Good morning, everyone. On behalf of the ard and management of the Standard Bank Group, it's my great pleasure to welcome you to the presentation of our financial results for 2024. As is customary, I begin by placing our strategic achievements and rapid financial growth in their broader context. Our Chief Financial Officer, Dr. Arno Daehnke, will then take us through the results in detail and will then provide our 2025 guidance. I will conclude by discussing our strategy and medium-term outlook. This slide summarizes the main points we will be covering this morning. We have a large and growing client base that is doing more with us. We managed costs and risks effectively. Our diversified portfolio of operations in 26 countries has achieved strong growth in constant currency throughout our banking, insurance, and asset management businesses. We are delivering on our promises.
We are doing what we said we would do to the end of 2025. We are completely confident that we will reach our 2025 targets. We are very well positioned to capture Africa's growth opportunities. Today, therefore, we are setting new and higher targets to 2028. As always, our purpose remains constant. Africa is our home. We drive our growth. The main themes of our strategy also remain the same: transform client experience, execute with excellence, and drive sustainable growth and value. I will shortly describe the progress we have made over the year on each of these strategic priorities. Our strategy continues to evolve within these broad parameters, and I will say more aut that in the concluding section. Geopolitics remained uncertain during 2024, but the global economy grew reasonably well, and inflation and interest rates moderated.
Turning to our Africa region's businesses, rapid economic growth continued in both West and East Africa, with moderate growth in the southern region. The strong performance of these economies is reflected in the excellent constant currency performance of these businesses, unfortunately dampened in our income statement by weaker African currencies compared to the South African rand. To be precise, weaker African currencies, particularly the Nigerian Naira and the Angolan Kwanza, reduced rand earnings by 9%. South Africa's politics surprised on the upside, delivering a new government that is committed to accelerated structural reform. Growth remained subdued, but the underlying signals were positive and bode well for 2025 and beyond. I draw your attention to the gray box in the center of the slide, which illustrates the weighted average inflation, interest rate, GDP growth, and currency impact felt by the group.
To reiterate, the weaker African currencies did no favors to our headline earnings, but our franchise and Africa's fundamentals both remained very strong. Looking first at our priority to transform client experience, starting on the left, our corporate and investment banking business achieved revenues of ZAR 65 billion. We made excellent progress towards meeting our sustainable finance targets, mobilizing ZAR 74 billion for Africa's energy transition and for socially inclusive infrastructure during the year. Two highlights of business and commercial banking's year were dispersing ZAR 52 billion in loans to clients and facilitating ZAR 150 billion in intra-African trade. Personal and private banking grew its active client base to a remarkable 16 million. PBB's digital performance was particularly pleasing, with digital revenues up 36%. Our clients in South Africa voted us number one for customer experience in consumer banking, according to the University of Pretoria's Customer Experience Index.
In the same survey, clients also voted us first in the categories of the banking app, contact center, branch, credit card, and home loans. Insurance and asset management ended the year with more than 3 million embedded policies and ZAR 1.5 trillion of assets under management. Our asset manager, Stan Lib, received ZAR 14 billion of net cash inflows from clients. New business value was up 14%. Our juggernaut sales force consists of more than 11,000 branch and call center staff, financial consultants, and tied agents. Close collaboration between personal and private banking and insurance and asset management generated 19% growth in the FlexiFuneral insurance book and also a 19% increase in FlexiFuneral collection rates. Standard Bank Insurance Brokers wrote ZAR 10 billion of premiums for PBB clients.
Turning to our priority to execute with excellence, we continue to run our business efficiently, with our cost-to-income ratio improving to almost 50%. Over the past five years, we have greatly improved the stability and performance of our systems. We did one and a half times as many upgrades to our systems in 2024 compared to 2020. This did not affect stability. To the contrary, material incidents of instability are down 95% since 2020. As Arno will discuss in more detail, we continue to manage our credit risk effectively, with our credit loss ratio remaining well within our target range. Our balance sheet remains as fortress-like as ever, ensuring our soundness and enabling good distributions to our shareholders. Our capacity for effective execution was very well illustrated this year by the completion of our program to integrate Liberty fully into the Standard Bank Group.
This has been achieved, yielding ZAR 13 billion in cumulative distributions to the group and annual synergies of more than ZAR 620 million achieved in 2024, more than we said we would achieve when we announced the transaction. Now looking at our priority to drive sustainable growth and value, our capacity to get things done and to keep our promises is well illustrated by taking a 10-year view of our headline earnings and return on equity. As shown on the left of the slide, the steady growth of our headline earnings was only briefly interrupted by the shock of the pandemic and has accelerated markedly since then. Our headline earnings have grown at an annual rate of 10% over the period. As the chart on the right-hand side shows, we have lifted our return on equity into a higher range, precisely as we said we would do in 2021.
Our ROE is now sustainably higher than the 10-year average of 15.9%. As the charts on this slide illustrate, we have grown our revenue since 2020 by a compound annual growth rate of 12%. Our cost-to-income ratio has improved by 8.6 percentage points. Our return on equity is firmly within our target range, and our dividend payout ratio remains at the upper end of the target band. The progress we have made over the past several years and in 2024 itself gives us a great deal of confidence that we will reach the targets that we set for the end of this year. I now hand over to Arno for the more detailed financial discussion.
Thank you, Sim, and good morning, everyone. I'm now going to cover the section two of the presentation, which analyzes the group's 2024 results in detail and outlines our expectations for 2025. In the 12 months ended 31st of December 2024, Standard Bank Group recorded headline earnings of ZAR 45 billion, up 4% on the prior year. In constant currency terms, group earnings grew by 14%. Dividends declared for the year of ZAR 15.07 per share were 6% higher, and tangible net asset value per share grew by 8%. The group delivered a return on equity of 18.5% for the year. After two years of excellent earnings growth of 35% in 2022 and 27% in 2023, this year's growth is a more moderate 4%.
This growth was delivered through revenue growth outpacing cost growth, leading to a lower cost-to-income ratio of 50.5% and an improved credit loss ratio of 83 basis points. The group's capital position remains strong, with a common equity tier one ratio of 13.5%. A summarized group income statement is shown on slide 13. It is evident here that currency movements have had a meaningful impact on all lines of our income statement. As anticipated and as flagged to the market, the basket of currencies in which we transact in our subsidiaries devalued by 9% on a weighted average basis relative to our reporting currency, the rand. As mentioned on the previous slide, headline earnings growth of 4% was 14% in constant currency terms. The biggest currency devaluation impacts arose in West Africa, as noted by Sim.
The constant currency growth rates shown here reflect the continued excellent momentum we see in our subsidiaries in local currency. The devaluation impact seen in 2024 is not expected to repeat in 2025, and I will come back to this in the outlook section. Net interest income growth of 3% and a repeat of 2023's bumper non-interest revenue print delivered a 2% growth in total income. Operating expenses were held flat year on year to deliver another period of positive jaws. Credit and payment charges reduced in 2024 due to favorable macros and enhanced collection strategies.
Tax charges increased due to a combination of increased withholding taxes on higher dividends received from our subsidiaries, a windfall tax levy imposed in Nigeria, and the introduction of pillar two global minimum tax in South Africa, which resulted in additional tax to be paid mainly due to our operations in the Channel Islands and in Mauritius. These movements combined resulted in headline earnings of ZAR 40 billion for our banking business unit, which is 3% higher than the prior year. Our insurance and asset management business unit grew earnings strongly to ZAR 3.3 billion, driven by the Standard Bank franchise growth to drive the Standard Bank franchise growth to 4%. ICBC Standard Bank PLC, via the group's 40% stake, contributed just over ZAR 1 billion to the group earnings, an 18% decline off a high base for this entity in 2023.
The slides that follow cover our banking business results. I will then cover insurance and asset management, followed by some reflections on the group's business unit and regional performances. Slide 15 looks at trends in loan growth since 2019. Our steadily growing lending portfolios added another 3% in 2024. This growth represents a slowdown when compared to prior periods. Client demand for credit was subdued as interest rates remained higher for longer than expected, which impacted affordability. Some pickup in demand was evident in the second half of the year. Corporate lending grew by 5%, driven by demand for energy and infrastructure financing. On the right-hand side, we show loan growth in South Africa at 4% and in Africa regions at 9% in constant currency.
On this slide, we show disbursements in South Africa for various products half on half to illustrate the pickup in lending in the second half of the year. After the election outcome and some certainty around rate cuts, we saw client demand for lending increasing across many products. In investment banking, we leveraged opportunities in energy, sustainable finance, and infrastructure and investment. CRBSA originated over ZAR 160 billion in the second half of the year. In business lending, we saw client confidence and demand pickup, driving disbursements 25% higher. Home services disbursements were down 5% year on year, but you can see here activity levels picked up in the second half, as demonstrated. The mortgage market remains competitive in South Africa, and we continue to focus on writing good quality business that is adequately priced and in line with our loan-to-value parameters to optimize profitability through the cycle.
Clients appreciate our support through the cycle, which remains consistent, and we remain the lend-off choice for mortgages in South Africa. In PPB, vehicle and asset finance disbursements slowed in the second half as we adjusted our strategy to focus on existing clients, and we made scorecard changes to reflect our changed origination strategy and risk appetite. Deposit growth momentum has been good over the last five years, and deposits grew by a further 6%. This growth was driven across many of our valuable client deposit franchises, including call accounts, term deposits, and current and savings accounts. Once again, the impact of weaker exchange rates dampened growth in ZAR, and Africa regions continue to show good deposit growth of 14% measured in constant currency terms.
Net interest income grew by 3% to ZAR 101 billion, relatively subdued lending growth compared to prior years and slightly lower margins combined to deliver this result. The net interest margin of 490 basis points was positively impacted by endowment, but offset by pricing pressures across home services, commercial asset financing, and corporate lending. The positive endowment impact contributed a ZAR 1.9 billion uplift in net interest income. As rates decline, the positive impact of endowment is expected to fade. The group continues to hedge endowment risk. In South Africa, the sensitivity to a 100 basis point interest rate cut has reduced from ZAR 1.4 billion last year to around ZAR 900 million in 2024. Our overall program, including tactical hedges in Africa regions and in offshore operations, contributed positively to NRI in 2024.
These hedges are expected to preserve NRI growth in 2025 and have been included in the 2025 guidance that I will take you through later in the presentation. Within banking, non-interest revenue, net fee and commission revenue increased by 4% to ZAR 32 billion. This growth was supported by growth in our client base, higher transactional volumes, and annual price increases. The personal and private banking business in South Africa recorded a noteworthy growth of 12% in net fee and commission revenue as client retention and entrenchment strategies continued to bear fruit. Account transaction fees were up a pleasing 9%, and increased card spend supported healthy growth in card fees. Our customers' preference for digital channels continues to be evident in good growth in electronic banking fees. Trading revenues increased year on year by 3% to ZAR 21 billion, off a very high base in 2023.
This result was supported by a strong finish to the year. The impact of reduced demand for commodity hedging and lower equity trading volumes was more than offset by strong growth in fixed income and currency trading. Within CIB Global Markets, client franchise-related revenues continue to make up more than 80% of total revenues. On slide 21, we turn to credit provisions, and we start by looking at our balance sheet provisions year on year. Apologies, balance sheet provisions at year end. Starting on the top left, gross loans increased by 2%. Similarly, as shown on the bottom left, total provisions for credit and payments increased by 2% year on year to ZAR 65 billion. Accordingly, the group's total coverage ratio remained flat.
Within the loan book, we saw stage three loans as a percentage of the book increase marginally, and we increased coverage ratios to result in ZAR 49 billion of balance sheet provisions held against stage three loans. Increased coverage ratios on stage three loans were necessary in secured asset lending in South Africa to account for the increased length of time which loans are spending in stage three without resolution. Continued client strain with interest rates higher for longer and delays in the legal processes in mortgages specifically have contributed to the increased milling. The group continues to proactively engage clients who are showing signs of distress, and we remain committed to keep clients in the homes where possible. Our total coverage ratio at 3.8% remains high, and we are thus confident that we are well positioned at this point in the credit cycle.
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, and this industry-wide portfolio is now around ZAR 90 billion. Our customer base continues to demonstrate resilience, with consumers proactively trying to find means to protect their assets and their credit records. We are pleased to note that inflows into early delinquencies, and this is shown on the left-hand graph, have slowed, and overall balances have been reducing since mid-2023. As expected, interest rate reductions in the second half of 2024 helped lending demand and affordability improved, both of which have assisted us in working through the stock of non-performing loans.
We are encouraged that these balances appear to have peaked and have now started to slowly decline. We will continue to work through the resolution of these non-performing loans in 2025. The overall charge for credit and payments in the income statement decreased by 7% year on year. Within this, credit and payments on lending activities decreased by 13%, and credit and payments on financial investments increased substantially. Credit and payments were raised against financial investments to account for sovereign credit risk deterioration in Malawi and in Mozambique. In 2023, you'll remember we released a provision for sovereign credit risk in Ghana, and I remind you that impairments on financial investments are not included in the credit loss ratio calculation.
Lower credit and payment charges on lending were driven largely by the slowdown in earlier years and reducing inflows into non-performing loans in PPB and BCB, down 6% and 11% respectively. Forward-looking provisions releases also contributed to lower income statement charges. In Africa regions, credit and payments increased in local currency in PPB and in BCB. Within CIB, successful restructuring and cures of long-outstanding stage three corporate loans resulted in a very low charge when impairments for sovereign risk are excluded, and this is reflected in the loss ratio for CIB of only eight basis points. The relatively slow loan growth, combined with 13% lower credit impairment charges, resulted in a 15 basis point decline in the credit loss ratio to 83 basis points.
On slide 24, we have illustrated the change in credit impairments charges by product year on year on the left-hand side and half on half in the middle of the slide. For the retail and business portfolios, the momentum in the slowdown in impairments is evident in the second half, and this bodes well for credit impairments in South Africa in 2025. In CIB, the charges are more idiosyncratic and subject to client developments. Turning now to expenses on slide 25, continued focus on cost management combined with the favorable currency translation impact led to total operating expenses remaining flat year on year. In constant currency terms, as you can see here, costs were up 8%. Staff costs were marginally higher as the impact of annual wage increases was largely offset by lower performance-related incentives.
A decline in professional fees, as well as a reduction in communication, depreciation, and marketing expenses, provided scope for continued investment in software and in technology. Slide 26 shows total IT spend, including IT staff costs, up 2% year on year and now comprising 28% of total costs. Within this cost, software, cloud, and technology-related costs increased by 3% as investments to improve platform stability, cyber resilience, and digital client features continue. We continue to increase our use of computer processing in the public cloud, which now stands at 44%. Being in the cloud, as you know, enhances our agility and resilience, and core system availability throughout 2024 is testament to this. IT intangible amortization was flat year on year as the group's large historic IT programs roll off.
Over the last four years since the pandemic, our focus on cost management and maintaining cost growth below revenue growth has paid off. We have delivered consistently positive operating leverage, and the cost-to-income ratio has now reduced to just over 50%. I am now turning to insurance and asset management. Starting at the top left of the slide, our insurance business had an excellent year with improved overall sales, margins, and efficiencies, which drove an uplift in new business value of 14%. In the top middle graph, our short-term insurance business gross written premiums were up 5%. In asset management, Standard has recorded steady improvements in performance in recent years, and a number of Standard funds are now recognized as top quartile performers.
Positive third-party customer inflows and good market returns increased assets under management and administration by 13% in South Africa and by 25% in Africa regions in constant currency. The insurance and asset management business unit headline earnings grew by 17% to ZAR 3.3 billion, and return on equity improved substantially to 16.7%, rather. A combination of improved retail persistency experience and lower new business strain supported insurance earnings growth of 3%. Asset management operating earnings increased by 10% to ZAR 1 billion, driven primarily by increased earnings from Standard Bank in South Africa. Returns on the shareholder portfolio more than doubled due to favorable investment markets and increased property valuations. It has now been three years since the Liberty Minority Buyout. In that time, the business has been integrated into the group, and closer collaboration across the banking, insurance, and asset management businesses is now well entrenched.
The corporate structure has been simplified, and this has enabled considerable capital efficiencies and distributions. The cumulative distributions made since the Liberty transaction was announced amount to ZAR 13 billion, more than the minority consideration on the announcement of the transaction. Integration costs were much less than we expected, and over ZAR 620 million of annual pre-tax synergies were realized in 2024. We are looking forward to ongoing revenue synergies arising from an integrated customer offering. The group's robust capital and liquidity positions shown on slide 33 enable both our continued support for client growth and distributions to shareholders. The group's common equity tier one ratio was 13.5%, and the group's liquidity ratios remained well above the 100% regulatory requirements.
The group's return on equity was 18.5% for the year, and this is well within our target range of 17%-20% and significantly above the cost of equity of 14.9%. The graph in the middle of the slide illustrates shareholder value added over time, and for 2024, the group's earnings exceeded its cost of capital by ZAR 8.7 billion. Taking into account the group's strong capital generation, ZAR 30 billion of the ZAR 45 billion of headline earnings generated was distributed. You can see here ZAR 26 billion was distributed as dividends and ZAR 4 billion in the form of share buybacks. Ordinary dividends declared for 2024 amount to ZAR 15.07 per share, and this is an increase of 6% and a payout ratio of 56%. I will now discuss the performance of our business units and regions.
On slide 36, we have represented the group's headline earnings by business unit on the left, product in the middle, and legal entity or geography on the right. These charts demonstrate the diversity and breadth of our client franchise. In this period of volatility, our mainstay retail banking business demonstrated its importance to the stability of the group. In a difficult operating environment, this franchise grew earnings by a solid 8%. CIB demonstrated remarkable resilience to absorb currency impacts to grow earnings by 5% year on year. Through a product lens, investment banking had a standout year due to excellent deal origination. From a legal entity perspective, our offshore operations in Jersey and Isle of Man were negatively impacted by the endowment impact of declining interest rates, but nevertheless delivered ZAR 4 billion in earnings at an ROE of 28%. Africa region's contribution to the group's earnings remained above 40%.
The waterfall chart on slide 37 illustrates contributions to the group's earnings and shows a sizable contribution from our three banking businesses and a growing insurance and asset management business. CIB generated ZAR 20.5 billion in earnings, up 5% year on year, and this is on a large base set in 2023. On a constant currency basis, you can see CIB grew by an impressive 21%. PPB grew headline earnings to ZAR 11.3 billion, up 8%, and generated an ROE of 23.3%. BCB improved ROE to an excellent 38%. Earnings of ZAR 9.3 billion were delivered, but growth was subdued at 2% in constant currency and down 1% in rands for the BCB business unit. Insurance and asset management delivered strong growth and ROE improved materially to 16.7%. ICBCS recorded a strong operational performance, and our share thereof in rands was just over ZAR 1 billion.
This slide covers our largest legal entity, the Standard Bank of South Africa. Net interest income in this entity grew by 6% on the back of 4% loan growth, and non-interest revenue was flat on the prior year. Within NRR, we are pleased that fees grew by 7%. This is an excellent representation of our growing and active client base across South Africa. Particularly pleasing was the fact that PPB South Africa grew fees by 12% year on year and 13% in the second half of the year. Excellent cost control and lower credit payments resulted in 11% headline earnings growth and an improving ROE in SBSA. I will now cover Africa region's legal entities at a high level on slide 39. The impact of the devaluation of subsidiary currencies against the rand is very evident here.
In West Africa, the Naira devalued by more than 100%, and the Kwanza and Leone devalued by, on average, 28% and 27% respectively. As a result, while constant currency earnings are up 37% in West Africa, earnings reported in ZAR declined. Despite excellent local currency results, inflation remained high in these markets. Looking forward, we expect inflation to ease in West Africa, and we are confident that the policy reforms introduced over the past years are stabilizing the macroeconomic outlook. In East Africa, our operations benefited from growing balance sheets and activity levels, driving revenue growth 11% higher in constant currency. A meaningful reduction in credit impairments due to improved book quality and a post-write-off recovery assisted in delivering good earnings growth in East Africa. In South and Central region, we experienced mixed results.
Zimbabwe changed their currency early in 2024, and Mozambique suffered a sovereign downgrade after post-election riots, both of which impacted financial outcomes for these entities. We are pleased with the overall Africa region's legal entity results of headline earnings growth of 22% in local currency terms, and this is evidencing very strong franchise momentum. ZAR 18 billion earnings were slightly lower than the prior year. Return on equities improved in all three regions to an overall strong 28.4%. Over the last 10 years, through many cycles and disruptions, our portfolio of financial services organizations in sub-Saharan Africa has indeed delivered an impressive 14% compound annual growth in headline earnings in rand terms, with all three sub-regions growing strongly. On the right-hand side of the slide, we show a country-by-country view up until 2023.
2024 is shown as a solid bar, as some of our listed entities have not yet reported. I will now turn to our outlook for 2025 and discuss macros first. Overall, the macro forecasts are constructive, and they bode well for lending and activity growth. On a weighted average portfolio basis, we see inflation reducing further to average around 6%. On interest rates, we forecast approximately a 100 basis point reduction in weighted average rates. We expect real GDP growth to accelerate to 2.7%, driven mainly by expansion anticipated in South Africa off a low base in 2024 and continued high GDP growth rates of 4.5% in Africa regions. As previously mentioned, the 9% currency devaluation impact that we experienced in 2024 is expected to reduce meaningfully in 2025. This means that constant currency and rand growth rates should be closely aligned in the coming year.
We anticipate a small further devaluation in local currencies in Angola, Ghana, and Nigeria. On slide 43, I will take you through our short-term guidance. I remind you that this guidance is shown on a rand basis. For the 12 months to December 2025, we expect the following. Net interest income is expected to be up by mid to high single digits year on year on the back of stronger loan growth and declining margins despite endowment hedge benefits. Non-interest revenue is also expected to grow by mid to high single digits. A larger and more active client base will support this growth. While we continue to focus on cost growth, we will equally continue to invest in our business to remain competitive and to grow. Banking cost growth is expected to be marginally slower than banking revenue growth, and hence we anticipate flat to slightly positive jaws.
Credit impairment charges are expected to be higher than in 2024 due to a pickup in loan growth and forward-looking provision releases not repeating and CIB charges normalizing. The group's credit loss ratio is expected to remain around the middle of the group's through-the-cycle credit loss ratio range of 70-100 basis points. We are anticipating insurance and asset management earnings growth and further improvements in ROE to well within the group's 17-20% target range. The group's 2025 return on equity is expected to remain well anchored inside the group's target range of 17-20%. Ongoing capital generation will support distributions to shareholders, and dividend payouts are expected to remain at the top end of the 45-60% range. While uncertainty is expected to remain elevated, our business is well diversified, growing, and resilient.
In August 2021, we set out the targets shown on this slide for 2025. Our strong performance since 2020 and the guidance I have just outlined gives us a high level of confidence that we will deliver on these targets. I will now hand back to Sim to take you through our strategy and the targets beyond 2025. Thank you.
Thank you ever so much, Arno. As you've heard, we think that economic conditions in Africa will be favorable this year, and we have high confidence that we will meet our targets for 2025. However, at the risk of stating the obvious, the world has entered a period of heightened economic uncertainty. Modeling by the International Monetary Fund, by the South African Reserve Bank, and by Standard Bank's own economists, risk managers, and the front line indicates that a prolonged and serious trade war would be negative for growth.
The IMF model, for instance, suggests that the world economy would be 0.3% smaller this year if tariffs were significantly increased. The Reserve Bank scenario finds that a global trade war could lead to a significantly weaker rand, higher domestic inflation, and therefore more contractionary monetary policy in South Africa. Standard Bank agrees that higher tariffs would have a negative effect on GDP in South Africa and in other emerging markets, although we think that this effect will be relatively small. To be specific, Standard Bank's modeling suggests that in a world with significantly higher tariffs, the South African economy would grow about 0.1 percentage points more slowly this year than if higher tariffs had not been imposed. As these estimates imply, a higher tariff world will unfortunately damage businesses in most affected sectors and therefore place people working in these sectors and their families under more strain.
In summary on trade wars, as we see firstly from the data and the modeling, and secondly, assuming a substantial increase in global tariffs from their current low single-digit level to a weighted average tariff of 10% on all goods, we conclude that the overall economic impact of a tariff war scenario is still likely to be quite small for our operations. Our outlook, therefore, remains positive for Africa, just as Arno has described. Having said that, we must also accept that much remains uncertain in the economic outlook. For instance, according to media reports, the relationship between South Africa and the United States has become more difficult. We have analyzed the possible scenarios and risks arising from heightened global tensions and from rising populism domestically and internationally.
While it is possible that the superpowers could fall into the famous Thucydides' trap of armed conflict, we continue to think that this is very unlikely. We have also analyzed possible scenarios arising from changing attitudes towards South Africa by important decision-makers. This analysis includes a consideration of the state of property rights in South Africa, the risk that they might deteriorate, and the possible causes and consequences of that hypothetical deterioration. In the context of South Africa's gold standard constitution and Bill of Rights and our deeply entrenched rule of law, we have concluded that the Expropriation Act of 2024 does not weaken property rights in South Africa, nor does it weaken the sanctity of contract.
To quote Worksmans, one of South Africa's most authoritative law firms, "Expropriation without compensation, as it is set out in the Expropriation Act, would only be applicable in very limited circumstances." Further, any hypothetical expropriation with or without compensation would be subject to judicial review on grounds including constitutionality, rationality, fairness, and the public interest. In summary on land expropriation, it is reasonable to conclude that the new Expropriation Act does not warrant any modifications to our lending policies or risk appetites. South African banks, including Standard Bank, of course, continue to maintain a high level of compliance with domestic law in all the jurisdictions where we operate and with international public law, including sanctions, money laundering, and related laws and norms.
As we understand it, thanks to a successful program of reforms and more prosecutions now underway, there is now a high probability that South Africa will leave the FATF grey list in October this year. Taking a broader and longer view, we continue to be certain that this is the African century. The fundamentals are on our side. As trade barriers rise elsewhere, Africa is getting more united, thanks to the African Continental Free Trade Area. In most of the rest of the world, populations are aging or even shrinking, and growth is slowing. Our working-age population is growing and getting better educated. Further, Africa is abundantly blessed with all the resources needed to help power the current state of the global economy and to make the transition towards a lower carbon world. As we look forward, we are in a very strong position.
We are, for example, the most valuable banking brand in Africa. We are the custodian of ZAR 2.1 trillion in deposits, plus ZAR 1.5 trillion in assets under management. Our total assets now stand at ZAR 3.3 trillion. We therefore remain the largest financial institution in Africa by assets. We are very well positioned to win in our markets and to generate attractive returns for our investors. Frankly, there is no other financial services business as well placed in Africa as the Standard Bank Group. Our purpose and strategic priorities will remain unchanged until 2028. We intend to achieve our goals in two main ways. First, we will continue to defend and grow our core businesses. These core businesses remain very well positioned to support Africa's short, medium, and longer-term growth. Second, we are actively pursuing new growth opportunities in three areas over the medium term.
Executing on these opportunities will enable us to further elevate our earnings and returns. Let me say a little more about why we are focusing on these areas and why we are also confident of our ability to win in these markets. We intend to lead Africa's energy and infrastructure development for two simple reasons. First, that there is immense demand for new infrastructure in Africa. It is often said that Africa cannot afford to invest in new infrastructure. This is not accurate. According to the African Development Bank, as things stand, Africa can afford to self-finance roughly $65 billion over the next 15 years, which is about half the investment required. Our ambition is to mobilize as much of this as is possible and, at the same time, to attract external funding. We will be doing this in fulfillment of our purpose. Africa is our home.
We drive our growth. Equally, this is an immense commercial opportunity. Second, we have unmatched capacity in infrastructure and energy finance, thanks to our deep sector expertise, our links to the global financial markets, and our sheer scale. This, therefore, is an area in which we know we can do well by doing good and in which we can win. The case for Africa being the case for being Africa's leading private bank is equally clear. Africa's strong and steady growth is rapidly creating middle and affluent segments in need of world-class financial services. We estimate that there are around 3 million potential private clients in South Africa and about 5.5 million potential affluent clients in Africa regions. We are already very good at providing higher-end retail financial services in many markets 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. This is an area in which we know that there is rapidly growing effective demand and in which we know we can provide market-leading services. Our third growth opportunity is optimizing our portfolio to respond to client demand in Africa's growing economies. This is an extension of our previous focus on East Africa. Some call it a vector. We are, of course, still committed to strengthening our position in East Africa, which remains the fastest-growing subregion. Our ambition has broadened. We will now aim to grow and refine our footprint to better serve our clients throughout Africa and to capture more of Africa's growing trade and investment flows.
For example, in 2024, BCB launched its offering in Mauritius to serve the needs of our clients for offshore banking. We are now awaiting the final approval to open a representative office in Egypt. This will enable us to better support our clients who are already active in North and East Africa, who are using Egypt as their base for multinational operations in Africa, and who are trading along the Africa Gulf Cooperation Council corridor. I should add that we remain quite willing to exit markets if capital can be more efficiently deployed elsewhere. As always, we will not pay above a fair price for any asset. Why do we think we can succeed with this broader ambition?
Because Africa's macros are supportive, because we have a very strong capital position, and because we have a very long track record of successful and disciplined expansion in service of our clients and of Africa's competitiveness and growth. Here are the targets we are now committing to reach over the period from 2026 to 2028. As can be seen, we are committed to growing headline earnings per share at a compound annual growth rate of between 8% and 12% from 2026 to 2028, to lifting our return on equity to within a new higher range of 18%-22%. These core metrics will be supported by the supplementary targets listed below, of which a cost-to-income ratio below 50% is probably the most significant. Let me make the central point of today's presentation even more explicit. We do not arrive at these targets lightly. We are confident we will achieve them.
As we have just shown, we are going to meet the targets for 2025, which we set in 2021. Our 10-year record is equally solid. We submit, therefore, that investors have every reason to share our confidence that we will meet our new targets to 2028. Thank you all very much for your interest. That concludes our presentation. I'll now request the panelists to please join me in the front. We'll now take your questions, and if we may start with the conference call. Operator, are there any questions on the conference call?
Thank you. We have a question from James Starke of Morgan Stanley. Please go ahead.
Hi, good morning, Sim and team. Thanks for the opportunity. Three questions from me. The first one is NIR-related regarding trading income. I mean, pleasing growth off a very elevated base.
How should we be thinking about growth in this key line item into 2025 and beyond? If you can perhaps expand on some of the factors which may risk the momentum in this area. The second question relates to costs. I think very impressive cost control so far. If you could perhaps expand on the scope to build on the current progress for further cost containment into the medium term, touching on both structural and cyclical drivers. Lastly, on ROE and the 18%-22% target, if you could share some thinking on how you see the ROEs evolving for SDSA and the IAM cluster from their current levels in support of the group ambition. Thank you.
On a demand, , you're taking the trading question, and then if you could then take the balance of the questions with support from Yuresh on IAM .
Yeah, thanks, James. Look, what we've tried to demonstrate as well is in the PEC is the makeup of our trading revenue and our global markets business in general. You'll see it's mainly made up, 80% more made up of our client activity, client revenues. That gives us a lot of confidence on its sustainability as demonstrated over the last few years. When we think about going forward, Sim talked about the supportive macros that we see on the continent. As a result, we have every confidence that we will continue to be able to grow the trading revenues. On top of that, we are continuing to mature in building out our financing businesses out of global markets, where we've combined the structuring capabilities as well as distribution capabilities of investment banking and global markets.
When we think about our business, we still think that base can still grow off the back of a very improving macro. On it.
Yeah, on costs, thanks, James. On costs, of course, that work never ends. There is always opportunity to think about more cost efficiency. Specifically, also as Funeka thinks about distributing products together with Yuresh, of course, physical footprints can continue to reduce, our physical distribution costs can come down as we leverage our digital solutions. Our amortization costs will also be coming down in 2026 and thereafter as well. That is going to give us a natural tailwind as we have processed more of our technology now in the cloud, as I mentioned, which is not capitalized. It is expensed in the year where we processed it.
That work will continue, and we continue to be very diligent on our cost schedule and have multiple interventions going on the group to continue to fine-tune those. On ROE, on IAM, first of all, you noted in my presentation the large distributions to group. That has fundamentally reduced and right-sized the capital base in IAM. Structurally, for 2025, there will be a higher return on equity for IAM just on the back of a reduced capital base. In SPSA, we continue to see an improvement in ROE as well. We see the outlook, macro outlook looking better in SPSA just on the back of GDP growth and some of the positive government and macro developments.
That will result in more lending, more client activity, more client entrenchment in the retail business, good growth in the BCB business, and that ROE will continue to eke upwards. Yuresh, anything to add on IAM?
No, I think Arno's covered it. Maybe just to call out that, just to emphasize, I think the capital efficiency program we started three years ago is complete, and now it's effectively growing the earnings base of where we found ourselves at the end of 2024, together with collaboration, particularly with the retail bank as well as the business bank and our open market strategy. Thanks.
Funeka, any closing points?
We are, I think the collaboration that we have built up within the teams in terms of what we ask the teams to do in IAM and PPB is really starting to show a much higher productivity print on insurance as well as in invest, and that can only continue. Therefore, we expect to see our overall insurance income and invest income to grow.
Thank you very much, James. Operator, any more questions?
Yes, thank you. Next question comes from Harry Botha of Bank of America Securities. Please go ahead.
Hi, good morning, Sim and team. Thank you for the updates. Given the increase in dispersions you noted, do you see improved advances growth coming through in 2025 in BCB and PPB? Can you possibly expand on the tactical hedges in Africa in specific regions? How do you expect it to change over time?
What's the duration of it? Thank you.
Could we have Bill and Funeka taking the—sorry.
I'll ask for a repeat for the first question.
Do you want to repeat, Harry, your first question? It's around, yeah.
Yes, sure. Given the increases in dispersions that you noted, do you see improved advances growth in BCB and PPB segments in 2025?
And Arno, the hedge you'll take, yeah. Okay.
Perfect. Thank you. Harry Solistio with Asset Growth and BCB. If you break it up into the three regions, they're all quite different. In South Africa, we definitely saw in the early part of the year with the transition to the GNU a much quieter business environment, much less drawdown. In the second half, as you saw from Arnold's presentation, a significant step up in asset demand. We do expect that to continue in South Africa.
Net-net through the year, it showed a flat outcome for us, but good momentum as we move into 2025. Africa regions, you'll see from the booklet, actually we had very strong asset growth in constant currency, roughly 15% year on year. That has been a consistent trend over a long period of time now. As we expect more stabilization of the currency, the benefit of that and conversion to rands, we would expect to translate into our rand income statements and balance sheet. For international, we're actually going through a process of working with Kenny around the reframing of that franchise. You have seen a modest asset decline. We're confident that with the reframing of that franchise and how we use it, that'll put us in a strong position going forward. Thank you.
From a consumer perspective, really, three things.
The consumer is broadly under strain still, but we are finding pockets of growth. We find it in clients that still have affordability as well as clients as an impact of an increased confidence. We are absolutely—we're starting to see very early signs of a really double-digit increase in dispersements, both in South Africa and in Africa regions, particularly in personal loans. We're actually starting to see a faster asset formation in our mortgage book as well.
I wonder if I may ask also to add, Harry, I know I'm taking liberties. You did not ask about CIB, but it would be remiss not to add the CIB dimension to dispersements.
We saw specifically in South Africa quite a big increase in our origination in our investment banking division.
A lot of that driven by the trends that we had tracked, which we felt post the government of national unity were accelerated. Those were opportunities around energy and infrastructure. That is one of the reasons why they remain important in our strategy going forward. We think they will continue into 2025 and beyond. We are hoping that we will start to see the other sectors, the positive sentiment starting to translate into the other sectors, growing the investment in the economy in South Africa and a strong bounce back into the Africa regions, which the underlying was quite strong but was dampened by the foreign currency exchange.
Thank you, Bill . On the hedging?
Yeah, on the hedges, thanks, Harry. You must just bear in mind the biggest hedge program is in South Africa. We have got around ZAR 100 billion of hedges on the book.
That's about 70% of the way through of putting this hedge program onto the book. In Africa regions, we have tactical hedges in certain markets: Ghana, Mozambique, Uganda, Zambia, Mauritius, and Nigeria, to give you a sense. Relative to the South African program, that's quite a small program, that, but it will contribute towards NII protection next year. We do expect some protection on margin as we hedge those markets in Africa regions and in offshore as well, just to make the point on that.
Thank you, Arno. Thank you, Harry. Operator, please, would you have more questions?
At this stage, we have no further questions on the lines.
Thank you so much. Sarah, any on the webcast?
Thank you, Sim. The first question is from Chris Stewart from 91. You have upped your longer-term ROE target range.
Is this more a function of continued increases in your core return on assets, disposal of underperforming assets, or increased gearing as capital levels reduce in your subsidiaries?
Arno, do you want to talk about the levers?
Sure. Hi, Chris. As you would expect, it's a bit of all of it, of course. There's no one silver bullet here. First of all, we already spoke about IAM having a structurally higher ROE that's going to boost the group ROE. In our retail business, we also see ROE going up as that business becomes more successful, even more successful in Africa regions and more entrenching our clients in South Africa. Plus, Funeka will also have less headwinds from the amortization charges. She's borne on the expensive SAP core banking program over many years now, and that's going to start coming down.
There is a structural shift in the retail business as well. Chris, as you can imagine, Africa regions is growing faster than South Africa. You saw the stats in my numbers. That ROE is at 28%. As that business becomes bigger, it naturally is going to push the overall group ROE as well. South Africa has a better outlook. I mentioned that already. 1.7% real GDP growth compared to 0.8% in 2024. That is going to boost the ROE. I mentioned that already, Sim. Of course, you saw Sim's concluding slides. We are defending and growing our own business, competing effectively there, and we are adding the three growth opportunities. Clearly, they are ROE accretive. I think those would be the main drivers. Fine-tuning and supplementary drivers could be fine-tuning our individual businesses.
In other words, optimizing what we have already, which is one of the pillars which Sim spoke about in terms of the Africa regions jurisdictions.
Although ROE is not a big driver in IAM, Yuresh, do you want to comment on your contribution there as well?
Yeah, it is. I think Arno made the point already around the structural change that we have. And so of the efficient capital base, I think the opportunity for us is where the growth arises for us in terms of domestically in South Africa, as well as across the continent to actually grow the earnings base and then ultimately contributing to the group ROE. Thanks.
Thanks. One more question from Chris Stewart. Can you confirm that your guidance for the uptick in CLR, credit loss ratio, in 2025 excludes sovereign impairments?
What is your assessment of the potential for additional sovereign impairments in 2025?
Yeah, Chris, as we've elaborated, it does exclude sovereign impairments or impairments on financial investments, the CLR. So it's a CLR to clients we're looking at there. We'll probably have a similar impairment charge as we had in 2024 in 2025. The one sovereign we're most looking out for is the Mozambican sovereign.
Thanks. I've got three questions from Charles Russell. Thanks for the presentation. What is driving the drop in client numbers in BCB? The second question is, how does the group currently feel about expansion into North Africa? Thirdly, can you unpack the components of the NIM compression you see in 2025? Anything more to add? Thanks.
Bill, do you want to take the first one? I'll take North Africa, and Arno, you can take the.
Yeah, thank you. Thanks, Charles.
Charles, I think there are a couple of factors here. The one is we've been doing some management of the portfolio, management of the definitions, all the rest of it. Some of it is a little bit of internal tidying up, if I describe it as that. There is a little bit in single customer engagement with ourselves where we've reframed the credit that we've looked at in respect to, say, something like VAF. What is important, though, Charles, is that if you look at how we've repositioned our Simply Blue offering in terms of acquiring and our transactional capability, we're actually seeing very good client acquisition at the bottom end of the profile. In the mid-tier, which, of course, is the most valuable tier in this, we're also seeing good client acquisition. Once you move from business into commercial, the numbers just aren't significant.
Although each individual client is significant, the numbers in terms of total client numbers are not significant. Charles, it is those sort of three factors altogether.
Charles, as far as North Africa goes, we have said that we are in the final stages of completing the regulatory process in Egypt to open a rep office. We are doing that to take advantage of the Gulf States, Egyptian, and East African trading corridor. As far as the rest of North Africa goes, we follow our clients. There are no concrete plans other than the ones that relate to Egypt. Arno, do you want to deal with the NIM?
Yeah, net interest margin. We expect a compression in NIM somewhere between 20 and 25 basis points.
The biggest component of that compression will be due to endowment headwinds, in other words, declining rates, somewhere between 15 and 20 basis points due to endowment headwinds. We continue to see pressure on pricing in retail and in wholesale specifically. That will also reduce some pricing pressure. This may be offset then by some growth mix benefits by growing Africa regions faster than South Africa.
The next question is from Kombelo Navora from Melbourne Douglas. He had a question with regards to pricing. I think we've dealt with that one. The second question is, regarding your 2028 targets, does it include potential M&A or is it primarily driven by organic business growth?
It's primarily driven by organic business growth, running our businesses better, simpler, better, faster, and of course, looking at opportunities as they arise.
Thanks. The next question is from Baron Nkomo from JP Morgan.
Please, can you elaborate on what gives you comfort and confidence that the currency devaluations in the rest of Africa will not repeat in 2025?
Do you want to go, Arno?
Yeah. Baron, we do see an improved macro outlook for those countries who have particularly high inflation rates at the moment. I'm mentioning four of them: Nigeria, Ghana, Malawi, and Angola. We have just refreshed our outlook for the inflation rates in those markets. In all of those markets, we see inflation coming down quite materially. I'll give you some examples. In Malawi, last year's average inflation rate was 32%. For 2025, we expect it to be 24%. In Angola, we expect inflation to reduce from 28% to 23%. In Nigeria, we now know inflation is around 24.5%. You would have noted that recent release. In Ghana, we expect inflation to drop from 23% to below 20%.
Structurally, inflation is coming down, and that will stabilize currencies and generally lead to an improving macro outlook for these markets. Having said that, of course, it's all an uncertain outlook. These are our best estimates at this point in time. We'll be dynamic and agile as we go through the year and then manage the currencies accordingly.
There's a question from Asanda Noche from Maisy Asset Management. Which elements of the income statement or balance sheet need to change the most in order to achieve the 18%-22% ROE range?
Arno, it looks like you have a busy morning.
Yeah, more revenue, less costs, Sim, wouldn't it? It's quite straightforward now. It's obviously a whole lot of components, and I mentioned some of them already. Obviously, we need to drive the top line. We need to have cost discipline, positive draws.
Operating leverage is critical. Continue to manage our credit portfolios and credit positions very carefully. Capital efficiency is also important. Every round of capital that gets deployed has to meet hurdle rates, is carefully scrutinized, and is optimized in that sense. If you put it all together, that does result in improved ROE. I mentioned already some of the underlying drivers: IAM, PPB, SA, Africa regions, the whole mix impact. I do not need to go through that again.
Thanks. There are a couple more questions with regards to margin. I think we have covered those already. There is a question from Radebe Sepamla from Mergence Investment Managers. Please, can you explain the drivers that helped support NIM despite the declining interest rate environment? What was the benefit of the hedging program?
Can you share what proportion of the balance sheet is hedged and how the hedge works through the swaps?
Sure.
Okay, so there is going to be NIM compression because interest rates are coming down. I spoke about that already. The hedging program will offset it by around five to six basis points. That is the impact of that. For the group overall, the impact in South Africa is much more material. When I talk NIM compression of 20-25 basis points and endowment contributing 15-20, that is a group view. We are seeing upside in 2025, as we did see in 2024 as well, actually, of the hedge program bleeding NII into our income statement. That is positive. There is a portfolio of swaps, typically three to five-year derivative instruments. It can also have some long-dated bonds in there as well, but predominantly swaps.
Those positions allow us to monetize the steepness of the curve and to protect any rate cuts as they come through. We are approximately 70% done, as I indicated, and that means approximately we have hedged half the endowment exposure. Three years ago, if you go back into our accounts, you would see our sensitivity to a 100 basis point rate cut would be around ZAR 2 billion NII in South Africa. ZAR 2 billion per 100 basis point rate cut. It is now ZAR 800 million per 100 basis points. We have taken out ZAR 1.2 billion of sensitivity.
Thanks. That is all the questions we have.
Thank you, Sarah. Just to check with operator, operator, were there any questions that arose whilst we are on the webcast?
Thank you. We have a follow-up question from James Starke of Morgan Stanley. Please go ahead.
Thank you.
Sim, I think for Bill, if we look at BCB, the non-interest revenue within that fee, net fees and commissions declined 2% year on year. If you can perhaps talk to the competitiveness of your existing fee envelope and how you're finding the competitive landscape more generally.
Yeah, James, I think it's clear that the market in BCB is getting increasingly competitive. In order to address that, we've actually proactively looked at a number of our pricing across a number of our products, particularly here in South Africa. That is what you see partially playing through the income statement. Equally, what you're seeing is customers being more discerning about where they allocate their products and use their banking services. I hope that gives you a perspective of where we are in the market at the moment. Thank you.
Operator, any more questions?
No, sir.
That concludes the questions from the lines. Thank you.
Thank you very much, ladies and gentlemen. That concludes the events this morning. Thank you for your time, and we look forward to chatting you in due course. Thank you.