 3% in half one. Impairments decreased by 50% and was the key driver of higher headline earnings, as is clearly evident in the graph.
Associate income increased strongly off a low base, and Terence will unpack the performance of our associate ETI in more detail later. Lastly, expenses were well managed at 6%. Pre-provisioning operating profit growth of 9% was strong, supported by growth across all of our business clusters and driven by higher revenue growth in the second half of the year. As a result, PPOP growth accelerated in the second half of the year to 21%, with CIB, RBB, Wealth and NAR reporting growth of 16%, 6%, 31% and 156% respectively. Reflecting on the balance sheet, gross banking advances increased by 1% after declining by 7% in the first half.
Noteworthy on the left is the turnaround growth in CIB banking advances in the second half of the year from a sharp decline in the first half as our corporate clients used excess cash to reduce their facilities. The growth momentum in RBB continued as banking advances continued to grow by around 7%. On the other side of our balance sheet, deposits increased by 2%, driven by good growth in transactional and core deposits, evident in CASA and call and term deposits growing by 5% and 8% respectively. Pleasingly, our reliance on wholesale funding continued to reduce, as seen in an 18% decline in NCDs and the contribution to the group funding mix decreasing to 32%. Turning to the income statement, NII increased by 8%, driven by a 37 basis point increase in the net interest margin.
The increase in NII was better than expected and was driven by a 13% endowment benefit from higher CASA and capital levels, offsetting a 14 basis point adverse impact of interest rate decreases from 2020. The benefit of asset mix and pricing continued as higher margin RBB loans grew faster than lower margin CIB loans. We were able to price upwards across most products. This contributed to a 20 basis point increase. Liability mix and active balance sheet management were also strong contributors. 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. Unpacking NIR growth increased by 4%.
The key drivers include commission and fees increasing by 4%, primarily as client transactional activity recovered, main bank clients grew, and we increased levels of cross-sell. Trading income decreased by 15% off a very high 2020 base. The trading performance, however, was solid and normalized to around 2019 levels. Insurance income increased 24%, driven by an enhanced asset and liability matching strategy and improved investment performance in our insurance business. Equity revaluations of more than 100% reflect the non-recurrence of negative revaluations in 2020. Lastly, fair value income declined by more than 100%, given the unwind of the 2020 gains as a result of accounting mismatches in the group's fair value hedge accounting solution.
Pleasingly, we saw no further volatility in the second half of 2021, and this volatility is not expected to recur in the future through refinements to our fair value hedge accounting solution. Insurance income was favorably impacted by strong investment returns due to a positive market rebound, as can be seen in the JSE All Share Index in the graph on the right. This was partially offset by increases in death and funeral claims in the life portfolio, although reducing towards the end of the year. Asset management delivered a robust performance driven by stronger growth in assets under management of 13% to ZAR 424 billion. This growth was underpinned by positive net flows, both locally and internationally, as well as a steady increase in market share.
Turning to impairments, the Group's balance sheet expected credit loss and ECL increased to ZAR 26.6 billion and is also higher than the ZAR 18.2 billion reported in 2019. This increase was driven by the ZAR 6.5 billion impairment charge and also accounts for post-write-off recoveries that increased to ZAR 1.4 billion. Write-offs remain conservative and increased from ZAR 7.4 billion to ZAR 8.1 billion. The 50% decline in the impairment charge to ZAR 6.5 billion was driven by a few important factors. These include a significantly better collections experience as clients benefited from the rate cuts in 2020, macroeconomic benefits coming through our IFRS 9 models as GDP growth forecasts improved during the period, and the decline in D7 loans.
In addition, D3 loans declined further to three billion rand as clients either started paying or made their way into the various stages of provisioning. Judgmental and macroeconomic overlays reduced to ZAR 1.5 billion as they were either released into models, released through the income statement, or remain in place. Our group credit loss ratio decreased from the 2020 level of 161 basis points to 83 basis points. Now back within our through-the-cycle target range of 60-100 basis points. This has been enabled by a reduction in credit loss ratios across all of our clusters. CIB moved to within its through-the-cycle target range of 15-45 basis points, with our commercial property finance portfolio continuing to perform ahead of expectations with a credit loss ratio now down at 30 basis points.
RBB moved towards the bottom end of its through-the-cycle target range of 130-180 basis points. Excluding some one-off benefits, the credit loss ratio was closer to the midpoint of the range. Wealth and NAR were both slightly below their through-the-cycle target ranges. The COVID-19 and macro-related overlays we raised over the past 18 months reached a stage where the underlying overlays have either moved into our new IFRS models or did not emerge and have been released through the income statement, totaling ZAR 675 million, or the risks remain in place and therefore the remaining ZAR 1.5 billion of COVID-19 related overlays. Reductions in the overlays were primarily from a ZAR 250 million rand reduction in the central provision.
In CIB, as D3 and D7 risks reduced, and in RBB for D3 loans that matured and reduced overlays in forward-looking information as the environment improved. Given ongoing risks and uncertainties, new overlays were also raised in the normal course of business. From a coverage perspective, coverage across stages 1, 2, and 3 is significantly higher than the levels before COVID-19, as seen in the violet lines above the 2018 and 2019 gray bars, pointing to Nedbank being in a significantly more conservative position. Our stage 1 coverage ratio increased marginally to 0.69% as RBB loans with higher coverage grew faster than CIB loans. Our stage 2 coverage ratio reduced slightly to 6.4%, primarily as COVID-19 related overlays were released and the benefits from an improved macroeconomic environment.
Our stage three coverage ratio increased to 38%, driven by D7 loans curing and higher coverage in CIB. Shifting our focus to costs. Expenses increased by 6%, primarily impacted by an increase in incentives that are aligned to the improved profitability metrics and ongoing investment in technology. Excluding incentives, expenses increased by just 2% as a result of good cost management and a focus on efficiencies and discretionary spend. Staff costs, excluding incentives, declined by 1%, reflecting the impacts of an average annual salary increase of 3.5% and a decline in headcount of 5%, largely through natural attrition aligned to our target operating model objectives. Computer processing costs increased by 9%. Importantly, the rate of growth in the amortization charge is slowing as our Managed Evolution journey matures. Other costs were well managed.
Although we have seen some normalization in expenses such as marketing, this was offset by declines in areas such as accommodation. With respect to our capital, our CET1 ratio increased from the 10.9% reported at December 2020 to 12.8%, driven by high levels of profitability, RWA optimization, and partially offset by the payment of our interim dividend. Our CET1 ratio is now above the top end of the group's board-approved target range, which was revised from 10%-12% to 11%-12% on January 1, 2022. Our CET1 ratio is also above pre-crisis levels of 11.5% and well above the SOLV minimum requirement of 8.5%. Going forward, we will continue with our active capital management while remaining conservative in a difficult, uncertain, and volatile environment.
We will retain appropriate levels of capital for growth, pay dividends as appropriately guided by the board-approved dividend cover range of 1.75 x to 2.25 x, and from time to time, consider other capital management actions. At the end of 2021, we had ZAR 5.6 billion excess capital measured above the top end of our board-approved CET1 range of 12% and ZAR 28 billion excess above the regulatory minimum of 8.5% from 1 January 2022. On the back of the strong capital position, the group declared a final dividend at a payout ratio of 57%, which is up from the interim dividend at 40%. The return to paying dividends and an attractive dividend yield, we believe, should be attractive to shareholders.
Lastly, before I hand over to our managing execs, the group headline earnings growth was driven by strong performances across all of our business clusters. ROE was similarly driven by increases across the clusters, with CIB and Wealth above cost of equity, RBB increasing to just below cost of equity, and now seeing a large rise in ROE to just below double digits. With that, thank you. I will now hand over to Anél, who is dialing in from her office at 135 Rivonia.
Thank you, Mike, and good afternoon. CIB continued our path to recovery in 2021. Return on equity has increased to 15.3% ahead of our forecasted trajectory to return to 2019 levels. Headline earnings increased by 54% on the back of good business performance supported by lower impairments. Net interest income is up by 9% to ZAR 7.9 billion, as the net interest margin increased by 48 basis points, mitigating the decrease in banking advances. I will discuss this and impairments in more detail on the next slide. Non-interest revenue grew by 9% off a high base as the private equity portfolio performed well after a difficult 2020. Trading income was down 16% as expected from a high base in 2020 that included a once-off gain.
Market conditions normalized over the course of 2021, with a particularly challenging environment in the last quarter in line with reported global trends. We expect tough conditions to persist through much of 2022, given the inflationary backdrop, global rate cycle, and renewed geopolitical tension. Fee and commission income declined slightly by 1% due to increased interchange fees that were somewhat negated by the continued gains made in primary bank wins. Pre-provision operating profit increased by 8% and is only 2% or ZAR 185 million lower than 2019 levels, noting a faster than expected recovery. Economic growth, confidence, and client activity are required to maintain this strength.
Continuing on CIB's performance, the credit loss ratio decreased to 42 basis points, below expectations and within our through-the-cycle target range of 15-45 basis points as risk management and improving factors in the forward-looking macro models lowered impairments. The increase in Stage 3 impairments relate mostly to a single counter, while the coverage ratio increased from 15%-24%. Our focus on high-risk COVID-19 impacted sectors, such as aviation and hospitality, is top of mind, and pre-COVID stress sectors, including construction and state-owned entities, remain challenging. We believe that adequate impairments have been raised. Banking advances have decreased by 2% from a high base as liquidity drawdowns in 2020 were repaid.
This, coupled with muted corporate demand, early and unexpected settlements, as well as our continued efforts to optimize the portfolio, led to the year-on-year decrease. However, we've seen increase in credit in the second half of the year, with banking advances growing 10% on an annualized basis, most notably in the telecoms, mining and resources, and agriculture sectors. We are committed to growing our presence in Africa, and our exposures increased 10% since December 2020 to 12% of the total book. Concerted efforts to balance income, achieve higher returns, and the needs of our clients, as well as lower market volatility, resulted in a 6% reduction in capital utilization and a 9% reduction in RWA. Looking at our four strategic growth levers, portfolio optimization is designed to deliver value and drive deliberate and considered asset growth.
This improves our ability to assess deals to ensure that we are generating appropriate returns at a client and sector level, and enhances our agility in positioning the portfolio for emerging themes such as ESG. We believe that this enhanced agility is critical to navigating the business through complexity and maximizing our ability to deliver enhanced return on equity outcomes. We have a sustainable people plan that supports the growth of the business by aligning variable remuneration to the market, addressing the skills required to grow our business, renewing our leadership programs to build skills needed to lead an agile organization while nurturing a culture of diversity, equity, and inclusion. Shifting to digital as the third strategic growth lever. The last two years hastened the move to digital platforms and transformed the way we interact with our clients.
Technology is integral to how we run our business, while client relationships are paramount to our success and form the basis of our warm digital approach. One example of our differentiated offering is the Nedbank Business Hub, which centers on digitizing our transactional processes to improve our client experience. It is a single, secure digital interface that enables juristic clients to apply for, maintain, and transact on their accounts in a self-service manner. It empowers our clients with full access to the CIB and business banking product offerings through a single platform and has been well received by our clients. We will continue our focus on technologies and optimization to transform and improve our juristic client experiences and grow our transactional banking client base.
The fourth lever that I would like to discuss is our focus on sustainably investing in South Africa, as our long-term sustainability and success are contingent on the degree to which we play our role to add value and be the difference that supports the development of a sustainable society. Through our sustainable financing solutioning expertise, we have remained at the forefront of arranging innovative green funding instruments and channeling the funding towards the further development of the green economy through projects such as renewable energy and green building developments. We continue to drive the energy transition with our support of the government's renewable energy program, as well as commercial and industrial generation projects, and this is underpinned by our energy policy.
We have collaborated and partnered with our clients to provide sustainability-linked financing solutions focusing on carbon emissions, energy efficiencies, water quality, and overall ESG ratings, thereby enabling a more sustainable banking client. Turning to outlook. We are shifting to an active portfolio management approach, optimizing scarce resources, capital, people, and liquidity. Both NII and NIR are supported by a robust pipeline across multiple sectors, building on the asset growth momentum of the second half of 2021. However, conversion is a function of confidence and certainty. We aim to maintain our credit loss ratio around the midpoint of through-the-cycle range. The global twin challenge of inflation and growth, now coupled with more uncertainty, remains front of mind for us and our clients. We strive to make a meaningful contribution to building a strong, equitable, and inclusive South Africa.
It is this focus of fulfilling our purpose to be money experts who do good that empowers and drives our people to innovate, rebuild, and to lead. Thank you. I will now hand over to Ciko Thomas.
Thank you, Anél, and good afternoon, everyone. The financial performance of Retail and Business Banking has continued to show good recovery from the impact of the COVID-19 pandemic and associated lockdown measures, with headline earnings for the year increasing by 184% to ZAR 4.532 billion. The main drivers of this performance were a 6% increase in revenues, as well as a 41% lower impairment charge. NII increased by 5%, driven by an increase in advances of 7%. The decrease in impairments was due to relatively lower consumer stress, driven by a strengthening macroeconomic environment.
When we normalize for the net ZAR 713 million benefit due to the unwind of one-off credit impairment benefits relating to the curing of all accounts, as well as COVID-19 related releases of overlays, the adjusted credit loss ratio is 153 basis points. At 153, it thus falls into the middle of our through-the-cycle target range of 130 to 180 basis points. NIR grew by 8%, driven by growth in client activity, including increased levels of client spend, cash withdrawals, and purchases of value-added services. The expense increase of 6% was driven primarily by higher incentive charges as RBB's financial performance improved, but this was partially offset by the benefit of additional cost-saving initiatives.
Allocated capital increased off the back of balance sheet growth, but given the much bigger, higher earnings, ROE increased to 13.7%, but still remains below the cost of equity and below the levels of 2019. Turning to strategic focus. We retained our four strategic focus areas. These are, firstly, creating leading client experiences. We are enhancing our client value propositions in the consumer and relationship banking segments. We will also continue to enhance client journeys to build on the improvements in client experience metrics over the years. Secondly, digital first and first in digital. We have seen pleasing improvements in key digital metrics, such as the number of active money app users and the share of our sales that are delivered through digital channels. We will continue to leverage digital to drive a lower cost operating model as well as to improve client experience.
Thirdly, an efficient and agile operating model. Project Phoenix is the capstone initiative in RBB aimed at a total restructure of our cluster into a more client-centered organization. Our second major project, Project Imagine, sees us fundamentally transform our frontline branch infrastructure to render it fit for a digital world, to be more cost-effective and to be more geared to growing market share at micro-market level. Fourth is the drive to exploring new growth vectors. These growth vectors include a focus on retail cross-sell, which has improved to 1.86, up from 1.78 in 2020. Growth through digital ecosystems such as Avo, which reached 675,000 active users at the end of December and has just pleasingly gone past 1,000,000 active users as of last week.
Enhanced growth in insurance funeral plan sales and deeper penetration of the opportunity presented by the township economy. We have developed various leading client innovations in line with our four core strategic levers. On the insurance side, we are focusing on life, funeral, as well as personal lines. On consumer health, we are focusing on money tracker, credit health, and money message. Our ecosystem play is underpinned by Avo, where we continue to focus on partnerships and have also added Avo Auto vehicle sales through key dealership partners. Our Nedbank Business Hub enables clients to access products and services seamlessly through a user-friendly central point. We have also introduced a solar energy finance offering through home loans, which will assist our clients to save costs as well as to secure financing for the outlay of capital.
We continue to focus on digital enablement through app and web, with a strong drive to entice clients to bank digitally with us. The number of main bank clients was up 1% to 3.1 million. This increase in main bank activity, the recovery of card spend, as well as the digitization of our client base, have all driven the NIR recovery this year. We also continue to scale several key growth vector products to supplement our value proposition and to support sustainable NIR growth. Retail cross-sell has improved, driven by several purposeful cross-sell strategies, including Core Plus in the front line, as well as the use of artificial intelligence to enable best action recommendations to our clients. Nedbank's share of main bank clients grew to 12.4%, up from 11.2% in 2020 in the annual independent Consulta survey.
At a growth of 1.1%, this was the fastest growth amongst the surveyed base of banks. We have now closed the share gap to just 1.2% of the average of Absa and Standard Bank. We continue to focus on arresting the decline in market share of household deposits. On the left-hand side of this slide, you will see the mix of CASA, term and notice deposits in the overall consumer deposits matrix. On the right, we have unpacked our quarterly market share movements in total as well as by category. CASA losses were showing improvement in the last quarter of last year off the back of main bank growth, and term was improving in quarters three and four as our pricing strategy was implemented. The focus on notice deposits in the 2022 year will continue to sharpen.
Sales productivity in transactional products is also growing in both digital as well as physical channels, which is supporting efforts to stem overall household market share declines. Turning to the outlook for 2022. We expect economic growth to be slower than in 2021. Despite this, we are encouraged by the multiple opportunities that the economic landscape presents with easing COVID-19 restrictions worldwide, offering businesses some welcome reprieve. We therefore expect continued momentum in advances with normalization of credit loss ratio to the midpoint of our through-the-cycle target range. We will continue to grow NIR by diversifying our revenue base and to scale key growth vector strategies while we continue to optimize expenses. Our client-centered growth strategy and execution plans will help us achieve our aspirations.
The strong capabilities we've built over the years in digital as well as data in particular, will allow us to create new and disruptive products and solutions to address clients' rapidly evolving needs and expectations, allowing us to expand access to new markets, to reduce operational costs, as well as to help us develop new revenue-generating opportunities. 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, in Cape Town.
Thank you, Tiko, and good afternoon, everyone. Nedbank Wealth delivered strong growth in headline earnings of 45% to ZAR 962 million, with an ROE of 21%, well above the group's cost of equity. Insurance reported headline earnings growth of 77% due to improved investment performance, the implementation of an enhanced asset and liability matching strategy, partially offset by an increase in death and funeral claims in the life portfolio. Asset Management delivered a robust performance with headline earnings up 12%, driven by solid growth in AUM with positive net flows and a strong market rebound. Wealth Management's headline earnings increased by more than 100% as a result of credit impairment releases due to a recovery on a large single client and strong growth in investment business lines, offset by continued low interest rates, particularly in the international business.
Moving on to our strategic focus areas. Nedbank Wealth remains committed to building a sustainable business by providing market-leading client experiences, building data and digital capabilities, driving long-term performance for our clients, collaborating across the Nedbank Group to increase client penetration, and investing in our people and culture. Nedbank Wealth has focused on delivering key strategic initiatives to accelerate growth. In insurance, we continue to focus on diversification and digitization of solutions by extending insurance quoting, fulfillment, and functionality on digital channels to 10 insurance solutions. The business has grown MyCover and MyCover Life solutions launched in late 2021 to a total sum insured of almost ZAR 3 billion and more than ZAR 3 billion, respectively. In 2021, through our collaboration with consumer banking, we launched MyCover Life and MyCover Funeral solutions to Nedbank mainstream bank clients with extremely competitive price points.
Lastly, we made good traction in our mobile and digital offerings, such as the inclusion of the MyCover Life and MyCover Funeral solutions on the Eclipse platform planned for Q1 2022. Moving on to the asset management slide. In asset management, we have grown the best of breed range, which now has ZAR 270 billion in total AUM locally and $5.2 billion in total AUM internationally. We continue to leverage access to group distribution and digital integration by including our products on the Nedbank Money app and other digital channels. Nedgroup Investments has grown its institutional offering locally and internationally, and has new mandates for the balanced fund, core range, and international funds totaling approximately ZAR 3.5 billion.
We have taken more steps in our journey towards becoming one of the leaders in responsible investing, and have published the 2021 edition of the Nedgroup Investments Responsible Investments Research Report. Lastly, according to the Q4 2021 ASISA Stats, Nedgroup Investments ranked fifth largest in total AUM locally, with a 7% market share, and third largest AUM internationally, maintaining its 12% market share. Moving on to the wealth management slide. In Wealth Management South Africa, we optimized our business structure and operations through improved segment-specific client value propositions. We collaborated with the group to increase cross-sell opportunities through combined client initiatives. We work closely with Nedbank Private Wealth International to increase flows between South Africa and our international business. Lastly, we digitized key processes to strengthen system and operational controls.
In our Wealth Management International business, we enhanced digital innovation and adoption through the deployment of digital signatures to improve client experience and to help reduce our carbon footprint. We collaborated with the Wealth Management South Africa business to increase flows between South Africa and our international business. Lastly, we simplified the technology landscape by investing in solutions with specific focus on digital data integration and automation. Moving on to the outlook slide. Our 2022 performance will be impacted by higher NII and widening of NIM due to improved interest rate environment and growth in our high net worth client base. Credit loss ratios remaining within the through the cycle target range. An increase in NIR due to growth in the MyCover portfolio, normalized claims trends, increased cross-sell opportunities due to penetration within the Nedbank Group and AUM growth due to an increase in market share.
We expect an increase in expenses due to investment in strategic growth initiatives, offset by cost efficiencies from the automation of key processes. The sale of the international trust business will result in a marginal loss of earnings in the short to medium term. However, we plan to utilize the proceeds from the sale to grow the remaining high net worth core business. Looking beyond 2022, Nedbank Wealth will continue to maintain a strong ROE above the group's cost of equity. Thank you. Now I will hand over to Terence at 135.
Thank you, Iolanda, and good afternoon, everyone. Headline earnings for the Nedbank Africa Regions business is up by more than 100%, with a strong performance largely driven by ETI. Overall, our NAR HE is up to ZAR 594 million in 2021, with ROE improving to 9.3% for 2021. Although positive, our return is still below our ambition of ROE greater than the cost of equity. A closer look at our segmental performance on the right-hand side of the slide. The SADC operations reported an improved performance with HE of ZAR 71 million, up by more than 100% from a loss of ZAR 141 million in the prior year. The main drivers of this performance was a decline in impairments by 62% and an increase of NII by 9%.
Despite an improved second half of 2021, NIR for the full year of 2021 declined slightly by 2% due to lower transactional activity from clients and negative foreign movements. What is pleasing is that the Nedbank Zimbabwe business also reported a lower net monetary loss of ZAR 138 million from ZAR 205 million in 2020, which is a 33% improvement. Looking at ETI performance, it continues to improve. With our reported share of HE up to ZAR 523 million from ZAR 153 million, driven by strong recovery across three core regions, namely UEMOA, which is Francophone West Africa, AWA, which is Anglophone West Africa, and CESA, which is Central, Eastern, and Southern Africa.
ETI's group capital and liquidity position strengthened further, reflecting a total CAR of 14.5% at financial year-end 2021, up from 12.3%, with a return on tangible equity of 18.8%, up from 0.3%. The ETI board has recommended the resumption of dividends on the back of these improved results, and Nedbank is set to receive its fair share of $40 million, amounting to just over $8 million, subject to approval at their upcoming AGM. Although profitable, Ecobank Nigeria's performance remains suboptimal and continues to be a focus of shareholders.
If we take a closer look at ETI, on the graph on the top left, associate income relating to the group's 21% shareholding in ETI for the period increased significantly from a ZAR 178 million loss in 2020 to ZAR 686 million in 2021. On the graph below, the value use of ETI is currently greater than ZAR 2.8 billion, with the market value in February 2022 at around ZAR 2.4 billion, slightly higher than the carrying value as of December 2021. ETI has a very strong West and Central African franchise, having top three banks in 13 of 16 countries where it operates. We also saw an improvement in NPLs and liquidity, with the three core regions reporting lower NPLs and higher coverage ratios. These three regions reported ROEs of all above 21%.
While still challenging, there are signs of improvement in Ecobank Nigeria, with increased profitability and a strengthened capital position. Turning now to the strategic growth drivers of our SADC operations. Firstly, we wanna do more with what we have. We'll continue to focus on growth opportunities in Mozambique, leveraging enterprise capabilities through the newly rebranded Nedbank Mozambique. We're accelerating the Africa region's digital growth strategy, leveraging group capabilities such as Avo, MobiMoney, and cross-border remittances. Last year, we won various awards, including Best Internet Bank in Africa and Best Mobile Bank in Africa, Most Innovative Digital Branch Design, and Digital Banking Brand of the Year in Mozambique, and Most Innovative Retail Banking App in Eswatini. Our aspiration continues to be a leader in client experience and grow our market share.
In this regard, we've made great improvements, and in 2021, our Nedbank Namibia and Mozambique businesses achieved their highest net promoter scores in their respective markets. Other improvements include in the top two positions for net sentiment in almost all the markets, and top in loyalty scores in three markets, namely Eswatini, Namibia, and Zimbabwe. In terms of transforming the NIR business and ensuring readiness for the future, we're focusing on, one, reconfiguring the size and shape of the business in line with the TOM 2.0 program. For example, in Nedbank Zimbabwe, we made great progress in reconfiguring the balance sheet. Nedbank Zimbabwe has completed its recapitalization to meet and comply with the minimum capital requirement of $30 million. We're also in the process of exploring the integration of the NIR business with group technology ecosystem to achieve increased efficiencies and product consistency.
Turning to our outlook for Africa Regions. Economic growth in sub-Saharan Africa is forecast to accelerate slightly to 3.7% in 2022 and rise further in 2023. For 2022, we expect to build on the NIR business performance in 2021. Of course, risks remain. New COVID variants, socioeconomic and political issues across the continent may still negatively impact African economies and in turn, our business performance. That said, rise in commodity prices will likely benefit commodity-driven economies. Performance in the SADC operations for 2022 is expected to continue to improve year-on-year. Our key focus areas for this year are to continue to transform our NIR business and its operating model, maximizing the Mozambican opportunities through Nedbank Mozambique, accelerating and implementing our Africa digital growth strategy, leveraging our overall group capabilities.
From our ETI investment perspective, we expect improved earnings in 2022, as evident in their recently released full year 2021 results. We are determined to continue increasing the flows between our two banks and work with the other major shareholders to resolve the challenges in Ecobank Nigeria to increase shareholder value. In the medium to long term, we expect Nedbank Africa Regions to continue to grow its overall contribution to group earnings. We aim to meet and exceed the ROE target of greater than cost of equity. Thank you, and I will now hand you over to Mike Brown, who will cover the outlook and make some concluding remarks.
Thank you, Terence. In closing, I will provide our outlook for 2022 and beyond, and reflect on the progress that we have made towards meeting our medium-term targets to end 2023. With a key takeout for investors being that our diluted headline earnings per share target is now expected to be reached in 2022, a year earlier than previously expected. Starting with our current macroeconomic outlook that informs our guidance and targets, and knowing that the events in Russia and the Ukraine in recent weeks increase risks in any forecasts, particularly with respect to inflation, interest rates, and economic growth. Our group economic unit's GDP forecasts highlight the better than initially expected economic growth in 2021 off the low 2020 base. Growth into 2022 and beyond, however, is expected to be lower than we previously thought and remain muted at below 2%.
Given global inflationary pressures and expected monetary policy responses, particularly in the U.S., South African interest rates have shifted into an upward cycle. In addition to the 25 basis point increase in January this year, we currently expect a further 100 basis points of increases in 2022, and then a further 50 basis points in each of 2023 and 2024, respectively. Industry-level credit growth was slow in 2021 at just over 2% and materially below our initial forecasts of around 5%. This is, however, expected to recover in 2022 to around 4%-5%. South Africa's fiscal position remains challenging but has been better than expected over the past twelve months as the country benefited from a strong commodity cycle and improved tax collections.
As highlighted in the budget speech, care will be needed to ensure that this cyclical outperformance in tax revenue is not used to structurally lift the already high government expense base. Using our economic outlook as a base, this slide shows our usual format of shorter-term line-by-line guidance for the full year 2022. For NII in the top left, after growing 8% in 2021, we currently expect NII growth in 2022 to be upper single digits. We expect this growth will be driven by the ongoing momentum we see in RBB lending, with some recovery in CIB lending. The benefit in endowment from 125 basis points of expected interest rate increases, and as a result, continued expansion of our net interest margin.
Our credit loss ratio, which was 83 basis points in 2021, is expected in 2022 to be in the top half of our through the cycle target range of 60-100 basis points. That is somewhere between 80-100 basis points, and we remain conservatively provisioned as the COVID impact on our clients reduces over time. With regards any exposure to the Ukraine and Russia, as a bank focused on the African continent, we have no direct exposures in these geographies, and any indirect exposures to clients who themselves have operations in these geographies are immaterial. Non-interest revenue growth is expected to increase in 2022 and be around upper single digits. Helped by both client activity as well as the non-recurrence of the fair value debits in the 2021 base.
Expenses, as always, will remain tightly under control, but are expected to grow above mid-single digits, primarily as the expected introduction of new regulatory costs, such as deposit insurance and Twin Peaks, are only partially offset by cost savings through TOM 2. As a result of this guidance, taken together, we would currently expect DHEPS growth in 2022 to be above nominal GDP + 5%. Capital levels are expected to remain strong and above the top end of our board-approved target range. Dividends are currently expected to be declared within our target range of 1.75x-2.25 x cover. Looking further out now than 2022, our medium-term targets that we set for end 2023 relating to DHEPS, ROE and cost-to-income ratio, as well as Net Promoter Score, remain unchanged, and meeting them should support ongoing shareholder value creation.
Given the strong performance in 2021 and good progress on strategic and operational delivery, we believe that our 2023 DHEPS target of above ZAR 25.65 should now be achieved a year earlier. That is, by the end of 2022. Achieving our end 2023 ROE target of above 15%, a cost-to-income ratio of less than 54%, and a Net Promoter Score of No. 1 ranked all remain appropriately stretched and ambitious targets. Since we are a year closer and following a strong 2021 performance, confidence in meeting them has increased.
Beyond 2023 and in the longer term, as our clients emerge from the impacts of COVID and as interest rates rise from historic lows, from diligently executing on our strategy, we see further opportunity to increase our ROE to above 18% or cost of equity +3% or 4%, as well as reduce our cost-to-income ratio to below 50% while sustainably growing DHEPS at 5% above nominal GDP per annum. In closing, as I said at the interim, I'm pleased that we can conclude the resilience phase of our post-COVID strategy with key balance sheet ratios on capital liquidity and coverage, all at or above the top end of board targets and above pre-crisis levels, enabling the resumption of dividend payments to shareholders.
Our people are at the center of our business, and we are working on bringing more staff back into the office in a COVID-safe manner, while upskilling and enabling staff to continue to deliver great client experiences. We believe our strategy remains appropriate and delivery is progressing well. In particular, we continue to focus on the successful finalization of the last pieces of our IT platform digitization, known as Managed Evolution, that is absolutely central to our future competitiveness in financial services. Client satisfaction metrics continue to improve and remain top of mind as we aim to be number one among South African banks. As we roll out more and more Managed Evolution functionality, the unlocking of benefits from TOM 2 should accelerate, and progress on leveraging our balance sheet to grow clients' transactional income and transactional deposits through SPT 2.0 should also improve.
We will continue to create positive impacts in the societies where we operate as we use our financial expertise to do good for all stakeholders. At the same time, participate and lead in new financing opportunities aligned to the United Nations SDGs and maintain our leadership position on ESG matters generally. Lastly, we'll continue to focus on value creation for shareholders through ongoing DHEPS growth, ROE, and efficiency improvements, combined with attractive growth in dividend payments. Thank you, and may you and your loved ones stay healthy and safe. Right. We're into Q&A. You will know that there are questions that you can post on the web. We have four questions there, so any other people who want to post, please post now. We'll go first to take questions from the phone lines, and then we'll come back and answer the questions on the web.
Thank you very much, sir. Just a reminder for the participants that have dialed in. If you would like to ask a question, please press star then one. The first question comes from James Starke from RMB Morgan Stanley. Please go ahead, James.
Hi. Good evening, Mike and team. Congratulations on the strong performance and thank you for the comprehensive presentation. 2 questions from my side. The first regarding your outlook for loan growth. I mean, given the client gains in your pipeline, how likely do you think it is that you can outpace the industry growth during 2022? The second question, maybe one for Ciko, regarding RBB transactional earnings. They look like they're under pressure. How should we think about the drivers of those earnings and the timing for returning that retail transactional income to profitability? Thank you.
Okay. Perhaps we'll start then with the loan growth question. Obviously for Nedbank, you know, loan growth is an aggregation of our retail business and our wholesale business. I think what we're expecting is ongoing continuation of the solid loan growth that we saw in retail in 2021 to continue into 2022. Loan growth in CIB is, I guess, somewhat more lumpy, where we saw, you know, a reduction in loan growth in the first half. Consequence, as we said, of clients with excess cash from commodities primarily in the commodity sector. Also some pretty strong portfolio optimization undertaken by our CIB teams, and then a bit of a bounce back into the second half.
My sense is that our ability to outperform our target on loan growth will primarily be driven by what happens in the CIB portfolio, and do we surprise or does the infrastructure and renewable energy projects, et cetera, in South Africa surprise on the upside. If we can just see if our tech works, and we can go across to Ciko to answer the second question around retail transactional growth.
Thanks, Mike, and hopefully you can hear me, James. Yeah, I mean, I think if you look at the rate at which we're growing clients, when we grew Main Bank clients, yes, positive, but just only by 1%. I imagine that in this incredibly competitive environment, all of our transactional revenues are going to come under pressure generally as the rate of competition amongst the banks, especially in the retail space, continues apace. Also, you know, there are still transactional generating lines of revenue that continue to be under stress. You know, travel continues to be under stress, for instance. Mike, the two Mikes show that high-level performance graphs in our card business.
We still continue to see pressure on earnings in sectors like travel, in sectors like hotel as well, where because of the Amex franchise, we continue to have a disproportionate share of transactional activity there. There's still sector there as we emerge out of COVID. But yeah, I mean, I think those two factors will continue to characterize what happens on transactional revenue.
Thank you.
Thank you. James, do you have any further questions?
Not for now. Thank you.
Thank you. At this time, we have no further questions on the telephone lines.
Okay, thanks. We'll go across then to the questions on the web, and we're gonna start there. Two questions from Chris Stewart, and we'll bounce them between ourselves, Mike. Chris, the first question. Chris Stewart from Ninety One. Would you anticipate your prospective dividend cover for FY 2022 and beyond to more closely emulate your H2 cover, i.e., 1.75 x, or your full year cover, i.e., 2 x? Chris, I think, you know, as we said on, I think slide 67 with the outlook on dividends, you know, we expect the board to continue to declare dividends within that range of 1.75x-2.25x. In deciding where to pitch within that range, the board would always look at, you know, the strength of our franchise in capital generation.
You saw very strong capital generation in the 2021 numbers. Balance that against our expected capital utilization through a combination of both RWA growth and RWA optimization. I think that said, you know, we do know that our capital levels at the moment at 12.8 are well above the top end of our target ranges. We know that there's some stretch to get to our ROE targets. I think you should expect to see us managing both earnings and capital in pursuit of our ROE targets through to 2023. The second question, also from Chris, and Mike, if you can pick this one up. How do you reconcile your increase in retail transactional banking clients with your material losses in retail transactional deposit market share?
Yeah. Thanks, Mike, and thanks Chris, and good evening to everyone on the web and on the lines. Chris, I thought you might ask this question, and I think it's a valid question. I mean, obviously, if you take the results in the entirety, I think they're a good set of results. If there's one disappointing metric, it is the loss in transactional deposit market share in the household deposit space. You know, pleasingly, we managed to grow in the commercial deposit space but didn't manage to grow in the household deposit space. Although we saw growth in Main Bank client market share, hence the question, how do you reconcile the two? I mean, it depends where we've grown in terms of which category of client, whether it be affluent, middle market, entry-level youth, et cetera.
I think that's one of the dynamics. The second point is, I think as we've seen growth in Main Bank client numbers in the past, it does take time to translate into balance sheet growth. In other words, growth in BA900 deposit balances. I mean, your question is still valid. It is a disappointing metric, and we're running hard to arrest that. We do provide additional detail in the booklet on slide 75 for a further conversation as we meet during our one-on-one meetings. Yeah, hopefully time, and we'll turn this trend into 2022.
Thanks. If I go to the next question on the web. It's from Kevin Harding at Investec. With ZAR 1.7 billion in overlays now being catered for in the IFRS 9 models, is group coverage now at a structurally higher level despite the good credit experience in the underlying portfolios? Or are there factors such as PDs, LGDs, or SICR criteria underpinning the IFRS 9 models, which are still calibrated at conservative levels? Kevin, I think, you know, generally, we would want our calibrations at this point in the cycle and in the current environment to be at the top end of conservatism. Within that, what effectively you've seen is that the more negative experience of the COVID period that we initially catered for in overlays is now in our models.
We would expect, if we could predict the future, that if that experience does not repeat, that negative set that's currently in our models will, over time, drift out of our models and be replaced by, hopefully, better PDs, LGDs, et cetera, and therefore, lead over time to a slight reduction in the coverage ratios that you see right now. The last question that we've got at the moment on the web from. Sorry, there's two more. There's one from Charles Russell from SBG Securities. "Thanks for the detailed presentation, et cetera, et cetera. It's always much appreciated. My first question relates to the current provisioning coverage at 3.3, still materially higher than pre-pandemic.
How do you see this evolving in coming years and getting back to the 2.1 pre-pandemic post-IFRS coverage? I think I've broadly covered that in answering Kevin's question. You know, if we could predict the future, and the future is better credit losses in the future than in the pandemic period, you know, I would expect it to drift down, but probably not back down to pre-pandemic levels. Obviously, coverage is also more applicable in the big homogenous portfolios of RBB. To the extent that coverage is driven by, for example, stage three coverage in CIB, that's not really model-driven. That's much more a function of client-by-client defaults. Do you happen to have an unsecured client and therefore very high levels of coverage or a very well-secured client and therefore very low levels of coverage? Probably a bit more volatility there.
Secondly, how much of your credit loss guidance is driven by concerns from the Russia-Ukraine conflict? I'm surprised the guidance is not lower given your provision coverage. I think as you heard me say in closing, we've got very little direct exposure to Russian or the Ukraine, or our indirect exposure to clients is also very, very little. So, you know, none of it is driven by exposures to Russia and the Ukraine. However, if you look at our macro models, you know, clearly what the Russia and Ukraine situation can drive is higher commodity prices, higher interest rates, and lower growth rates. You know, we have catered for some of that in our overlays, but that could drive slightly higher credit provisioning just as a consequence of those macro models.
Finally, on the web from Stephan Potgieter. Mike, and I'm gonna pass this to you. I'm sure you were preparing for it. Can you unpack, from Stefan from UBS, what drivers you would be to lift your ROE from the 2023 target of 15%, which we know is a stretch, to our longer-term target of 18? Or we also reflect that sometimes as cost of equity + 3%-4%.
Yeah. Thanks, Stefan. Thanks for the question. First of all, we gotta get to 15%. We certainly acknowledge that by 2023. I think hopefully this set of results does demonstrate the fact that we've made progress towards achieving that stretch target. You know, when we look at the 15%, we make it very clear that we've got to get cost to income down effectively below 54%. That is a key driver in terms of delivering a 15% ROE. In terms of our more long-term targets, it really speaks to an extension of our three big strategic drivers, where we've looked to focus on balance sheet to create value in areas where we believe we are currently subscale. For that, we speak to SPT 2.0.
Driving pockets of growth where we currently subscale, recognizing the benefit of utilizing growth in those particular areas to grow main bank clients and to lift levels of cross-sell, I think is an imperative in terms of A, reaching the 15% and stepping off towards 18% in the longer term. Secondly, as we have and continue to invest in technology and get more of our clients to effectively transact with Nedbank through digital channels and platforms, it means we've got to take costs out the back end. I think importantly, we're 85% complete with regards to the Managed Evolution journey. As we complete that through to 2023, hopefully that provides a technology platform that doesn't require massive amounts of additional tech spend. As a result, again, we can bring down the cost as it is associated with computer processing.
To take cost out the back end through that TOM initiative or those operating model shifts, as we effectively reduce things like teller activity, staff numbers, et cetera. I think those three strategic drivers is an extension off the back of 2023 that we'll continue to deliver, which effectively drives the cost to income ratio below 50%. I think to deliver that sort of ROE, we're looking at that sort of cost to income ratio.
Great. Thanks, Mike. There are a couple of other questions that continue to come in, which is great. First of all, we have one that's come in, not on the webcast but via the LinkedIn. It says. It's from Sean Seger of Nedgroup Investments. Is a special dividend being considered considering the passing of dividends during the recent past? I think at the moment, a special dividend is not being considered. Clearly, the board would look at that from time to time as we get to every dividend declaration period. As you saw, we declared the second half dividend right at the bottom end of our cover range.
Given what we said in the second half of 2020 when we chose not to declare a dividend, we said to investors that, you know, in the first half, we didn't declare a dividend because no banks were allowed to. In the second half, we chose not to in the circumstances, and we said to investors that dividends not declared are stored up in NAV and can be declared at a future date. We have started a move towards returning that dividend by choosing to declare this dividend at the low end of our target range, as opposed to our more normal declarations in the center of that target range. If I could then jump to the next couple of questions that are on the web and from Mark du Toit of OysterCatcher Investments.
Your NIM has already improved ahead of the increase in rates, which will come through this year. Is this due to Portfolio Tilt or more driven by a change in funding mix? Mike, will you pick that up?
Thanks again, Mark, for the question. A number of drivers behind the improvement in NIM. One relates to higher levels of essentially free funding through higher levels of profitability and/or transactional deposits, which translate into absolute endowment benefit, offsetting the adverse implications of the rate cuts we saw back in 2020 that run-rated through 2021's results. The second is, as a result of a reasonably flat balance sheet, we've been able to enhance the funding mix of the organization, again, through higher levels of transactional deposit growth, which effectively result in a reduction in NCDs or more expensive funding. The third area relates to, and to some extent, SPT 2.0 as we've grown market share in certain of the unsecured categories.
We've also seen an ability to better price the front book, and we've also seen the benefit of a widening of Prime JIBAR basis, which essentially widens the margin on the back book to the extent that the asset portfolio is linked to Prime. We've also seen, obviously, RBB consistently grow around 7%, and we've seen within the construct of the RBB secured portfolios, we've seen VAF grow stronger than home loans. Now, all of that comes with higher NIM versus the CRB portfolio, which essentially, although saw strong growth in the second half of the year, is essentially down 2% on the prior period. You're getting the mixed benefit translating into higher NIM. Lastly, we've shared this with you before.
You know, during 2020, particularly during the second half, we essentially replaced treasury bills with higher yielding government bonds, whereby the basis on the government bonds widened. We've effectively replaced a reasonably large proportion of treasury bills with high yielding government bonds from a basis perspective, and that's translated into higher NIM. Certainly, with a 37 basis point widening, again, to me, a standout of this set of results.
Thanks, Mike. Just coming back then to some further questions on the web. We've got one from Chris Stewart. Ninety One again. To what would you ascribe your strong performance in the RBB NIR other category, which was up 9.9%, which appears to be ahead of peers. I must say, Chris, I don't have the answer to that without digging a little deeper. I don't know if you do, Mike, or whether that's something we'll address with you.
I'll tell-
In our one-on-ones.
I can take that, Mike.
Great.
On the surface of it, what sits in other, Chris, is also our VAS, value-added services. Things like electricity, lotto, airtime, and all of those, so to report them there. There would be a big driver of that. You'll see in page 93, and we'll discuss it in our section when we do our one-on-ones. On page 93 of the big booklet. There's some big growth numbers driving that on the value-added services side. That was a big driver of that.
Great. Thanks, Ciko. Will you also pick up the question from Siphelele Mdudu?
Yes, I'll pick it up. Siphelele, on home loans, no, it was not deliberate. We would have liked to grow share faster. We've got strong, alongside our other, SPT aspirations. We'd like to grow our home loans share, much more aggressively. One of the things we've learned is, you know, the investment in the, you know, amongst other things, in the home loan originator, mortgage originator space is gonna be critical for us to drive this growth. Still have some work to do there, but we're starting to see some nice, green shoots coming through in terms of our relationship, sorting our processes with MO and mortgage originator channels. We feel, we believe that those will help us continue to strengthen our ability to grow share stronger for home loans going forward. Certainly, it was not deliberate.
We would have liked to see it grow stronger. Thank you.
Great. Thank you. As we are now, I don't see any more questions on the web as I'm refreshing here. Any more questions from anybody?
There are no questions on the phone line.
Okay. I think all that remains is for me to say thank you, everybody, for listening, and stay healthy and stay safe.