Welcome everyone to our full year briefing. Before we start, we'd like to acknowledge the presence of some of our members of senior management seated at this table. We'd also like to, we have Charles Rodriguez. He's the Head of our Institutional Banking Group. Beside him is Coco Martin, our Treasurer. Beside Coco is our Deputy Treasurer, Arnold Bengco. To the far right, it's Jerome Guevarra, our Chief of Staff. Beside him is Cora Mallillin, Head of our Branches. Last but not least, Rolly Tanchanco, the Head of our Consumer Banking. We'd also like to acknowledge the presence of one of our Independent Directors, Mr. Vipul Bhagat. We reported PHP 82 billion in net income, this is a new record for us.
It's 12% growth compared to last year, it translates to a return on common equity of 15%. Again, this return on equity is something we've sustained from 2023. If you look at the fourth quarter earnings, in particular, PHP 21.4 billion, it's also another record high for us. On the lending business, our loans were up 13%, we saw double-digit growth across all market segments. For our asset quality, we improved our NPL ratio at 1.83%. Cover, now using the new BSP definition, which excludes retained earnings, is at stable at 145%. We have not done a major release in our provisions yet. Our capital position remains strong. Book value is up 11%, CET1 at 14.1%, which again gives us sufficient cushion for balance sheet growth. Just a reminder, I think this is something we disclosed previously about the changes in our reporting format.
We have incorporated transactional costs in specific line items, we have also condensed our insurance results into a single pre-tax profit line. The result of that was that it resulted in lower margins, at the same time also it resulted in lower cost income ratios for us, which again is closer to the regional best practices. The most recent change is, again, what I mentioned earlier in terms of the NPL coverage. It now excludes the amounts appropriated in retained earnings. It doesn't mean that the general loan loss we have in retained earnings is excluded totally. It is still part of our compliance with the BSP regulation to maintain a 1% general loan loss, that continues to stay in appropriately retained earnings. It's just that it's now not considered part of NPL cover.
Again, in terms of net interest income, 8% growth driven by stable margins at 4.35% and our earning asset growth. Fee income up 17%. Again, we're very encouraged by this because we've seen an accelerating trend in terms of our fee income on a quarterly basis through 2024. Others, there's a 25% decline. If you recall, we booked a PHP 6 billion gain when we consolidated SM Capital in late 2023. That resulted in a decline on the reported number. If we were to normalize that, our gross income, instead of an 8% growth, actually grew by 11% on a going concern basis. If we look at our pre-provision operating profit from a 4% reported number, the going concern is roughly at 8% growth year-over-year. Again, this strips out the impact of the one-time gain that we booked in 2023.
Provisions, there's a slight decrease compared to last year. Again, this is in view of what we feel. We still have one of the highest coverage ratios in the industry, and given the trends that we're seeing in terms of our NPL ratio, we are very comfortable with a slightly lower level of provisions in 2024. Lastly, again, because of the sustained growth across our core businesses, 12% growth in income, 15.1% return on equity. On the balance sheet, as mentioned earlier, 13%. Our LDR is now at 85%. If we look at our CASA ratio steady at 71% and 6% growth in our CASA. Book value, as mentioned earlier, up 11%. Looking at our loan growth, the 13% loan growth, if you look at the column on 2024, 16% growth in consumer lending. For middle market, almost 12%, corporate 12.6%.
In terms of deposits and branches, I mentioned earlier 6% growth in CASA. Our cost of deposit is just under 2%. In terms of branch openings, we opened a total of 71 last year, 55 from network, 16 from the BDO Unibank platform. On non-interest income, fee-based accounts for 72%. Again, 17% growth last year versus 11% growth in 2023. Again, this is from a combination of payments, merchant acquiring, loan fees, credit card fees, wealth management. For our insurance operations, there's a 7% growth from their contribution to pre-tax income. In reality, this was also affected by the volatility in the equity markets. If we look at the new business volumes for BDO Life, it was up actually 14%. Still decent mid-teens growth in terms of new business generation for our life insurance business.
For operating expenses, I highlighted earlier the components of our OpEx, and that translates to a cost-to-income ratio of 55%. For our asset quality, our cost of credit last year was equivalent to 46 basis points. As you can see here, the quarterly trend in NPLs has been very stable. In terms of return on equity, we're continuing with our mid-teens ROEs. Again, that's higher than the industry average of about 12.5% over the last two years. We have a progressive dividend policy, if you look at our dividend payouts, while it is on a fixed amount basis, it has been steadily increasing through the years. Our CET1 ratio at a parent level, which is the number that we watch more closely, is at 13.7%.
In terms of our macro and business outlook, while GDP growth last year was under 6%, it is still higher than global and emerging market averages. Government spending has been limited by its deficit position, but the overall trends still show signs of recovery. Inflation, we think will still be well within the target range of the central bank and two recent statements or pronouncements from the BSP. Economic outlook supports a calibrated shift to a less restrictive monetary policy. What has changed is the global uncertainty, especially the uncertainty over trade policies. What are we watching out for? Interest rates and FX uncertainty. If there's volatility there, that affects the private sector decisions in terms of CapEx investments.
Commodity price shocks are another thing, although again, based on developments that we're seeing in the Middle East, we hope that that will result in more stability going forward. Lastly, the twin deficits on the part of the Philippines for the fiscal and current account deficits. In terms of our outlook, we remain cautiously optimistic. We think loan growth could be sustained in the low- teens with upside potential from a CapEx cycle. NIM's supported by asset growth rebalancing. We have seen consumer loans growing faster compared to corporate, and we're also hoping that CASA growth will come in at better levels compared to previous years.
Of course, again, the early gift that we got from the BSP in terms of another two percentage point cut in the reserves. On fees, we expect continued growth in our fee businesses. Our strategic initiatives continue to provide positive momentum. On the asset quality side, our NPL ratio remains stable, and we have more than adequate cover today. That's it. At this point, we can start taking questions. May I ask our senior officers to please join me here up front?
This is Richard Tan. I'll be moderating the Q&A session. For those attending on-site, please wait to be acknowledged and kindly introduce yourself and the firm that you represent.
We'd also like to acknowledge the presence of our President and CEO, Mr. Nestor Tan. Mr. Tan, can you join us here, please?
Good afternoon, everybody.
Let me relay the questions from Citi, Tan Yong Hong. First question, time deposits declined, which helped NIM. If loan growth continues at low teens, how would this be funded? Any LDR gap or cap?
We have strong deposit generating capacity. That should still be the bulk of the basis for funding. On top of that, last year, we took advantage of the capital markets by issuing two one and a half year labeled ESG bonds for a total of PHP 119 billion. Lastly, well, the BSP, as of last week, announced a 2% cut in reserves, which should free up something like PHP 320 billion for the system. For BDO alone, given our deposit balances, that's an additional over PHP 60 billion of freed up funding. Based on that, we're comfortable basically with Charles and all our lending groups.
If I may add, I don't think the LDR is going to be a constraint. While our LDR has increased to about 85%. Again, with a 5% reserve requirement, your theoretical LDR should be about 95%, and we're still 10 percentage points away from that. Secondly, we hope basically to see the balance sheet funded by growth in CASA coming from the branches, time deposits, bond issuances potentially, given a more favorable interest rate environment.
Question from Citi. Is the quarterly fees income driven by new product launches, or do you think there is something more seasonal?
I think it's a combination of those things. New product launches, it's really more of an enhancement of existing product launches with more features. In terms of seasonality, yes. Typically, the fourth quarter is a strong season for consumer lending fees. Again, what is encouraging for us is the overall trend has been accelerating through 2024, and I think that's a good momentum to carry forward into 2025.
I think it's just natural combination, as Chito said. Natural volume growth is one. Second is the new products, they're all incremental. There's no home runs, just small steps that add to the volume. Third is also changing market behavior, maybe we are on the right market to capture the changes in what they're doing, from wealth to payments, to information, to insurance.
Yeah.
It's a combination of things.
Okay, we have another question here from Metrobank Trust, German de la Paz . Is there an upcoming issuance in the pipeline? If so, would appreciate if you can share some details, such as purpose and estimated size.
Yeah. It's going to be based on how we foresee our cash. Well, the loan growth. At the same time, we also keep track of our deposit growth. The view is for gradual easing of policy rates. We have actually resisted issuing in the foreign capital markets over the last few years, simply because we had the excess. For the peso, we use it opportunistically, and last year our issuances were based on the lower effective cost of rates for these labeled bonds.
Let me relay a question from Goldman Sachs, Olivia Shi. What will be your target dividend payout ratio in the medium term?
That will depend on a couple of factors. The pace of internal capital generation. However, if the expected CapEx cycle materializes and we see a higher trajectory for loan growth, again, we have to make a balance between what we should reinvest in the business and make sure that we do not forgo opportunities because of our capital position. It's a continuing thing. We monitor both sides very closely and, of course, to the extent that we can pay more dividends, we would like to do that also. Again, we have to take it in the context of what are the opportunities in the market, and we don't want the bank to miss out on those.
If you look at the loan growth, the overall average has been relatively stable, but the mix has changed substantially. Pre-pandemic, a big portion of the loan growth was coming from large corporate and infrastructure. Post-pandemic, it reversed. You have a lower capital charge as a result of the growth in consumer. Now with PPP coming on board, that mix may change again, and the volume, the quantum of the volume will also be there. Right now we're looking at about mid-20s dividend payout. Right, Chito? It should be, I would say, the floor, given normal conditions.
Thank you, sir. I have one last question here from First Metro Investment, Cristina Ulang, for Mr. Tan. What are your top three issues, risks about the bank and the industry that worries you? How are you strategizing to manage the risks relevant to the bank?
Honestly, we are seasoned bankers. We're seasoned analysts here. The biggest fear that I have is something I'm not familiar with, and that's cybersecurity. Credit risk, we can control. We know the downside. Market risk, we have the guardrails, and we know how to control. Operating risk, the same way. Cyber risk is an unknown for me, that's my biggest fear.
Again, we'd like to thank everyone for joining us today. For the onsite participants, we have lunch ready. For our online participants, thank you, and let us know if there's anything else we can help with.
Okay. Thank you.