Good morning, everyone. On behalf of the board and management of the Standard Bank Group, it's my pleasure to welcome you to the presentation of our financial results for the first half of 2024. This has been a half of disciplined, steady, and successful execution. We have delivered excellent organic growth throughout our businesses. I will begin by placing our strategic achievements and rapid franchise growth in their broader context. Our Chief Financial Officer, Dr. Arno Daehnke, will then take us through the results in detail. I will conclude by discussing our strategy and outlook. The performance of the world economy was dampened by continuing serious geopolitical tension, including major wars in Europe and the Middle East. Deglobalization, destructive trade rivalries, and the disruption of formerly well-established supply chains have continued and even accelerated over the half.
More than a billion people have already voted this year. We've seen serious political uncertainty and even outright instability in several major economies. Although inflation moderated, it did not slow down as fast as had been hoped. Policy rates, therefore, stayed higher for longer. Overall, the world economy grew at a lackluster pace compared to the growth rates recorded earlier in the century in more peaceful and globalized times. By contrast, most African economies grew rapidly. Both Nigeria and Kenya, however, had a difficult half. In both countries, economic reform encountered political and social resistance, reducing confidence and slowing growth. Protests in Kenya peaked during the first half, but Nigeria's ten days of rage occurred in July and August. Currency weakness in several major African economies is reflected in the group's costs and its income.
However, as Arno will show, it's important to look through currency effects to the strong underlying growth of these economies and, of course, our businesses. South Africa's first half is best understood as two distinct quarters. The first quarter was characterized by continued electricity and logistical constraints and by rising political uncertainty in some quarters, and that accelerated as the elections approached. Standard Bank was always unshakable in our optimism. We knew without doubt, and often said so, that constitutionalism, good sense, macroeconomic orthodoxy, and commitment to transformation would prevail. Of course, the group did its scenario planning and were ready for less positive outcomes. But we are on record as having said that South Africa would remain robust, and that after the election, there would be a rally in confidence and in asset prices, and an acceleration in investment and growth, and so it has proved.
The second quarter saw impressive improvements in both electricity and supply and logistics. It also saw the establishment of a government of national unity, firmly committed to constitutionalism and to continued fiscal prudence, transformation, and structural reform. Inflation improved, but the policy rate stayed very high by historical standards. The macro conditions are reflected in some aspects of our financials for the first half, as Arno will discuss. They did not, however, slow us down from executing our strategy or from delivering successfully against our strategic priorities to transform client experience, to execute with excellence, and to drive sustainable growth and value. Our robust and efficient technology enabled much of the successful execution and delivery of our strategy. We continued to maintain excellent stability in South Africa over the first half. We have had no material client incidents in the last two years.
Our investment in technology is delivering best-in-class client platform, world-class customer relationship management systems, and AI-enabled contact centers. These successes are not confined to South Africa. We have powerful, full-scale, always-on digital financial services operations in our 20 countries in Africa. These results reflect us doing precisely what we said we would do this year when we last reported in March. For instance, we said we would continue to grow our client franchises. Well, we delivered 5% growth in active client numbers, which resulted in 19.5 million clients. We said we would defend and grow our businesses. We delivered a 10% increase in fee income in personal and private banking in South Africa, and we grew assets under management in South Africa by 11%....
We manage risk effectively while supporting our clients with the execution of deals in CIB for clients worth ZAR 105 billion. Disbursement in South Africa of ZAR 61 billion, comprising ZAR 40 billion for PPB clients and ZAR 21 billion for PCB clients, and death, disability, and annuity payouts of ZAR 13 billion. In line with our strong focus on saving to invest, we continued to execute our intention to move our processing into the cloud. By the end of the period, 44% of our processing was in the cloud, delivering reduced costs and increased stability. Our subsidiaries provided a diversified source of dividends for the group. The integration of Liberty into the wider group and capital optimization initiatives have facilitated another ZAR 5.7 billion in distribution so far this year, and over ZAR 11 billion since the transaction was announced.
While our offshore entities provided a dividend of ZAR 4.2 billion to the group. Our large scale and diversified income streams have enabled us to grow income steadily over the past decade, delivering average growth of 7% over the period. Similarly, headline earnings have grown on average by 10%. Earnings have grown faster than income, reflecting consistently excellent credit management and steadily improving operational efficiency. Our return on equity has improved by 580 basis points over the decade, even including the enormous impact of the pandemic. Since we listed in 1970, we have only missed one dividend, which was when the South African regulator issued a directive at the height of the pandemic, discouraging the payment of dividends.
As shown here, our average payout ratio has been 50% or better for the last decade, and we have grown our dividends by an average of 12%. In summary, we are the largest financial organization in Africa. We are a resilient and a consistent business. We deliver what we undertake to do. We grow steadily. We generate market-beating returns for our investors. Our record of consistent execution and good growth is also reflected in the strength of our brand and our reputation as a leading African financial services business. In the first half of the year, for example, we won a number of awards which reaffirm our expertise and capabilities across Africa. These include Best Investment Bank in Africa from the Banker, Africa's Best Private Bank from Euromoney. I Am Sandton City received global recognition from the International Council of Shopping Centers for marketing excellence.
Overall Firm for Research in the Financial Mail Top Analyst Award, as in eight of the last nine years. We are the top-ranked bank in South Africa and Africa in the Banker Top One Thousand Banks ranking. I now hand over to Arno to take us through the numbers.
Thank you, Sim. I'm now going to cover section two of the presentation, which covers the group results in detail. After an exceptional performance in 2023, we are pleased to be able to demonstrate continued strong organic growth and returns in all our businesses. In the six months to 30 June 2024, Standard Bank Group delivered record headline earnings of ZAR 22 billion and delivered a return on equity of 18.5%. Our franchise headline earnings growth, which excludes our investment in ICBCS in London, was a strong 7% in rands. The banking results reflected positive jaws to lower the cost-to-income ratio to 49.7%. We have declared our highest dividend ever of ZAR 7.44 per share, growing at 8%, and at a payout ratio of 56%.
The group ended with a strong common equity Tier 1 ratio of 13.5%. As Sim has covered, our disciplined execution of our strategy and the resilient nature of our group of companies helped us navigate a complex period from a macro perspective. When we provided 2024 guidance earlier this year, we flagged that weaker Africa Regions currencies, most notably the Nigerian naira and Angolan kwanza, would impact our group results when these subsidiaries results were translated into rands. This is now evident across all income statement and balance sheet line items. As can be seen on this slide, group headline earnings grew by 4% in rands and by 17% if the impact of currency movements is removed. This currency impact is expected to reduce in the second half of 2024 and to diminish further into 2025....
The slides that follow cover our banking business unit results. Our banking businesses benefited from continued client franchise growth, larger balance sheets, and increased transaction volumes. Total income growth at 1.4% was slightly ahead of cost growth, which generated positive operating leverage of 50 basis points. Credit impairment charges benefited from a few large restructures completed in June in corporate and investment banking, as well as improved client performance in our retail and business portfolios. Credit charges thus reduced by 15%, lowering the credit loss ratio to 92 basis points, which is back into our 70-100 basis points target range. Banking headline earnings growth of ZAR 20 billion was 6% higher, and ROE was 19%. The constant currency growth rates illustrated here show strong underlying franchise growth, with revenue up a strong 13%.
Slide 14 looks at trends in loan growth over the last five years. In the current period, gross loans to customers grew by 3%. Our largest book of corporates and in sovereign lending grew a robust 8%, supported by strong origination in the energy and infrastructure sector, driven by the continent's infrastructure deficit and energy transition and sustainable finance mobilization. Lending for home services grew by just 1% as client demand faded and pricing hurdle rates were maintained. Disbursements were 18% lower in South Africa in Home Services. The business lending portfolio declined due to lower client demand, affordability constraints, and also lower business confidence. Our focused retail vehicle and asset finance strategy, where we aim to be the primary provider of vehicle finance solutions for our own customers, has seen us maintain market share in this product.
Across all portfolios, our origination strategies remain prudent and selective and subject to customer affordability criteria. On the right-hand side, we show good loan growth in South Africa at 6% and Africa Regions at 15% in constant currency. Deposits increased by 2% period on period to over ZAR 2 trillion. More expensive term deposits grew faster than transactional accounts as customers actively searched for yield in a higher interest rate environment. PPB South Africa deposit growth was nevertheless 6%, as client acquisition, entrenchment, and retention strategies paid off. In South Africa, deposits grew by 4%, supported by a growth in term deposits, as I mentioned. In Africa Regions, deposits grew by 17% in constant currency. On an average balance sheet basis, average interest earning assets and liabilities grew by 5%, and this is a slowdown relative to longer-term averages.
As interest rates decline and economic activity picks up, we should see a reversion to mean growth, which will be positive for NII growth in the medium term. Starting on the left, net interest income grew by 7% to ZAR 50 billion, and margin expanded to 497 basis points. On the right-hand side, we have shown the drivers of NII growth, which illustrate that net interest income continues to benefit from asset growth, although to a lesser extent than prior years. The positive endowment impact of high interest rates was ZAR 2.2 billion in the period, or 20 basis points. For our portfolio of countries, weighted average interest rates were 40 basis points higher than the same period in the prior year.
For the 2023 year, this was 300 basis points, and this evidences the waning tailwind from higher interest rates in our margins. Asset pricing negatively affected margins during the period as competitive pressures were evident, particularly in South Africa, Kenya, Angola, and Mozambique. Pricing pressures in South Africa increased in home services, vehicle asset finance, and also in corporate lending. NII benefited in the current period from a new tranche of liquid assets being classified as held at amortized costs, and these were held at fair value in prior periods. This was a ZAR 1.1 billion uplift in the current period in NII, which would have been accounted for in non-interest revenue in prior periods. In South Africa, we started hedging endowment risk in 2022 already and have continued to extend the program.
This has reduced our interest rate sensitivity per 100 basis point rate cut to ZAR 932 million, despite a growing endowment base. Prior to any hedging activity, the sensitivity would have been ZAR 2.1 billion and was ZAR 1.2 billion this time last year. Net fee and commission revenue increased by 4% to ZAR 15.1 billion. Account transaction fee growth of 8% was supported by a growing active client base, clients doing more with us, and higher client trade and transaction activity, as well as annual price increases. Ongoing investment in our digital capabilities drove increased adoption rates, growth in activity, and in turn, revenues from our digital platforms. A drag on fees as a result of digitization and migration away from cash is now largely in the base in South Africa....
Card-based commissions grew by 6%, linked to increased card turnover in the issuing business and higher revenue from card acquiring, particularly on travel spend. As you can see here, electronic banking fees grew by 11%, supported by our clients' preference to process transactions in real time. Foreign currency service fees were impacted by increased competition in West Africa, driving margins down, but showed good growth in constant currency terms. In line with our expectations, trading revenue was softer against a remarkable performance in the first half of 2023. The graph on the left-hand side shows trading revenue for consecutive halves, showing that, 1, trading revenue has grown at 10% off the 2023 second half base, and that, 2, on average over the last 5 years, we have a strong and growing client franchise.
In the first half of 2020 and 2023, trading revenue was particularly strong due to increased client activity and trading opportunities in volatile markets. Excluding these periods, the business has recorded sequential increases in average revenues with a focus on growing client revenue. The graph on the right-hand side shows trading revenue by region. Contributions from Africa Regions and SBSA were equal in this reporting period. This graph illustrates the portion of total global markets revenues, which are market making and hence more volatile. Over the 5-year period shown here, on average, less than 20% of revenues are from market making, and client revenues show a healthy 11% compound annual growth. Turning now to credit provisions on slide 21. On the left-hand side of this slide, you can see an analysis of our loan book, which has grown by 3% since June 2023.
It shows the percentage of our book, which we classify as non-performing, or Stage 3, and has remained at 6%, apologies. In the middle graph, you can see our balance sheet provision levels, with overall balance sheet provisions up 8% since June. Stage 3 provisions increased to ZAR 49 billion, now 73% of our ZAR 67 billion of balance sheet provisions. Stage 3 loans remain well covered at 47%. Our total coverage ratio, at 4%, remains high, and we are confident that we are well positioned to manage risks arising from higher for even longer interest rates. PPB, South Africa, makes up two-thirds of non-performing loans, so we thought it would be worthwhile spending some time on the trends in this portfolio, specifically. Consumers in South Africa remain under pressure, navigating high inflation and interest rates and low economic growth.
Across the industry, customers in debt review have grown by more than 15% over the last year. With this industry-wide portfolio now around ZAR 88 billion. Our customer base continues to demonstrate resilience, with consumers proactively trying to find means to protect their assets and their credit records. In our portfolios, many customers are part paying, and customers are becoming better at engaging us to seek alternative solutions and payment arrangements. To respond to this demand, our customer assist programs have been redesigned to allow for ease of application and simplification of this process. We are pleased to note that inflows into early delinquencies, shown here on the left-hand graph, have slowed, and overall balances have been reducing for the last 2 reporting periods. We have also successfully increased outsourced capabilities with debt collection agencies, which has resulted in higher collections and lower inflows into non-performing loans.
Non-performing loans, also known as Stage 3 loans, continue to build up, but as you can see, at a slower rate than previously. Post a positive election outcome and anticipated interest rate reductions in the second half of this year, we are expecting lending demand and affordability to improve, both of which will assist working through the current stock of non-performing loans. Although we expect to continue to see improvements, we anticipate provision levels to remain high through to the end of this year. The overall credit and payment charge in the income statement decreased by 15% to ZAR 8 billion. This, together with relatively slow loan growth, resulted in a lower credit loss ratio of 92 basis points.
The income statement charge is impacted by a small decline in PPB of 3%, driven by the slowdown in early arrears and inflows into non-performing loans that we discussed on the previous slide. A small decline in BCB, also of 3%, due to improved collection strategies and improvements of client performance in East Africa, specifically. A large decline in CIB, where debt restructures in the period offset increased corporate provisions, and provisions for sovereign risk in the prior period were not repeated. Another look at the credit impairment charge by product reveals the relatively stable charges in retail and business lending products. With the large swing evident in corporate and bank lending, as well as the credit impairments for financial investments, where large provisions for sovereign investments in Malawi, Zambia, and Ghana were raised in the prior period.
Disciplined cost management led to well-contained cost growth period on period. This, together with Africa region's relative currency weakness, resulted in less than 1% cost growth for the period. Staff cost growth was limited to 2%. In constant currency, this growth was 8%, in line with our weighted average inflation rate of 8.3% for the period. The impact of annual salary increases and an increase in our still skilled staff complement was largely offset by lower performance-related incentives. Software, cloud, and technology-related costs, together with IT amortization and depreciation, increased by 1%. I will cover these costs on the following slide in more detail. Premises costs increased by 5% in rands, but 16% in constant currency, ahead of weighted average inflation as municipal and utility costs increased.
In South Africa, lower fuel and maintenance costs from reduced load shedding helped to offset this. All other expenses, when aggregated, were 4% lower. We focus on cost discipline and reduced discretionary spend in the lower revenue growth environment. Slide 28 shows total IT spend, including IT staff costs. In the graph on the left-hand side, we show the current period increase of 2% or 8% in constant currency, relative to the 5% CAGR of 8%. Five-year CAGR of 8%. In the graph in the middle of the slide, we show the largest component of IT spend, software, cloud, and technology-related costs, which were 6% higher. Cost pressures were evident in contractual increases on software services and increased licensing fees on client platforms. Continued investment in security software and higher cloud subscription costs added to the cost increases.
These pressures were offset by lower amortization and depreciation costs. IT intangible assets on balance sheet are valued at just over ZAR 9 billion at the end of this June, compared to ZAR 21 billion in 2018, and this illustrates a steady replacement of on-premises, owned, and bespoke technology to utilizing cloud-based software as a service technology. That completes our banking analysis. I'm now turning to insurance and asset management. Life insurance indexed new business in South Africa grew by 4%, with increasing sales and higher margins, especially in increasingly popular guarantee-type products that offer conventional annuities or guaranteed investment plans. Our insurance operations overall generated new business value of ZAR 1.6 billion in the period, and this is an increase of 13% over the prior period. The main driver of new business value remains the South African life business, particularly embedded products.
Assets under management in the South African asset management business increased by 11% to over ZAR 1 trillion. This growth was attributed to third-party customer net inflows and positive investment market movements during the period. The Nigerian pension fund business continues to grow in constant currency. The insurance and asset management franchise headline earnings grew by a pleasing 19% to ZAR 1.6 billion. Insurance operations earnings grew by 15% to ZAR 2.1 billion, supported by improved retail persistency, lower new business strain, as well as a risk claims experience, which remained in line with our expectations. Asset management operating earnings decreased by 19% to ZAR 472 million, driven primarily by the impact of the devaluation of the Nigerian naira on translated earnings from our pension fund business in Nigeria.
The shareholder portfolio delivered a profit of ZAR 195 million on the back of favorable investment market outcomes. This improved performance, together with the execution of capital optimization initiatives, resulted in a higher return on equity of 15.5%, broadly in line with the group's cost of capital. The solvency capital requirements cover of Liberty Group Limited and Standard Insurance Limited both remained robust and within their respective target ranges. Turning now to the group's robust capital position. As you can see here, risk-weighted assets grew by 4% since December, and the group's capital position has increased to ZAR 276 billion. The group's common equity Tier 1 ratio was 13.5% at end of June 2024. Our target common equity Tier 1 ratio of greater than 12% was previously shown as greater than 11%.
This higher target is not a change in risk appetite or a change in dividend policy. We have simply updated the external target to better reflect how we manage the business and how we run the business internally. The group's liquidity ratios both remained well above the 100% regulatory requirements. On this slide, the graph on the left shows the group's return on equity relative to the cost of equity, and the graph on the right shows the group's interim dividend per share and the resultant payout ratio. The group's annualized ROE is 18.5%, inside our target range of 17%-20%, and well above the group's cost of equity. Our interim dividend of ZAR 7.44 per share equates to a dividend payout ratio of 56%, which is also inside our target range.
I will now discuss our business units and legal entity performance. On slide 36, we have represented the group's headline earnings by business unit on the left, by product in the middle, and by legal entity on the right. These charts clearly demonstrate the diversity and breadth of our client franchise across our four business units, range of products, in 26 countries. As you can see, corporate investment banking remains our largest business unit, generating ZAR 10.4 billion in earnings. On a product basis, transactional banking in each of our banking business units combined to generate almost half of the group's earnings. In the legal entity chart, it is noteworthy that the Standard Bank of South Africa's earnings of ZAR 9.4 billion grew by a healthy 12%, despite the difficult domestic operating environment.
On slide 37, we have shown the buildup of group earnings by business unit. PPB generated much of the group's growth in earnings in the period, to end at ZAR 5 billion at an ROE above 20%. BCB maintained a strong return on equity of 38% and held earnings flat when compared to the prior period. CIB saw strong constant currency growth of 17%, but earnings reduced slightly in rands, generating an ROE of 23%. I have already covered the key drivers of IAM performance. ICBCS, while the group's 40% stake, contributed just under ZAR 600 million to group earnings in the period, a decline of a high base this time last year. As we saw earlier, Standard Bank of South Africa generated ZAR 9.4 billion in earnings.
This is excellent growth in NII, which was dampened by slower growth in NRR to generate total income growth of 4%. NII benefited from loan growth of 6% and expanded margins. Within NRR, fees were up 6%, supported by growth in the active client base, more entrenched customers, and increased transactional volumes across our digital channels and network of ATMs, as well as points of representation. Trading revenue was down 4% in this period for SBSA. Operating expense growth was well contained to 2%, well below average inflation in South Africa of 5.3%. The resizing and reconfiguration of our branch network over the last five years, which has reduced branch square meterage by 40% over this period, has assisted with premises savings.
Improved credit, particularly in CIB, resulted in an improved credit loss ratio of 97 basis points, and SBSA's common equity Tier 1 ratio was 12%. Despite a complex and mixed operating environment, our portfolio of Africa Regions franchises delivered another exceptional performance, with earnings growth of 27% in local currency. The weaker average exchange rates dampened earnings growth, resulting in a 2% decline in rands period-on-period. On this basis, Africa Regions contributed 41% to group headline earnings. All three sub-regions performed well, with West Africa most impacted by currency translation effects. The overall portfolio, as you can see, it delivered a strong return on equity of 29.1%. The top eight contributors to Africa Regions' headline earnings were Angola, Ghana, Kenya, Mauritius, Mozambique, Nigeria, Uganda, and Zambia.
Our Africa Regions portfolio has delivered robust earnings growth in rands, shown here, over a long period of time. The graph on the left shows the earnings contributions by sub-region since 2014, delivering an impressive earnings CAGR of 15% in rands. On the right-hand side, we have included a split of our individual countries, and their respective CAGRs are also shown here. Given that some of our listed subsidiaries have not yet released results, we have not included country-specific numbers here for 2024. We remain convinced that the diversity of this portfolio and the growing client franchises that we have built will continue to deliver superior returns and growth prospects over the medium and longer term. That concludes the results analysis. I will now hand back to Sim to cover the group's strategy and outlook. Thank you.
Thank you, Arno. As you have heard, the Standard Bank Group remains in excellent health, and better yet, is poised for excellent growth over the long term. The key strategic point we want to emphasize this half is that we have demonstrated our capacity for disciplined execution and delivery over both the short and long terms. We will continue to execute against our strategy in order to deliver everything we undertake to do. The macroeconomic outlook for the countries in our portfolio is very positive. Starting on the left, we expect inflation in our businesses to trend downwards in 2024 and 2025, from 7.7% for the group in 2024 to 7% in 2025. This will provide scope for central banks to reduce interest rates.
In South Africa, our economists forecast a decrease in the repo rate of 100 basis points over the next 12 months. This will provide relief to our clients on debt repayments, and of course, a declining interest rate cycle is also often a signal of the beginning of an investment cycle. In Africa Regions, we think that interest rates will be higher for longer, with most rate cuts happening in 2025. The graph on the right shows our forecast for GDP growth in our markets. We expect average GDP to accelerate to 2.7% in 2025. The group expects to continue to deliver robust underlying growth. We expect the dampening effect from weaker currencies in some of our markets will subside in the second half and into 2025.
Accordingly, we reaffirm our guidance for the full year of 2024 for our three core metrics. Firstly, banking revenue will grow by low single digits. The cost-to-income ratio is expected to be flat to lower year-on-year. The group's return on equity will remain well within the group's target range of 17%-20%. I also want to reemphasize that we remain completely on track to meet our commitments to 2025. We maintain our fact-based optimism about Africa's medium and long-term prospects. As mentioned, geopolitical and trade tensions are slowing, and they are slowing the world's growth and creating the possibility of higher for longer global inflation. But precisely the same tensions are creating new opportunities for Africa's economies, arising, for example, from outright superpower competition for markets and influence, and from a growing preference for shorter and more diversified supply chains.
Turning to Sub-Saharan Africa itself, we expect that inflationary pressures and sovereign stress should continue to improve. We expect interest rates to start falling in South Africa and in several other African countries. As the cycle turns and confidence rises, we expect to see more demand for loans, more financial activity in general, and more investment by both the private and public sectors. Because we have always stood with our clients through good and bad times, we are now ideally positioned to grow, to grow both our book and our revenues rapidly. We continue to expect that Africa will have become the fastest-growing region in the world by 2030. Over the same period, Africa will continue to become more interconnected, with increasing internal trade under the African Continental Free Trade Area, the largest free trade area in the world.
Africa's trade with the rest of the world will also continue to expand rapidly. We see both trends reflected in client activity. For instance, the discussions at our recent Business and Commercial Banking Conference in Cape Town. Interest in Africa as a trade and investment destination keeps growing in the United States, in the United Kingdom, in the European Union, in China, and very intensely from investors and traders based in the Gulf. Again, this is something we are hearing and seeing from our clients. It's not a coincidence that Standard Bank's international network maps exactly to these pools of capital and centers of trade. Our strategic partnership with the Industrial and Commercial Bank of China, the biggest bank in the world, is, of course, a key element of this network and creates unique capabilities along the China-Africa corridor.
Standard Bank's clients and Standard Bank's investors are perfectly placed to benefit from these growing flows of capital and trade. Next, as the global and African energy transitions continue, we are certain that Africa's competitive and comparative advantage in energy supply will continue to improve. As is well known, Africa is endowed with a remarkably attractive combination of renewable resources, transition fuels, and the minerals needed in the production and storage of renewable energy. Again, we see this in our book, where sustainable finance is growing very fast. As is perhaps less well known, energy abundant parts of Africa will also become increasingly attractive sites for manufacturing, with both wages and carbon intensity comparing well with other regions. We are sure that Africa's population will continue to grow quickly. Africans will continue to become healthier, wealthier, better educated, more urbanized, more digitally and physically connected, and more productive.
Turning to South Africa, we now look forward to accelerating structural reform, including continued recovery in the network industries. For example, the dramatic improvement in Eskom's plant performance has resulted in no load shedding for more than 4.5 months. The Two-Pot retirement system, to be implemented in just over 2 weeks, is another example of a well-designed reform that is likely to have positive macroeconomic effects. We look forward to South African acting as a host in the G20 next year. We think this should present valuable opportunities to reinforce South Africa's global and regional role as a center of trade and investment. South Africa is very well positioned as the natural hub for doing business and trade in Africa. In summary, Standard Bank has always stayed on the front foot in South Africa, and that's where we are now.
We are ready to play our full part in supporting the investment and in accelerating transformation and growth in South Africa. Africa is our home. We drive at growth. As we have shown, our group is exceptionally well positioned to support Africa's short, medium, and long-term growth opportunities. On top of that, we are also actively pursuing growth opportunities in three areas over the medium term. These are, first, become a leading financial services business in East Africa. Second, be the leading private bank in Africa. And third, continue to lead Africa's energy transition. The case for East Africa is clear and simple.
It's the fastest growing sub-region of Africa, increasingly tightly integrated by the East African community, closely linked to some of the most dynamic economies in the world, including India and the Gulf, the United States, the EU, and in fact, China, and steadily growing at a better than 5% rate a year. Financial services are a scale business. The most profitable firms are almost always in the top three. We already have strong businesses in East Africa, including the largest bank in Uganda, and we will continue to allocate more resources to that region. We are actively pursuing all available growth opportunities in East Africa, subject, of course, to maintaining tight capital allocation disciplines in the interests of our investors. The case for being the leading private bank in Africa is equally simple and compelling.
Africa's development path is rapidly creating middle and affluent segments in need of world-class financial services. We estimate that there are around 2.8 million potential private clients in South Africa, and nearly 5 million potential affluent clients in our Africa Regions markets. We are actively and already very good at providing higher, higher-end retail financial services in markets including South Africa and Nigeria, and through our offshore hubs. In South Africa, we estimate that we have existing relationships with more than half of the people in this segment. We will continue to improve client experience and to increase our market share and share of wallet, particularly by continued closer integration of Liberty's capabilities. Africa's potential for economic growth is heavily dependent on expanding the electricity supply and improving access to electricity.
A just transition must balance energy security, food security, and economic growth, and human development with the decarbonized environment required to mitigate the impact of climate change. We're already Africa's largest and most capable financier of energy transition, and we are well on our way to meeting our target of ZAR 250 billion of sustainable finance mobilized by 2036. We see Africa's energy transition as inextricably linked to Africa's wider need for more infrastructure and more industrial capacity, which our experts estimate to require... and we expect to require new investment of more than $3.4 trillion. On behalf of the board and management of the group, I'd like to thank the 19.5 million clients for their confidence in us. We remain very grateful to our regulators in South Africa, throughout the continent, and in the global financial centers.
Their excellence makes it possible for us to continue to compete sustainably. We're just as grateful to all our investors. And of course, I want to thank and acknowledge all the 51,000 Standard Bankers for their dedication and professionalism... All of us look forward to a second half and to the years that follow with great optimism and confidence. We are in a very strong position, and we are determined to keep delivering on our commitments, winning in our markets, and growing for our investors. Thank you. That concludes our presentation. We'll now take questions, and for that purpose, I will ask my business unit colleagues to join Arno and I in the front. And as they come forward, we will start with the conference call. Operator, are there any questions on the conference call?
Yes, sir. The first question we have comes from James Starke of RMB Morgan Stanley. Please go ahead.
Hi, good morning, Sim, Arno, and team. Thanks for the opportunity. A couple of questions. Just firstly, on credit losses, and particularly when you think about the outcome for the rest of this year. I thought the first half was pretty strong, so well done on that. I mean, if we think about how you turn out or run rate from here, given the backdrop of rising NPLs in the last six months, how should we think about that as we move or model out for the rest of the year? The second question is on non-interest revenue, in particular, your guidance. It looks like it's changed a bit, from up mid-single digits to down low to mid-single digits. Can you give us a bit of color on what's behind the change?
And then lastly, just within headline earnings, there was an adjustment of net ZAR 428 million. If you can give us some color on that and how that probably may persist going forward. Thank you.
Arno, I think all three are for you.
Thank you, James. Good to hear from you again. On credit losses, as you mentioned, we're seeing early delinquencies actually declining. We're seeing our formation of non-performing loans also declining, and I showed that in my results. So we think peak credit is behind us, specifically in our retail business in South Africa, and I'm sure you'll have more discussions on that with Funeka. And we also see a continued improvement in BCB as well. Of course, CIB, as by its nature, is a lumpy performance and well, it will be name-specific. So overall, we see continued gradual recovery in the credit outlook, and we should be around the top end of our through the cycle 70-100 basis points credit loss ratio. On NRR, I made reference on the presentation that certain of our liquid assets we account for differently now.
Previously, they were held at fair value in our NRR line. Now they're held at amortized cost in the NII line, and that is improving the NII outlook but also reducing the NRR outlook. So there's a slight adjustment there. It's not material, and of course, at the total revenue line, it does not make a difference. It's just mainly a movement between those two line items. I was making notes whilst you were talking. The third question related to-
Earnings.
Oh, the headline unique adjustment.
Yeah.
It relates to Zimbabwe. Previously, we accounted for Zimbabwe in a hyperinflation environment using the Zimbabwe dollar, the local currency in 2023. As of 1 January 2024, considering our balance sheet is 80% denominated in USD assets and liability, we've changed the functional currency to USD, and that is taking out sort of earnings in terms of our property valuation now in USD.
Thank you.
Thanks, Arno. Thanks, James. Operator, any more questions?
We have another question from Keamogetse Konopi of Citi. Please go ahead.
Morning, Sim and Arno and team. Thank you for the opportunity. A couple of questions. Can you elaborate more on your NIM outlook? How do you see pricing and mix evolving? And maybe touching as well on the impact of deposit insurance on your margins in the first half of the year and what you expect for the second half. And secondly, on credit quality, given the better credit losses in personal banking, what will you be looking for in order to start reducing coverage in this particular part of your business, which remains ahead of peers? And lastly, on West Africa's performance, which is down about 17% in ZAR, how do you see this performance trending in the second half of the year, especially given the higher base that last year, the second half of last year presents? Thanks.
Arno?
Yeah, and maybe I can handle some of them relating to retail pricing and retail.
Maybe the West Africa one-
Okay.
You can take.
Yeah.
On the NIM outlook, we do expect here a slight widening still in margins, considering we're still enjoying some endowment tailwinds. But into 2025, we will probably see endowment headwinds. In the slides Sim showed, we saw 110 basis point rate cuts on average across our portfolio, and that will result in some margin compression. We estimate that somewhere between 20 and 30 basis points. Should I hand over to Funeka on the pricing and the retail business and the credit?
Yeah, let me start with the credit. Thank you very much for the question. So you're absolutely right that we've got higher than market coverage, particularly in mortgages, but we also do have a higher market share. So what we are definitely seeing, as you've seen in the results, that we're seeing the rate of formation of new NPLs really slow down, so we are nearing a peak. However, it's very clear that our clients are under pressure, and therefore, an interest rate reduction will definitely be welcome and will help to relieve some of that pressure and increase affordability from a client perspective, and the natural consequences of that would be a workout of the... Oops, must I start again? Sorry, let me start again. I forgot to, that I wasn't miked.
Yes, so, absolutely right, that we've got elevated, coverage compared to the industry, particularly in home loans. We're seeing the reduction in terms of new NPL formations, but, it's very clear that our clients need a reduction of interest rates, so that we can have a lot more affordability and, and we'll expect that to result in lesser impairments and lesser coverage over time. And secondly, just from a pricing perspective, we continue to see pressure, across the, various, asset lines, particularly as it relates to, mortgages. But our outlook from a NIM perspective is flat.
Great. On deposit insurance, before I hand to Kenny, we have not seen an impact on client behavior as a consequence of deposit insurance, but of course, there's a cost to the company. In South Africa, we estimate that's around ZAR 250 million in this financial year. I'm handing over to Kenny on West Africa.
Well, thank you, Arno. I think let me start by sort of reflecting on the underlying health of our client franchise in West Africa. In constant currency terms, those businesses are doing exceptionally well. But unfortunately, when that is translated into rands, because of the weakening of the naira, as well as the Angolan currency, the impact has been fairly sort of massive. So we're not worried about the underlying health of our franchise. Those businesses continue to grow, continue to gain market share, and we think that the currency, especially in Nigeria, is a bit overdone, and that over time, we should see the naira pulling back, which will then stabilize the performance of those businesses. Thanks.
Thanks, Kenny. Any more questions, operator?
There are no further questions on the conference call, sir.
Thank you ever so much. Sarah, on Teams?
Thank you, Sim. The first few questions are from Charles Russell. I'll read all three of them, to start. What range of loan growth is possible in South Africa in 2025, given the expectation of lower rates and higher growth? The second question: Do you expect a different trend on deposits under this positive scenario? And third question: What are your key assumptions behind your expectations for lower FX headwinds that will reduce for the full year and beyond, into 2025?
Arno?
Thank you, Charles. As you've noted, we've had muted loan growth in this reporting period as interest rates are being eased. Starting in September, when we do expect a 25 basis point rate cut on the nineteenth of September, we do expect some of the stimulus to translate into higher loan growth, and it should be then reverting to mean loan growth between mid and higher single-digit loan growth, which we've posted in the past. That would be in our retail and on our small enterprises business, builds business. In CIB, we possibly will have higher loan growth, as we've also demonstrated in this period.
Deposit growth, probably following a similar trend, we obviously need to fund this loan growth, so we're raising more wholesale deposits while continuing to focus on growing our retail client base as well, transactional deposit base as well, which is growing in mid to higher single digits in South Africa. On FX, the biggest impact was naira and kwanza. Those were done, the big devals happened in the first half of last year, so that is in the base, and hence, the impact will be less severe for the rest of the year. Actually, in the results presentation, I believe it's on slide 50. Slide 50, there's a bit more detailed analysis on which currencies we expect to weaken further and which ones to remain relatively strong compared to the rand.
You can see overall, we see a much more subdued translation impact due to currency weakness in 2025 compared to 2024.
Thank you, Arno. The next question is from Chris Stewart. One of your peers has recently indicated potential capital management activities, as they have a CET1 ratio above the top end of their target range. Is this something the Standard Bank Group is considering?
So you may be referring to Nedbank's share buyback announcement, possibly. We continue to manage our capital, taking into account the organic and inorganic growth opportunities we are seeing on the continent. And Sim has pointed out, we're seeing substantial growth opportunities and obviously managing our capital adequacy and providing returns to shareholders. Returns to shareholders could be in the form of ordinary dividends, which has been the main component or share buybacks, and we'll update the market once we do any share buybacks. For now, the focus is on returning our capital through ordinary dividends, and we showed another generous dividend in this reporting period.
Thank you. The next question is from Ross Krige. Thanks for the presentation and congrats on the result. Couple of questions. The first one on the credit loss ratio. Just to clarify, you suggest that 1H 2024 is the peak in credit losses on the income statement, which implies that the credit loss ratio in the second half will be lower than the 92 basis points. Am I understanding this correctly? Also, do you have any thoughts on the potential impact of the Two-Pot pension changes and expected credit performance?
Division of labor there?
Yeah. Should I do the first one? Not necessarily lower than 92 basis points, Ross, because we've had this unusual release from CIB, and we don't expect that to be repeated. So CIB currently is well below its through-the-cycle range and possibly will be higher than that. So some improvement in BCB and PPB, but not necessarily an improvement in CIB, resulting in the higher, sort of, towards the top-end credit loss ratio range.
... sorry, do you want to answer the-
Sorry, let me quickly-
Yeah.
On the impact of credit on the Two-Pot pension system. Maybe let me say two things. The first one is that typically what we do with our clients, particularly on big, lumpy exposure, such as mortgages, we sit with them and do a solution, you know, even if it means re-underwriting, just to keep them in their homes. So, broadly speaking, I think that would not be something that we would proactively encourage, but we do think that that can happen. But I think the most important thing for us is long-term financial planning of our clients.
The Two-Pot? Mm-hmm, okay. Sarah?
Thank you. One more question from Ross. On NII guidance, you note guidance is subject to loan growth. What are the key risks versus what is embedded in the current guidance?
The key risks to NII?
From loan growth.
Yeah. I mean, there's obviously different components to that. The one is endowment, the one is the loan growth, and the other one is pricing. I'm very happy to hand over to my colleagues on the pricing pressure we are feeling in South Africa, specifically at the moment, and maybe, Funeka, you want to comment on that. On loan growth, I think we've answered that already. We're seeing mid to higher single-digit loan growth in the medium term once the rates have eased. Do you want to make a comment on pricing you're seeing in South Africa?
Sure. We certainly are seeing pressure in pricing in the housing market. We're seeing a lot more interest by all banks. And as a result, we're definitely seeing some prices that are perhaps lower than what we've seen in a very long time, and as a result, it's putting pressure on the margin. What is important to say, though, is that at this stage, if you look at the business that's been written in the last year, we are not yet in a position where we think that the market is not attractive, but it is certainly lower than what we've seen before.
Thank you. The next question is from Warren Riley. I think we've answered that already. It also relates to the credit growth, both in the short term and the medium term. The next question is from Harry Botha, also with regards to, regarding the credit loss ratio. I think, again, we've answered that one. And then another one from Harry. He says: What are you expecting in terms of NIR, NIR growth in PPB over the next two years, so for the rest of 2024 and 2025?
Thank you very much. Yeah, we were quite pleased with the fee and commission trend of double digits. Our outlook over the next two years will be at similar trend at an NIR level, which is an upper single digit, for PPBSA.
Those are all the questions that we have. Thank you very much.
Thank you, Sarah. Thank you very much. There are no further questions, in which case we've come to the end of today's proceedings. Thank you all for your time and your interest, and, of course, for your support. Have a lovely day, and see you soon.