A very good morning, a very good morning to everybody, both present here and online. On behalf of the board and management of the Standard Bank Group, it's my pleasure to welcome you to the presentation of our interim results for the H1 of 2023. Here is today's agenda, which should be up already. We wanna emphasize. Okay. We wanna emphasize that the results are the product of the group doing what it said it would do. At the full year 2022 presentation, we announced four focus areas for 2023. Three of those focus areas were strategic, and the fourth is financial. The three strategic focus areas are listed under point one on this slide. These are: improve our competitiveness, which is reflected in the growing numbers of active clients and increased transactional volumes.
Maintaining strong momentum in our sustainable finance business. We retain our leadership in sustainable finance with a growing number of market-leading deals during the period. Third, optimize capital and integrate Liberty. Liberty paid ZAR 6 billion in dividends since the deal was announced, and the highlight of the H1 was the establishment of our integrated business unit, called Insurance and Asset Management. Moving to our financial focus area, which is point 2 on the slide. At the end of 2022, we announced that we were determined to continue to progress towards our 2025 financial targets. This half financial results are well in line with our 2025 commitment on profitability, efficiency, and return on equity. We announced this morning that the group's revenues were strongly up, moderated by higher credit charges and elevated cost growth. We achieved positive jaws of more than 11%.
Turning to .3, the group's headline earnings grew by 35% on the prior H1. As a result, the group's return on equity for the H1 of 2023 is 18.9%, well inside our target range of 17%-20%. We are declaring an interim dividend of ZAR 6.90 per share, which is a 34% increase in line with the growth in headline earnings per share. Starting with the global backdrop, the tragic and destructive war in the Ukraine and its wider consequences continued to reduce confidence and place upward pressure on prices.
Tension between the United States and China clearly reduced towards the end of the half. As US Treasury Secretary Yellen said in April, and I quote her: "China and the United States can, and need to, find a way to live together and share in global prosperity." End of quote. This perspective gained traction over the half, as evidenced by the establishment of new China-U.S. working groups at the start of August. To quote Professor Li Haidong of the China Foreign Affairs University, he said this: "The handling of this relationship by both sides is gradually maturing and entering a relatively predictable stage." End quote. Central banks continued to raise policy rates over the half. It now seems likely that the inflationary pressures created by the pandemic and the war are starting to be brought under control.
In sub-Saharan Africa, most economies continued to be both resilient and dynamic. Although public debt continued to rise and inflation remained high, the probability of further sovereign restructurings this year reduced over the half. The most notable policy change over the period was the liberalization and devaluation of the naira. This move, although negative for inflation in Nigeria in the short term, is promising for growth and investment in the medium to long term. As noted in the Fitch BMI Sub-Sahara Reform Tracker, reforms also accelerated in Kenya, Angola, Ethiopia, and indeed in South Africa. Kenya and Angola improved their fiscal policies, while Ethiopia continued to liberalize its telecom sector. Expectations for the South African economy were very low for the H1 and were slightly exceeded. Progress continued to be made in growing and diversifying the electricity supply.
Based on what is known about investment in new generation, it's reasonable to hope that power shortages will ease considerably over the next year. We also note that Eskom's energy availability factor has improved since the lows reached in January, and that the economy is becoming increasingly resilient to Eskom's declining performance, thanks to rapid growth in private and household generation and storage. For instance, according to Eskom, the private sector has installed a remarkable 4,400 megawatts of rooftop solar since the start of 2022. South Africa continued the unbundling of Eskom and concessioned Durban Container Terminal Pier two, which handles 46% of South Africa's port traffic. We hope that ambitious structural reforms of this sort will continue apace.
Another positive development since we last reported, is that, in our view, the risk of South Africa losing AGOA preferences or of sanctions being imposed has receded. During the half, President Ramaphosa visited both Kiev and Moscow to encourage negotiations, and senior government officials were visiting Washington earlier this year to clarify South Africa's stance. Earlier this month, U.S. Deputy Secretary of State, Victoria Nuland, is reported as having said that, while she did not want to preempt the decision by U.S. lawmakers on whether South Africa would retain AGOA status, President Ramaphosa's statements would help to motivate for an extension.
To quote Secretary Nuland directly, she said this: "When South Africa stands up and says Russia's war against Ukraine must be settled in a manner that defends the UN Charter, that defends sovereignty and territorial integrity of nations, that says no to taking land by force, that statement is unique weight." End quote. Inflation remained high over the half, and the repo rate increased a further 125 basis points since the start of the year. We think that inflation in South Africa has peaked at the end of the half. The robustness and long-term competitiveness of our business is illustrated by the graph on the left. This shows that over 10 years, the group's earnings grew by 9% on average, a period that included the pandemic, a once-in-a-century disruption, and several environmental catastrophes, including the devastating KwaZulu-Natal floods in 2022.
On the right-hand side, our winning geographical and market diversity is illustrated by the half-on-half change in headline earnings. As mentioned, group headline earnings were up 35%. Within this, Africa Regions' earnings were up 65%. International earnings were up more than 100%. In South Africa, South Africa banking earnings were up 17%. We submit that 17% earnings growth in the current South African context speaks to a very strong business with an enviable client base. Taking advantage of the opportunity for rationalization created by the Liberty integration, we reorganized our operating model. The group is now structured into the business units described on this slide. We've also made some slight name changes for clarity. The business units are now Personal and Private Banking, Business and Commercial Banking, Corporate and Investment Banking, and Insurance and Asset Management.
The fundamental drivers of our performance are the competitive strength and growth of our client franchise. To list some of the highlights for each business unit: First, Personal and Private Banking grew its number of active clients by 9%, half on half, and increased digital transactional volumes by 15%. Our Business and Commercial Banking business unit expanded its client base by 5% and grew digital banking volumes by 9%. Corporate and Investment Banking grew its client revenues by 32%. We have more than 7.5 million active insurance policies. Our Insurance and Asset Management business grew new business value by 52%. We do everything in our power to support our clients through good times and bad. We are always looking for ways to increase the financial and economic inclusion of our fellow Africans.
Everything we do emerges from this perspective, and all our activities aim to create sustainable growth and inclusive value. We safeguard and grow our clients' assets. There is a strong correlation between savings rates and economic growth in our countries of operation. An economic fact, very salient, given our purpose: Africa is our home, we drive her growth. Together, assets under management and deposits make up a large part of the capital available to governments, state-owned entities, and businesses to build infrastructure, fund production, and create long-term jobs. In countries with low savings rates, like South Africa, savings is a scarce and highly valuable source of good, and we support this very real form of national service.
We kept ZAR 1.8 trillion in deposits, and we kept them safe for our clients over the half, and we paid ZAR 45 billion in interest on those deposits to individuals, corporates, and governments who entrusted their savings to us. Interest paid to clients was up 70% on the prior half. We managed ZAR 1.4 trillion in assets over the half, which is mostly money that people are saving for their pensions or that they are relying on in retirement. Talking of assets under management, and as August is Women's Month in South Africa, we'd like to mention that the Standard Bank-sponsored African Women's Impact Fund has so far raised $85 billion for women fund managers to invest in Africa.
Risk management and insurance are also major creators of value for society, enabling people and businesses to manage risks and therefore to plan and invest more confidently. For example, a big part of what our global markets business does is reduce uncertainty for our clients. Like banking, insurance is also an intensely human business, helping people at their times of greatest personal need. Over the half, we paid out more than ZAR 11 billion to clients in annuities and for death and disability claims. Safeguarding deposits is one of the most important ways in which we create value for society. That's why we are so careful about how we lend out depositors' funds. Declined loan applications aren't a symptom of a lack of humanity. They follow, always with regret, from our primary duty as a deposit-taking institution to keep our clients' deposits secure and always available.
Charging interest on loans is, of course, less popular than paying it, but the interest paid to savers comes from interest charged. Do the provisions we use to ensure that depositors' funds are safe with us, and Arno will be spending a considerable amount of time on this a little bit later. Talking of loans, at the end of the H1 of 2023, we held a stock of ZAR 1.4 trillion in loans. Our aim is that each loan brings people closer to realizing their aspirations. For instance, we lent ZAR 22 billion to small and medium enterprises across Africa to grow their businesses. Another example, over the half, we registered ZAR 1.4 billion of affordable housing loans, bringing the number of clients we have provided loans to for affordable homes to more than 98,000.
We helped more than 20,000 clients in South Africa to manage their debt obligations. After lending and taking deposits, our next most valuable role is to facilitate transactions, enabling people to buy and sell safely and reliably. Over the half, we processed over ZAR 8 trillion in domestic payments in South Africa alone, and over ZAR 4 trillion in cross-border payments across all our markets and segments. Within this, one particularly important category is international remittances, a significant contributor to national and household income in many African countries. This half, we enabled ZAR 41 billion in international remittances across all our countries. Finally, we contribute to Africa's economies directly through the taxes that we pay.
We make a substantial contribution to the tax revenues of a country, both in terms of the tax we pay and the tax we collect from our clients and our staff on behalf of governments. Our commitment to sustainability, of course, also means that we will strongly support sustainable energy, along with other energy projects that generate net positive social and environmental outcomes. For instance, so far, we've mobilized ZAR 83 billion in sustainable finance for large corporations and are well on our way to meet our commitment to have mobilized over ZAR 250 billion in sustainable finance by the end of 2026. We raised a $250 billion 7-year sustainable finance loan with the International Finance Corporation, which we will use to fund a portfolio of green and social assets. On the green side, the focus is on renewable energy.
On the social side, these funds will be applied to social housing, with a focus on first-time women borrowers. We disbursed ZAR 458 million to help individuals in South Africa to install solar solutions in their houses or buy houses that have been built in a green and resource-efficient way. We provided ZAR 1.1 billion to support renewable energy installations for small and medium enterprises and larger commercial businesses. Within this, we partnered with a leading provider of subscription-based solar solutions to support its ambition to expand access to reliable, renewable energy solutions for South African households. Insurance and Asset Management has more than ZAR 13 billion in infrastructure assets under management, of which just over half is renewable energy assets. Technology is and remains the foundation of everything that we do, literally the platform on which we build our business.
It underlies our capacity to serve and support our clients. It enables us to grow market share by winning new clients. It provides the advanced digital capabilities that will enhance our future competitiveness. Our technology has to work as close to perfect as we can get it. We had our share of technology challenges in the past, and we're not perfect now, but we're building a formidable track record of robustness, rapid innovation in service of our clients, and we are increasing our efficiency. Here are a few examples. Our ATMs were up more than 98% of the time, and our mobile app was up more than 99% of the time. Systems downtime was 72% less than it was in the prior half, and meantime to repair, which is really what affects our clients' experience, improved by 50%.
Over the half, we released more than 14,000 system updates to improve client experience and security. Both our mobile app and internet banking Net Promoter scores rose strongly over the half. Our number of ATMs and branch square meterage continued to fall in line with changing client preferences, and more than a third of the processing selected for migration is now in the cloud. The current management team is standing on the shoulders of giants as we execute the group strategy, which was established by our great predecessors. These results reflect our commitment to our clients over many years, including some very, very difficult times. We see these results as a stepping stone towards meeting our long-term obligations to our clients, our shareholders, and the communities in which we work.
As always, we're here to serve our clients, to win in our markets for our shareholders, and to drive Africa's growth. I'll now hand you over to Arno to take you through the results in more detail.
Thank you, Sim, and good morning to you all. I'm now going to take you through the results for the six months period ended 30th of June, 2023. In the six months, Standard Bank Group recorded headline earnings of ZAR 21.2 billion, and that was up 35% relative to the prior six months and delivered a return on equity of 18.9%. This performance was underpinned by robust earnings growth across all our banking business and our Insurance and Asset Management business. The group ended the period with a strong Common Equity Tier 1 ratio of 13.4%, and net asset value grew by 10%. The slides that follow cover our banking business results, and thereafter, I will cover Insurance and Asset Management, followed by a business unit and regional splits of results.
Our banking business benefited from continued client franchise growth, larger balance sheets, and increased transaction volumes, as well as certain markets and interest rate tailwinds. Revenue growth, at 27%, was well ahead of cost growth, which supported strong positive operating leverage, and as Sim mentioned, a decline in the cost-to-income ratio to 50.5%. Credit impairment charges increased across all portfolios, reflective of a difficult macroeconomic environment, and the credit loss ratio increased to 97 basis points. This ratio remained within our through-the-cycle target range. Banking operations recorded headline earnings growth of 42% to ZAR 18.7 billion, and the return on equity improved to 19%. Despite significant changes in exchange rates at period end, average rates were similar period on period, and constant currency growth rates were therefore similar to growth rates translated into rands.
Looking at balance sheet growth, gross loans advances to customers grew by 9% to ZAR 1.4 trillion, and this was boosted by strong growth in the corporate and sovereign portfolio, up 17%. On a regional basis, South African lending growth was 8%, and Africa Regions was 16% on a constant currency basis. In CIB, we saw increased drawdowns on existing facilities and good origination in investment banking in the half, led by client demand in the energy and infrastructure and consumer sectors. Investment banking in South Africa originated ZAR 81 billion in the period. In contrast, disbursements declined across other product categories in South Africa. The overall mortgage market declined by around 20%, given customer affordability constraints, and we therefore saw mortgage disbursements coming off a high base in 2021 and 2022.
Vehicle asset finance, personal unsecured lending, and business lending disbursements slowed, too. More so in personal finance than in commercial finance. We continue to see lending opportunities in South Africa and stand ready to support our clients' demand. Deposits increased by 7%, driven by ongoing underlying client franchise growth. Current savings and call accounts grew by 7%, and term deposit growth outpaced to this. On a regional basis, we are encouraged by the strong deposit growth of 14% on a constant currency basis across our network of banks in Africa Regions. On an average balances basis, assets grew by 10% and liabilities grew by 9%, consistent with longer-term trends. Bigger balances and margin expansion drove a 34% increase in net interest income.
On the graph on the left-hand side, you can see net interest income growth of 34%, as mentioned, this was driven by, number one, strong average, average balance sheet growth seen on the previous slide. Number two, wider margins linked to higher average interest rates across South Africa, Africa Regions, and international. Weighted average interest rates across our network were 4% higher in the first 6 months of this year than the last first 6 months of last year. Net Interest Margin, shown in the graph on the right-hand side, increased by 87 basis points to 477 basis points, of which 66 basis points related to positive endowment. This movement equates to a positive endowment impact of ZAR 6.5 billion in the period, and South Africa contributed ZAR 2.8 billion of this impact.
The negative impact of tighter asset pricing due to increased competition in home loans, vehicle asset finance, and corporate lending in South Africa, was more than offset by a mixed benefit from stronger loan growth in Africa Regions. Excluding the impact of endowment in this period, NII growth would still have been a strong growth of 15.5%. Net interest- net fee and commission revenue, rather, increased by 6%. Transaction fees were supported by a growing client base, higher client trade and transactional activity, and annual price increases. Ongoing investments in our digital capabilities drove higher adoption rates, growth in activity, and in turn, revenues from digital platforms. For example, card-based commission revenue grew by 12%, linked to higher card turnover, and electronic bank- banking fees grew by 9%. Fewer advisory deal opportunities resulted in a decline in knowledge-based fees.
Some deals were delayed, and there's a strong deal pipeline for the remainder of the year. Trading revenue grew by 36% to ZAR 11.7 billion. Fixed income and currencies recorded an exceptional performance, driven by increase in widespread foreign exchange-related client activity. Within CIB trading revenue, client revenues grew by 27% to ZAR 7.5 billion. In our market making activities in CIB, we benefited in the current period from African currency devaluations, which is unlikely to be repeated, as well as sizable structured equity trades in investment banking. Turning now to credit provisions on slide 25. This slide reflects our balance sheet provisions held against credit impairments over a long period. It shows a steady buildup in provisions and total coverage ratios, and this was through the implementation of IFRS 9, which introduced forward-looking provisions.
The COVID-19 pandemic, where business activity was severely interrupted and clients were offered payment holidays, and now a period of rapidly rising inflation and much higher interest rates. Our stock of balance sheet provisions is now at ZAR 61.7 billion, and this represents a prudent 3.8% of our total loan book. On the left-hand side of the slide, you can see an analysis of our loan book. It shows that the percentage of our book, which we classify as non-performing, or Stage 3, has increased to 5.8%. Our early arrears, or Stage 2 book, has remained similar to last period at 7%. In the middle graph, you can see how we have responded to these changes in terms of raising provisions.
Stage 3 provisions have increased to ZAR 43 billion. This amounts to 70% of our ZAR 62 billion of total provisions. As a percentage of the Stage 3 book, this has reduced to 46% coverage, largely due to a higher weighting of highly collateralized mortgages and corporate lending in the Stage 3 book. This slide expands the middle graph on the previous slide and analyzes balance sheet provisions by business unit. The June 2023 bars on this slide add up to the ZAR 62 billion I mentioned already. In Personal and Private Banking, provisions for Stage 3 loans increased by 14%, as customers battled to keep up with interest rate increases in South Africa. Many of these customers are part-paying. We classify them as Stage 3, and provisions are raised accordingly. We also saw an increase in customers on a debt review in the period.
The Stage 3 coverage ratio dipped slightly in PBB, but remains very prudent at 47%. The overall coverage ratio in PBB increased to 5.9%, and this is much higher than pre-COVID levels of 4.3%. In BCB, Stage 2 provisions will increase to account for pressure evidenced in the small business segment, driven by affordability and electricity supply constraints. Stage 3 provisions will increase for new NPLs in South Africa, as well as West and East Africa in this business unit. As you can see, total coverage ratios increased in BCB. Corporate provisions and coverage ratios are determined on a case-by-case basis. In the current period, new Stage 3 loans are either highly collateralized or have firm workout plans in place, and hence a lower Stage 3 coverage ratio is noted.
Credit impairment charges income statement increased by 42% to ZAR 8.4 billion. Credit impairments on financial investments, and this is shown in the light blue on the left-hand graph and includes impairments on sovereign exposures, were ZAR 584 million in the period. In the current year, we raised additional sovereign provisions in relation to risks in Malawi and Zambia. The overall credit loss ratio increased from 82 Period. Variable remuneration increased on the back of strong business performance and contributed towards the higher staff cost growth. Costs related to technology investments grew by 13%. I will spend some time on this on the following slides. Premises expenses grew by 10% overall. Load shedding in South Africa increased fuel costs. Municipal and cash security costs were also higher. A reduction of physical footprint helped contain expense growth.
All other costs, when aggregated, grew in line with the weighted average inflation of the group, which I mentioned was 12.5%. Our investment in infrastructure aims to support our 11 million clients and their activities on the channels of their choice in South Africa. Based on their usage patterns shown here, our increased investment in digital infrastructure is appropriate to support the increased volumes and values flowing through these digital channels. In PBB in South Africa, we saw a 5% increase in digital value transactions and a 23% increase in total digital transactions. Our customers are converging their usage on our mobile app from USSD banking and internet banking. In the month of June 2023, for example, we recorded more than 100 million logons to the app, and this is up from 55 million logons this time last year.
Our access to clients has been improved by reconfiguring our branch network over the last couple of years. We continue to increase points of representation via the deployment of Pick n Pay in-store branches, kiosks, and branches on wheels as we rightsize and close traditional, large, and expensive bank branches. Outside of South Africa, our clients are showing the same digital adoption patterns, with digital transaction volumes growing by 14% in BCB and 27% in PBB. Total IT spend, which includes staff costs, was up 12% for the period. As covered by Sim earlier, this spend has resulted in improved system stability and resilience, and significantly improved response and recovery times. Our client experience score in South Africa have benefited as a result. Our cloud migration journey remains on track, with 34% of planned cloud migrations now complete.
Our call centers and public-facing websites are now fully deployed and running on the cloud in South Africa, contributing to a 100% uptime. IT intangible assets on balance sheets are valued at ZAR 11.5 billion at the end of June, this compares to ZAR 21 billion in 2018, thus illustrating a steady replacement of on-prem, owned, and bespoke technology to utilizing cloud-based software as a service. That completes our banking analysis, I'm now turning to Insurance and Asset Management. Our acquisition of the minority shares in Liberty last year triggered a change in the way we organize and run the group. Sim has shown you how we have organized ourselves into four business units.
As illustrated on this slide, the IAM Business Unit combines all insurance and asset management businesses across the group into a single business unit, and this integration is now complete. Inter business unit attributions have also been agreed to incentivize distribution of products manufactured in an adjacent business unit. In terms of capital optimization, Liberty declared ZAR 3 billion in dividends as part of a transaction in early 2022, and we have received a further ZAR 3 billion in dividends since the transaction. This increased dividend flow is linked to improved performance and a lower targeted capital coverage ratio in Liberty. The potential buyout of Liberty Two Degrees minorities announced recently will deliver further capital synergies. Opportunities for structural realignment within the group exist, which, once effected, also will deliver additional capital optimization. These combined synergy benefits exceeded the expectations we had at the time of the transaction.
Insurance business across all our operations generated new business value of ZAR 1.4 billion in the period, which is a significant increase compared to the prior period. The increase was driven by all the South African insurance business lines. Group assets under management increased to ZAR 1.4 trillion, This is making us the third largest asset manager in Africa. Insurance operations overall delivered ZAR 1.8 billion in headline earnings, which was up 26% higher than the prior period. In the long-term insurance business in South Africa, underwriting risk has largely stabilized to pre-pandemic levels, Retail mortality experience is now broadly normalized and within expectation. Client persistency has deteriorated on certain books, particularly on investment propositions and solutions offered into the middle and the mass markets. Asset Management operating earnings increased by 4% to ZAR 601 million.
Within South Africa, earnings decreased largely because of higher planned ex-operating expenditure, within Standard Bank. Africa Regions recorded a strong performance, with earnings up 27% in the period, driven by higher assets under management and related fees. IFRS 17 has prompted a change in the composition of assets and exposures that previously resided within the shareholder investment portfolio, and this has now been renamed Shareholder Assets and Exposures. This portfolio is particularly sensitive to long-term bond yields and unlisted property valuations, and landed on a loss of ZAR 14 million in the period, compared to a loss of ZAR 265 million in the prior period. IAM recorded improved operational performance, and after attributions to banking business units, increased headline earnings to ZAR 1.4 billion. IAM's ROE of 13.1% is improving, but remains below the group's cost of equity.
We expect IAM's ROE to continue to grow to within the group's target range of 17%-20%. The group's capital position remains robust. As at 30th of June, the group had capital of almost ZAR 270 billion. As I mentioned, the group's Common Equity Tier 1 ratio was 13.4%. The group's annualized return on equity of 18.9% is well above the group's cost of equity, and our board approved an interim dividend of ZAR 6.90, which equates to an interim dividend payout ratio of 54%. The dividend growth of 34% is in line with the growth in headline earnings per share. On the following slides, we look at the Standard Bank Group franchise results split by business unit and legal entity, where we use legal entity as a proxy for region.
The left-hand pie chart shows headline earnings by business units, excluding the center and ICBCS. Here you can see our four business units and their relative contributions to the group. CIB remains the largest contributor. On the right-hand side, we show a legal entity view of group earnings. In this half, SBSA contributed 40% of the group's earnings, and Africa Regions contributed 44%, up from 36% this time last year. International's large contribution in the half stems from significantly increased revenues in operations in the Jersey islands and the Isle of Man. This waterfall chart illustrates the business units' contributions to the group's earnings growth and shows that all four business units contributed positively. PBB grew headline earnings to ZAR 4.6 billion for the half and generated a return on equity of 19.4%.
BCB improved ROE to nearly 38% on the back of a 61% increase in headline earnings. CRB added ZAR 3 billion in earnings to end at ZAR 10.7 billion, up 41%, and generated an ROE just under 25%. I've already covered the key drivers of the NIM performance. ICBCS recorded a strong operational performance, and our share thereof in rands was ZAR 1.1 billion. Earnings were lower than in the prior period, given a once-off insurance claim receipt, you may remember, in January 2022. Central costs increased due to higher withholding tax paid on dividends received from our subsidiaries, as well as Forex losses crystallized between dividend declaration and receipt dates. The center also benefited in the prior period from a release of a COVID-19 related credit overlay provision, amounting at the time to ZAR 151 million.
As noted by Sim earlier, our South African banking franchise headline earnings grew by a strong 17% to R 8.4 billion, and the return on equity improved to 15.2%. Despite a difficult operating environment, demand for renewable energy financing and trade facilities, continued strong transactional activity, and a volatile foreign exchange environment helped this business drive balance sheet and income growth. Importantly, within the 11% non-interest revenue growth shown here, PBB grew fee and commissions by a strong 8% in South Africa. Our Africa Regions franchise performed particularly well, with headline earnings up 65% in rands and by 63% in constant currency. You can see here the return on equity improved to over 28%. Excellent income growth was enough to absorb increased costs and elevated credit payments in the period.
Credit payments almost doubled, driven by book growth and higher inflows into Stage 3 across most countries, linked to higher interest rates and provisions related to sovereign credit risk migration in certain African markets. Our Africa Regions franchise delivered an outstanding performance across all 3 regions. You can see from the map that all countries grew earnings by more than 10%, other than Angola. The top 6 contributors to Africa Regions headline earnings were Ghana, Kenya, Mozambique, Nigeria, Uganda, and Zimbabwe. The graph on the left shows the earnings contributions by subregion over the last 11 interim periods, delivering average earnings growth per year of 20% in rands. The graph on the right shows the same data, but by country. As you can see, it is a well-diversified portfolio that has delivered really robust earnings growth over time, a testament to our strategy.
From a macro perspective, the outlook remains murky, but it seems more constructive than at the beginning of the year. The resolution of the US debt ceiling standoff and strong action by authorities to contain turbulence in U.S. and Swiss banking markets reduced the immediate risk of financial sector turmoil. Of course, we are cognizant that risks to global growth remain. Geopolitical tensions, slower growth from China, and higher and longer, higher for longer inflation interest rates all weigh on the global growth outlook. During 2023, we have welcomed positive actions in Ghana, Kenya, Nigeria, and Zambia, which have reduced sovereign credit risks in these markets. Sovereign credit risk remains high, however, in Malawi, and has increased in Angola and Mozambique.
In South Africa, we are encouraged that inflation is back within the target range. The next move in interest rates is likely to be down sometime in 2024, we think. We currently expect that the South African economy will grow slowly at 0.8%. This is somewhat faster than most other forecasts for 2023, but we believe that growth will be supported by continued rapid investment in electricity generation and storage, and by accelerated structural reforms. For the 12 months to 31st of December 2023, banking revenue growth is expected to be stronger than previously guided in March 2023, but slightly slower than the strong H1 performance. As shown here, off the back of our stronger-than-expected H1 performance, we have upgraded our NII and NIR guidance for the full year.
Despite continued management focus, banking cost growth is likely to remain elevated in a high inflation environment, and continued investment in our franchise will be required to ensure our client propositions remain competitive. Banking growth is expected to remain ahead of cost growth, and we will be generating positive jaws. The credit loss ratio is expected to remain in the upper half of the Group's through the cycle range of 70 to 100 basis points, driven by year-on-year increases in credit impairment charges across all three banking business units. NIM's recovery should continue at a similar pace to the H1, barring extreme weather and other unforeseen market events. The Group's 2023 ROE will be lower than the H1, but is expected to remain inside the 2025 target range of 17%-20%. I would like to reemphasize what Sim said earlier.
These results should not be seen as a once-off moment. They emerge from a long-term strategy and are a stepping stone towards meeting our long-term commitments to our clients, our shareholders, and the people of Africa. We appreciate analysts' concerns regarding some of the impacts of this particular set of results, and we would like to address them now to avoid any doubt about the sustainability of our financial outcomes to 2025 and beyond. Firstly, on endowment. Yes, endowment impacts will fade as rates stabilize and start to fall, but low interest rates are good for growth and will be supportive of our clients' needs and abilities to transact and to borrow. We have part hedged our endowment exposure to mitigate some of the downside risk, and our NII sensitivity in South Africa has been reduced to ZAR 1.2 billion for every 100 basis point rates changes.
We will continue to closely monitor, and where applicable, manage this exposure going forward, the endowment exposure. NII growth, as I mentioned already, excluding endowments for the half, was still a very strong 15.5%. Most importantly, our client franchises are large and robust, and continued strong lending and deposit growth, particularly in our Africa Regions franchise, bodes well for NII growth going forward. Trading revenue. We acknowledge an outside trading performance in this half. Market volatility and our access to FX flows allows us to generate additional revenues, specifically following the Naira and Kwanza dislocations. Of course, this may not be likely to be repeated. We have widespread underlying client franchise, giving clients access to markets and risk mitigation solutions, and these also had an excellent performance in the first 6 months of this year.
In fact, it is this client-led business that has allowed us to grow trading revenues by, on average, 17% every year for the last 10 years. We therefore are confident that our revenue growth targets remain achievable towards 2025 and beyond. Finally, looking at the translation impact of weaker currencies. Towards the end of the half, we saw a significant weakening in currencies, particularly in Nigeria and Angola. These market-set valuations are welcome, as Sim indicated, and positive for investment and growth in these countries, as we have noted already. At the end of the reporting period, the assets and liabilities of our subsidiaries are translated into rands at the new lower spot rates, and impacts accounted for in the foreign currency translation reserves in equity. These impacts were large, but minimized by the portfolio effects of dollar, pound, and other subsidiary balance sheets denominated in a strengthening currency.
Going forward, these new market rates will then be used to translate the earnings from these countries. Africa Regions has, over the last 10 years, grown earnings translated into rands by, on average, 20%. I think this gives you the evidence about the resilient diversity and ability to deliver out of this network of countries. Our primary measure of shareholder value remains return on equity, and in line with our 2025 commitments, we remain focused on delivering an ROE sustainably within our target range. Many of you will be familiar with this slide. Our drivers to deliver improved ROE have not changed, and we look forward to delivering returns that will exceed market expectations.
In the short term, we continue to monitor the impacts of high inflation, higher interest rates, electricity supply constraints in South Africa, sovereign vulnerabilities in certain African markets, and global geopolitical tensions, all of which pose a risk to our outlook. Regardless of the scenario which unfolds, we stand ready and able to serve the needs of our 18 million clients and to support the growth of economies in which we operate. Thank you for your attention. I will now hand you back to Sim.
Thank you very much, Arno. Our purpose, Africa is our home, we drive at growth, just does not change. We remain committed to that purpose. Our medium-term strategic priorities are certainly just as valid now as they were when we announced them in 2021. Our financial targets also remain in place, and as we've said, it's noteworthy that we have achieved our revenue, cost to income, and return on equity targets this half, and we are absolutely confident that we will achieve them for 2025. Once again, we can't promise only upward movement. Many of our clients are under strain, as you heard from Arno. The world is a very volatile environment, and it remains unpredictable.
These realities, combined with our commitments to soundness, to supporting our clients, to sustainability and inclusion, and to fulfilling our purpose, mean that the path to 2025 will be more winding and bumpier than in a perfect world. Just as we delivered on our commitment for the H1, as seen on the left-hand side of this slide, we will deliver on our priorities for the full year of 2023. These immediate priorities for the next half are listed on the right-hand side of the slide. They are, first, manage costs tightly and credit responsibly, supporting our borrowers to the best of our ability, consistent with our duties to our depositors and to our shareholders. Second, provide excellent service, both in person and on a consistently stable system.
Third, continue to expand our leadership in promoting intra-Africa trade and investment, continuing to connect Africa to China, to Europe, and to the United States. Fourth, continue to expand our leadership in inclusive and sustainable finance. Last, remain within our ROE target range. Recently, the group was recognized as the most valuable banking brand in Africa by Brand Finance for the second year in a row, increasing in value by nearly 30%. Brand Finance also awarded us Most Admired Financial Services brand in both South Africa and Africa as a whole. As always, our sincere gratitude to our policymakers and regulators for the world-class regulatory environment that they create for us and for our sector. We're equally grateful to our shareholders for their continued support. We'd like to thank our 18 million customers for their continued trust in us.
Last but not least, we thank our 50,000 employees across Africa for their incredibly hard work, and this, of course, includes our colleagues in the rest of the world. Thank you, all. That concludes our presentation. We'll now take questions, and if I may ask, my colleagues to join me on stage, starting with Funeka Montjane, Chief Executive of PBB, Bill Blackie , Chief Executive of ICBC, Kenny Fihla, Chief Executive of CIB, Yuresh Maharaj, Chief Executive of IAM, and Arno Daehnke, the Chief Financial Officer. We'll start with questions here in Baker Street, and then we'll turn to the conference call and then finally to BlueJeans. A reminder, to submit your questions on BlueJeans, please do so by clicking on the Q&A link on the right-hand side of your screen.
Please remember, for those of you that are in the room, that there's a button that you need to push to get the microphone going right there in front of you, and please speak as clearly as you can into the microphone. If you could please tell us who you are, when you, when you speak. Let us start then in Rosebank. Did I say Rosebank? It feels like Rosebank here at the GLC in Sandton. Any questions from the floor? I see a hand here, the gentleman in the blue shirt.
Hi, well, done in the result. Myles Ruck, Laurium Capital.
Hi, Myles.
Hi.
Good to see you.
Your eyes are going. Your new glasses.
No, this light is like an interrogation, constantly.
Two questions. Firstly, congrats on the results. If you look at the last 10 years, the growth has been very strong, but Africa has grown substantially faster than South Africa, sort of, I think 17%-18% a year, and it is now 45% of earnings of the group. If you look out the next 3-5 years, and it's obviously a lot of forecasting, what sort of number do you think that could be going forward? That's the first question. The second one, just on the credit loss ratio, which was at 97 basis points for the H1.
Just to clarify, on the guidance for the full year, it seemed quite comfortable that you're between 75 and 100 bp range, which assumes, I guess, at this stage, that you expect it to be lower in the H2 than the 97.
Myles, on your first question, we are about to go into our four-year planning cycle, and we'll be presenting that to the board in the next couple of months. All of this is predicated on the rate of growth of South Africa and the various countries in which we operate. We don't set specific targets. It's dependent entirely on business volumes and the growth in those economies. We don't set a target, and we don't announce one either. It's just dependent, as I say, on customer activity and GDP growth in each of those countries. Honor, do you want to maybe embellish on that proposition and then answer the second question, please?
Yeah, the growth has been stronger than expected, so it's obviously very pleasing. We'll continue to invest into our network of Africa Regions countries. That's no doubt where the growth factor for the group is gonna be differentiating us from our peers. I think the strategy is, is, is proven to deliver very well there. It's always been a CIB-led strategy. What I'm particularly pleased about, actually, is the progress we're making in our retail business, as well as our Business and Commercial opportunity in that network of countries. Going forward, the strong growth of vector actually is gonna come from those other two business units, and CIB is probably gonna just continue delivering its, its strong franchise there.
Yeah, the CLR question?
The CLR, yeah. We expect to better H2 of the year, particularly in Personal and Private Banking. We've got various management actions in place, which we believe are gonna deliver fruits in the H2. That will allow us to, to remain within comfortable with our target ratio range.
Great. I think there was a hand who was there.
Yeah. Morning, sir. James Starke from RMB Morgan Stanley. Congratulations on an excellent result. My question's on NIM, and there's 2 parts to it, so I guess I'm probably directing it to Arno. I mean, you mentioned in the outlook you have taken specific action to hedge some of the endowments in South Africa. If you could just comment on your strategy to manage endowments, specifically in the Channel Islands or international business. Then secondly, if you look beyond 2023 to 2024, how should we be thinking about your NIM evolving from the current 477 basis points? Thank you.
The last point was on NIMs evolving. We've part hedged our endowment exposure. We continue to look for opportunities to hedge further. Obviously, to fully hedge the portfolio is probably not feasible at this point in time and will take quite a bit of time. As opportunities arise, we will continue to hedge downside risk, and that includes not just South Africa, but in the Channel Islands as well as in Africa Regions, where we've employed, deployed tactical hedging strategies over the time. Our NIMs, we expect continued strong NIMs for this year, and then a slight reduction in 2024.
Thank you.
Thanks, James. You have the gentleman next to James.
Morning, sir, and thanks very much for the opportunity. It's James Starke from RMB Morgan Stanley. My questions relate to Insurance and Asset Management, so you, Yuresh. Three questions on that. Just, first one, can you just explain the dynamic around the increase in the index new business value by 7% relative to the VNB growth, which was more substantial? I guess there's a variety of metrics to look at there, your headline number being 32%. If you can just unpack the better margins. Can you just explain the impact of onerous contracts ? We're still getting to grips with, with IFRS 17 and just having a look at, you know, the current half relative to the previous half's disclosure. There seems to be some movement in the onerous contracts numbers. If you can just unpack the impact on profit.
Lastly, can you just expand on, on what you need to achieve operationally to improve the ROE in the segment to, within the target range of 17%-20%? Thanks.
Okay, thanks. Thanks, Arno. I think on the first, first aspect on the index new business, driven at inflationary levels, I mean, I think that's the key driver as well, which will operationally give us leverage in the franchise, in South Africa and in Africa. With regards to new business value, that increase in what we show now is effectively the entire new business value of the combined offerings of the group. That includes the embedded products and solutions that are now distributed, particularly through Personal and Private Banking. We aggregate the sort of combined impact and the value that's been achieved over the last year. That's the, that's the composition of new business value. On the final piece, I think it's a combination of three factors.
One is continue to drive volumes, tightly manage costs, and continue looking for capital efficiencies, as was called out earlier.
Thanks, Yuresh. Just the last point on owners contract.
Oh, sorry. I mean, we'll deal with that obviously in detail. This is the inclusion of IFRS 17, where we sort of unpack some of our new disclosure, moving from IFRS 4 to 17. That sort of talks through a particular definition of onerous contracts relating to the standard, and that talks to it and sort of at the sort of highest macro level, where you incur sort of costs and charges upfront, but obviously earning the revenue stream over the periods of time. There's distinct portfolios that we have to look at and identify those. We can unpack that on the one-on-one discussions later.
Thanks very much.
Thank you so much. I don't see hands. Maybe just speak up, sir. I can't see. Ah, the inimitable Mr. Levin .
Am I on? Thank you.
Human.
First of all, my congratulations on the excellent results. I'm particularly impressed the way you've taken great steps to impress on us how sustainable they are. We share your hope, or rather your faith, we live in expectation. If I may just remind you all of the effect of the Grindlays acquisition now 30 years ago, with Africa's contribution, it won't be long before it's gonna be close to beating South Africa. I'm particularly impressed by your country disclosure in slide 46. I think that's a very notable first-time step. It's obviously been facilitated by the improving performance and stability. I'm curious to know what your plans are for Liberty Two Degrees, taking that off the market. I'm sure you got some very unhappy shareholders over the period of that investment.
I'd like to also compliment you on your capital efficiency, achievements within Liberty. That ZAR 6 million was obviously not all dividends or it might have been called dividends. I'm still curious to know, as the previous questioner, raised, how you're gonna get from an ROE of 13 to 17, although Juris has provided some explanations. Thank you.
Sim, thank you very much for those comments. I didn't detect any questions there. We agree with a lot of what you said, and we thank you for your contribution to the Grindlays acquisition. Could we take any more questions from the floor? Doesn't appear to be any. Sarah, are there any on the conference call?
Hi, Sim and Arno, and team. Thank you for the presentation and congratulations on the results. A few questions from my end. Can you please comment on the way you see elevated sovereign credit risks emerge, how do you believe it evolved to initial expectations in March, and your outlook on credit impairments on financial investments? Secondly, on the cost-to-income ratio improvement materially, you noted it improved in banking activities. Can you please unpack the drivers for moderating costs effective in the H2 of this year, and where the cost-to-income ratio is expected to land in 2H23? Thanks.
Thanks, Arnold. I think those are yours.
Yeah, I already mentioned the credit outlook being more benign in PBB, and we see those management actions bearing fruit now already, so we've got confidence in that. If you can go into detail, that would speak. On sovereign investments, we're obviously monitoring carefully the environment for sovereign risk. We mentioned off the podium, Malawi is one of those sovereigns we're worried about, and we think we are appropriately provided and have managed our books as well as we can in the current environment. I think we also demonstrated last year on the back of the Ghanaian sovereign event, that such sovereign risk events can well be absorbed in the overall portfolio of the book.
On cost-to-income ratio, yeah, I've mentioned off the podium that we are expecting higher cost growth, not as high as the first six months, but for the full year it will be slightly lower. We expect positive jaws, and we continue to achieve our ambition of having a cost-to-income ratio at the low 50 percentile. I hope I covered everything there. The line was not that clear, maybe you can just confirm that I've covered it.
I think all those questions, I think there were three, and they're all covered. It was okay. Sovereign, impairments on investments and cost-to-income ratio.
Yeah.
Any more questions from the operator?
Yes, sir. We've got a question from Harry Botha of Anchor Stockbrokers . Go ahead.
Hi, good morning, everyone. Welcome. Just want to get a sense in the detail in South Africa. Obviously, credit loss ratio is lower than in some regions not. Is there anything one call for normal in, in terms structures, considering at the Stage 3 exposures to the force in the last few years? Thanks.
Sorry, operator. I certainly struggled with that question. Did you get it, Phyllis?
I did.
Yeah. Good.
Thank you for the question. I would say 2, 2 factors. The first one is that if you look at our competitive, the way in which we have, the credit loss ratio has changed over the last 3 years, you will note that it's been different. You will note that over the last 3 years, we've actually had a far more smoother, change in the credit loss ratio. That's the first one. The second one is that we are, as we've said, we are quite confident that in the H2 of the year, that we will be able to pull that ratio within its, the credit loss ratio within its, sort of, through the cycle range.
Great. Any more questions from the conference call, operator?
No further questions on the conference call, sir.
Thank you so much. Sarah, on BlueJeans.
Thank you, Tim. The first question is from Jeremy Gorven . Should South Africa and the world go through an interest rate reduction cycle of approximately 200 basis points, would this pose a headwind to NII growth? What would the impact be on cost-to-income ratio and ROE? In addition, is the bank prepared to manage its costs in such a way as to preserve cost-to-income and ROE?
Arnold?
Yeah. We do disclose the interest rate sensitivity. I mentioned off the podium, 100 basis point interest rate drop would reduce the NII in South Africa by ZAR 1.2 billion, and approximately a similar number across our other portfolios as well. You can multiply that times 2 for the 200 basis point impact. Of course, that would dampen the revenue growth, but at the same time, this would be premised on the back of reducing inflation and lower interest rates. This would, number 1, support our credit outlook, and number 2, also reduce our cost growth, which is linked in some instances to the inflation environment.
We remain confident that our medium-term targets, and that we, they will elaborate at 17%-20% ROE and the cost-to-income ratio approaching 50%, will be maintained, notwithstanding the declining interest rate environment going forward.
Great. Thanks, Sarah.
Thanks. The next question is from Ross Krige. Given the level of profitability in Africa Regions supported by very high quality rates, do you see any risk of any relevant government implementing banking special tax?
I mean, at a high level, there's always a possibility, especially given what's happened in, in Europe, the latest being Italy, as well as Spain, Hungary, and various other countries. That's always a possibility, and we stand ready to deal with it, as is appropriate.
Thank you. The next question is from Charles Russell. How do you anticipate that the significant Naira and Kwanza devaluations will impact your H2 earnings?
Obviously, they'll be translated as weaker rates, but at the same time, we're seeing a better business environment in both of those markets. That will be offsetting to some extent, the, the lower interest rates. We must also bear in mind, Russ, I keep on emphasizing the portfolio effect. As some country currencies are weakened, others are strengthened, and that obviously gives us a net uplift, and we've seen that in this period as well, both on spots, FCTR, as well as on average interest rates. Sorry, average exchange rates.
The next question is from Chris Steward . There are two questions. The first one is: With SBSA's CET1 ratio at 11.7% and constraints on repatriations across certain African subsidiaries, are you confident that the group can sustain its historic full-year dividend payouts for 2023 and beyond?
Mm.
Then the second question: All banks are reporting management actions in collections in retail banking. Can this be greater than a zero-sum game, or is there pressure on consumers? What has to give, discretionary expenditure or future consumption, if loans are to be restructured and terms extended?
I'm not gonna take this.
I'll take the first one.
Wait a second, yeah.
Chris, I'd like to know what constraints you're talking about. We can't feel them. Our dividends are all being repatriated from Africa Regions in size and volume, as and when they are declared. As we all know, there were some constraints in Nigeria as quite some time ago. Those have been alleviated really at the beginning of the year, and certainly with the new regime, market-related regime there, that we don't see mixed constraints going forward. Africa Regions is increasingly paying a larger and larger share of the group's dividends, and to cut to the chase of it, we continue to see our dividend being paid within the target payout ratio range of 45%-60%.
Collections?
Yes, on the retail side, firstly, no doubt there is pressure from a client perspective. I do want to say that from our client perspective, we do have a quite a high quality, middle income to an affluent client base that we lend to. A lot of these clients are paying, they're just not paying the current interest rates. There's a shortfall from it in terms of the current interest rates. Whenever we make arrangements with these clients, there are a vast majority of these clients are adhering to that. We definitely have gone through different cycles that look like this. What we do know is that when we provide bridging with the right level of communication and right level of support, these clients will come through.
I'm absolutely, I've got a high degree of confidence that the actions that we are doing to support our clients through this, are not only important from a management of the impairment as cycle or their credit risk, but really for deepening the relationships we have with our clients, so that they know that we are not a fair weather bank. Sorry, 1 more question from Chris Steward . Is this a more conducive environment for the completion of the sale of the ICBCS stake?
The conversations with our colleagues at ICBC are ongoing. We've just come back from the Middle Kingdom with the chairman. They are going to be here next week to attend the BRICS conference. We're going to be talking about the continued integration of ICBC into ICBCS into ICBC, strengthening our cooperation with them, and that conversation continues. There's nothing new to announce in that regard, Chris.
The next question is from Wale Adebayo, from Goldman Sachs. Congratulations on the strong results. The question is around SBSA ROE. This ROE, despite solid endowment tailwind, still sits at 15%. What drivers will help improve this as the benefit from the rate subside?
Honor? Yeah, I mean, the macro environment is tough in South Africa, as we all know. In PBB, we've had to raise considerable amounts of in payments. PBB business in South Africa grew earnings by only 1%. As we see rates come off and the macro environment improves, bit of growth coming through, we'll see a higher ROE for SBSA. Yeah, I think I'll probably leave it at that. Need to bear in mind that SBSA does have some of the group costs, and obviously that, that will always be a cost which has to be borne by this entity.
The next question is from Louis Kruger. He says: The FCTR did not show a loss, as one would expect, given the material devaluation in the naira and in Zimbabwe. Can you give color on why this is not the case?
Yeah. Thanks, Louis. I'll take that too. We've received strengthening in the Ugandan shilling, Mozambique, Zambia, Isle of Man, which is, with the dollar-denominated, as well as pound-related currencies. That, obviously, from an FCTR point of view, has offsetting the weakening of the naira, the Angolan kwanza, and the Zimbabwean currency. There we would have our FCTR debits. Elsewhere in FCTR credits, the net impact is largely flat for the period. Again, I emphasize the portfolio effect.
The next question is from David Leshilo. Given the devaluation in naira, which exchange rates do you expect to get money out of Nigeria at, in terms of dividends?
At the official exchange rate, which is currently trading at NGN 780 to the dollar.
Thank you very much, Simon. That's all the questions we have.
Thank you very much, Sarah. To the shareholders and interested people on the line, thank you for your time. To the ladies and gentlemen here in Morningside, thank you for joining us. It was wonderful to see you all. Please join us for refreshments outside, and thank you again for coming to Morningside.