All right. Good afternoon, everyone. Let's settle down. We'll start already. Welcome to our earnings call to discuss BPI's results for the fourth quarter and full year of 2023. I'm Chinky Lukban, your moderator for this afternoon's session. We are conducting this briefing in a hybrid manner with our BPI speakers and panelists in our headquarters here in Ayala Triangle Garden, Tower Two in Makati City, while others are dialing in remotely. I am pleased to introduce our speakers this afternoon. Jose Teodoro "TG" K. Limcaoco, our President and CEO. Eric Roberto M. Luchangco, our Chief Finance Officer and our Chief Sustainability Officer. We are also joined by the rest of the BPI Leadership Team in person and remotely.
This afternoon's agenda will start with opening remarks from our President, Jose Teodoro "TG" K. Limcaoco, followed by our CFO, Eric Roberto M. Luchangco, who will walk you through our performance highlights and strategic updates. The floor will then be open to questions from the audience. The presentation is being recorded and legal disclaimers apply. Now let me turn you over to Jose Teodoro "TG" K. Limcaoco for his opening remarks.
Thank you very much, Chinky Lukban, and a nice afternoon to everyone who's joined us today here physically at our headquarters in Makati, as well as to everyone who's joining us remotely. Today we are presenting our full year numbers for 2023, and Eric has created a presentation that provides significantly more detail and more granularity into our results. I believe that the results speak for themselves. They're quite strong and gives me optimism as to what we are looking forward to this year. A couple of things I do wanna point out before Eric comes on is the fact that we do have record earnings for 2023, up significantly, almost parallel to the kind of growth we saw in 2022 if you do ex one-off.
We also had very strong growth in the fourth quarter for both our deposits and our loan book, which I believe allowed us to gain market share for the full year. Finally, our NIMs continued to expand throughout the year, and we see this as something that will be steady and possibly continuing for the first part of this year. The second part of the presentation is where we will walk you through the progress that we have made in the last two years since we presented our strategic imperatives in July 2021. It will be a self-reflection where we'll talk about what we believe we have achieved and where we believe we have fallen short, and therefore what remedies we are taking to catch up on these targets.
As usual, the whole senior management of BPI is present here today. I'll acknowledge them later as we do the Q&A. At this point, allow me to turn the mic over to our CFO, Eric Luchangco. Eric?
Thank you, TG. Move this down a bit, not quite as tall. Good afternoon and thanks to all of you joining us for our fourth quarter and actually full year earnings call. We're pleased to report that for 2023 we had another year of solid results for BPI, with the bank generating record income of PHP 51.7 billion, up 30.5% from the prior year, driven by record revenues. Excluding the impact of the one-off gain from an asset sale last year, net income would've been up 44% from last year. Return on equity further improved to 15.35%, while return on assets was up to 1.93%.
Loans and deposits continued to grow, up 10.5% and 9.5% respectively. Liquidity and capital positions remained strong with the LCR at just over 200% and NSFR at just over 150%. The capital position further strengthened, reflecting strong income generation with indicative CET1 ratio at 15.3% and the CAR ratio at 16.2%. Asset quality remained robust with an NPL ratio of 1.84% and NPL cover at 156%. In 2023, we added 1.7 million new clients and delivered the most improved and highest net promoter score among local banks. We gained market share in several of our businesses and continued to make significant investments in our people, products, and technology.
In December, the bank received approval to merge the combined resources and networks of BPI and Robinsons Bank, effective January 1, 2024. On our performance in the fourth quarter, we delivered a net quarter net income of PHP 13.1 billion, down 3% on the sequential quarter from the usual year-end increase in operating expenses, up 19%. Offset which offset the increase in revenues, which were up 6%. Compared to the fourth quarter of the previous year, though, net income was up PHP 4 billion or 44%, driven by revenue growth, which was at 21%. Net interest income was up 18%, driven by loans, which were up 10% and NIM up 40 basis points.
We posted record trading income up 93% year-on-year, and fee income was up 21% on higher transaction count and volume. Income before provision was up PHP 3.8 billion or 29%, reflecting a sustained positive jaws. Finally, provision was down PHP 667 million or 40%, further boosting our net income. For the full year, we delivered record net income of PHP 51.7 billion, up 30.5% from the previous year's PHP 39.6 billion. This was largely driven by record revenues and lower provisions, which offset the increase in operating expenses. These results include revenue at PHP 138.3 billion, which was driven by record net interest income up 23% and record trading income up 37%, which offset the decline in fees.
Operating expenses were up 19%, driven predominantly by manpower, technology, and marketing expenses. Pre-provision income at PHP 69.2 billion was up PHP 80.7 billion or 14%, and provisions were down PHP 5.2 billion or 56%. If we exclude the one-off gain from the asset sale of 2023, fee income in 2023 would actually have been up 17%, and total non-interest income would have been up 19%. Revenue was up 22% and would have been ahead of the 19% increase in operating expenses. Pre-provision operating income would have been up PHP 13.7 billion or 25%, resulting in a PHP 15.8 billion or 44% increase in net income.
In many ways, once the one-off sale is stripped out, 2023 showed even greater growth than 2022. Net interest income was slightly better, but non-interest income was much better. From a 2.3% growth in 2021, from 2021- 2022, non-interest income grew 19%, from 2022- 2023, with both trading income and fee income showing double-digit growth. As a result, BAU net income growth in 2023 outpaced the net income growth from 2021- 2022. We have delivered consistent improvement in returns over the past four years with an ROE of 15.35% and an ROA of 1.93% in 2023. Earnings per share for 2023 reached PHP 10.45 per share, up 32% compared to last year's earnings per share of PHP 8.78.
Our balance sheet expanded 11% year-on-year and 7% quarter-on-quarter to reach PHP 2.89 trillion, backed by loan growth up 10.5% and deposit growth of 9.5%. The ADB on loans was up 10.8%, while ADB on deposit was up 6.3% year-on-year. Our liquidity remained healthy, supported by a stable and reliable franchise. 84% of the deposit growth last year was from retail customers, notwithstanding the lower branch count. Growth in time deposits offset the decline in CASA, resulting in a CASA ratio of 67%. While competitive pressures on deposits continued as some banks pushed prices higher, we focused on managing our excess deposits and did not blindly chase deposits with rates.
As a result, our loan to deposit ratio continued to improve, up 181 basis points quarter-on-quarter and 76 basis points year-on-year. Excess deposits were invested in securities, which were up 17%. Total loans stood at PHP 1.94 trillion, up 10.2% year-on-year and 7.8% quarter-on-quarter. All segments posted strong volume growth led by consumer loans up 21%, while institutional banking loans increased 7%. The loan mix shifted 230 basis points in favor of consumer loans to now reach 23.2% from 20.9% in the previous year. We'll see the breakdown in greater detail on the following slide. Credit Cards Growth. On the following slide.
Looking to the performance of the segments, growth was broad-based and was led by credit cards up 38% as the card base expanded by 480,000 or 24%. Special installment plan loans were up 28% year-on-year. The market share in credit card loans grew by 112 basis points year-on-year to 19% as of December 2023. Auto loans up 24% with growth observed in both auto loans and floor stock and the floor stock portfolio. Our share in the Philippine banking system of outstanding auto loans as of September 2023 was up 60 basis points to 14.8%. Loan releases over the past 12 months have been consistently higher than previous years' levels, with December posting 27% year-on-year growth in loan releases.
Mortgage is up 6.7%, which is comprised of 82% end user mortgage loans and 18% contract to sell portfolio. Regular mortgage loans grew 10% year-on-year, driven by successive record loan releases, which reached PHP 5.1 billion in December, up 54% from last year. The contract to sell portfolio, which was down 6%, largely due to lack of supply in the primary market, while the market share in regular housing loans was stable. Personal loans posted the fastest pace of growth, up 109%, driven by diversification of channels, the launching of new products, and expansion of pre-qualification criteria. Monthly loan releases were consistently higher than previous year, with December loan releases reaching PHP 1.5 billion, which is two times the previous year's level.
Microfinance loans are up 34% on a 38% increase in loan releases arising from the additional 33 BanKo branches and the rollout of the BanKo-on-the-Go roving vehicles that bring BPI closer to communities where access to banking services is limited. Institutional banking loans, by far our largest borrowing segment, saw strong loan growth in the last quarter to end the year 7% higher, with positive indications for growth expectations in 2024. Moving on to asset quality, NPL. The NPL ratio stood at 1.84%, up 8 basis points year-on-year, but down 13 basis points from the prior quarter. NPL cover remained more than sufficient at 156%.
Looking to the segment, upticks in the NPL ratio were seen in institutional banking, credit cards, and personal loans, while the remainder of the loan segments have remained relatively resilient. The increase in NPL ratios of credit card and personal loans is directly linked to our strategy to expand our market and grow our consumer book. Notwithstanding the upticks, our credit card business continues to maintain the lowest past due rates among the top five credit card issuers in the industry.
Consistent with guidance in previous meetings and to address concerns of our auditors on over-provisioning, we reduced provisioning to gradually lower the NPL cover during the course of the year to end 2023 at 156%, which is down from the peak of 180% in December 2022, which was due to the anticipation of rising borrower stress, due to the higher interest rate environment. We are confident that our provisioning is more than adequate. In addition to the 156% provision cover, collateral cover is close to 200%. Moving forward, we expect credit cost to normalize closer to pre-pandemic levels.
On NIM, contrary to early year expectations that BSP would adopt an easy monetary policy in 2023, BSP delivered a total of 50 basis points worth of rate increases through the course of the year. Higher rates supported further NIM expansion to 4.09% from 3.59% or 50 basis points up from the previous year. Higher NIM was also supported by deposit cost management and higher allocation of consumer in the loan mix. Fourth quarter NIM, however, declined by 2 basis points after three successive quarters of expansion as the impact of higher asset yield and higher LDR was offset by the increase in cost of funds, particularly with our time deposits. For 2023, the bank generated record revenue for the second year driven by record net interest income and record trading income.
Fee income was down 3% due to the one-off gain last year, but if not for that, as explained earlier, it would have been up 17%. Fourth quarter fee income also posted strong growth year-on-year, up 21%. This positive trend in fee income has remained intact for six sequential quarters. On our fee income, card fees were a major driver of fee income growth, up 33%, driven by a 27% increase in average active consumer base. Average active customer base. 45% increase in transaction count and a 41% increase in billings from retail, cash advances, and installment loans. 40% of new clients in 2023 were acquired through digital channels, up from 33% in the previous year. As a result, we gained market share across important metrics.
Client base market share grew 83 basis points to 18.2%, and card billings market share grew 120 basis points to 19% as of December 2023. Please note that these will also show up in marketing expenses as we spend to acquire and engage clients in our cards business. Wealth management fees increased 6%, with AUM expanding 19% year-on-year with 16 months of successive net inflows. Our client base expanded 31% with 98% of new clients acquired digitally. Market share of the trust industry rose 3 percentage points to 19.4% market share in UITFs. Market share in UITFs was up 1.7 percentage points to 30.4%, and market share in mutual funds was up 5.6 percentage points to 57.5%.
All of these were as of September. BPI Wealth also launched last year the signature private wealth experience, which underpinned the 36% increase in private wealth AUM. Branch service charges were up 18%, driven by a 15% increase in transaction fees and a 10% increase in transaction count. Branch commissions were up 27%, notably from new bancassurance product. Service penalty charges were up 10%. Income from insurance is comprised of equity income from joint ventures, royalty fees, and branch commissions. For 2023, insurance fees were up 43% year-on-year from higher equity income up 52% and higher branch commissions up 32%, following a 20% increase in new plans for the year.
Fees from ATM and digital channels were up 16%, driven by a higher ATM and digital transaction counts that were subject to fees. Excuse me. Fees such as services from our open banking payment gateways and real-time payment systems with the onboarding of 19 new partners to bring total partners to 128, offering 16,000 services from only 2,000 which were offered in 2022. Transaction banking was down 7%, driven largely by a decline in supply chain revenue as receivables from contracts purchased years ago are nearing their final maturity. Remittance fees were up 19% from a 36% increase in transaction count and 19% increase in volume. Market share in land and sea-based remittances grew five percentage points to 28%.
Retail loan fees were up 17% driven by higher loan origination, while securities brokers and IB fees were down 14% on less active markets. BPI Capital, however, continues to rank first in the Bloomberg League Table for debt capital markets and second for equity capital markets. The decline in asset sales and rentals was largely due to last year's sale of the Pasong Tamo property, which was also being leased prior to the sale. As told, we saw solid growth in fee income, and we expect to carry this momentum forward in 2024. Moving on to expenses. Operating expenses increased 19%, led by manpower, technology, and marketing expenses. Manpower spend increased 19%, driven by structural salary increases and a slight increase in headcount. Technology expense was up 29% from volume-related expenses, investments in new products and services, platform enhancements, regulatory compliance, and cybersecurity.
We also saw higher volume-related technology expenses across our businesses. Premises was flat year-on-year as the decline in leases from the decline in branch footprint was offset by improvements and repairs and maintenance. Regulatory was down 8% due to decline in fines associated with the Agri-Agra compliance. Other expenses up 34% was predominantly from rewards, marketing, advertising, and other expenses pertaining to client acquisition and higher client engagement. While the increase in cost was not insignificant, it did bring some meaningful benefits. We added 1.7 million new customers and clinched the number one position in NPS among banks. We saw good growth in volume across the bank and gains in market share. We achieved operational efficiencies with a declining cost-income ratio after adjusting for the one-off gain.
While we believe that managing cost is an important task for us, especially moving forward, we also believe that as long as we maintain a positive jaws, we continue to be on the right track. Looking at our capital. Over the past twelve months, our CET1 capital improved to PHP 324 billion, with indicative CET1 ratio up 15 basis points to 15.3% and CAR by 14 basis points to 16.2%. These are notwithstanding the higher cash dividends that we declared this year. Our capital ratios remain well within regulatory and internal thresholds, and if anything are too big a capital buffer. Our rating agencies are very happy. We do look to bring these down gradually through an increased dividend payout. Strong earnings in 2022 allowed for sharp increases in the capital distribution last year.
Following the bank's shift from a fixed dividend amount per share to a variable dividend amount, the bank declared a total dividend for the year of PHP 3.36 per share, up 58% from 2022 and 87% from our old fixed dividend. To summarize the financial performance on profitability, the bank delivered another year of record income, reflecting strong business momentum across its businesses. Our balance sheet further strengthened with higher liquidity and capital ratios. Our asset quality remains strong with more than sufficient cover. Lastly, on growth, we delivered strong new client acquisition and client engagement, resulting in record volumes and increases in market share in several of our businesses. We're proud of what we have accomplished in 2023.
With the strength of our balance sheet and our franchise, we are well-positioned to follow through on our five-year imperatives while sustaining share value creation and profitability. Which leads us to the second part of our presentation today. At this point, allow us to provide you with an update of what we have accomplished 2.5 years since our second quarter earnings call in 2021, when we shared with you our key initiatives, which include increasing the share of consumer loans and SME, which we call business banking in our loan book. Establishing ourselves as the undisputed leader in digital banking. Using branches as sales stores more than service points. Closing the gap in funding leadership, and promoting sustainable banking. All of these are underpinned by our passion for the customer.
On growing the share of the consumer and business banking loans in our loan book, we closed 2023 with loans at PHP 1.9 trillion. Up PHP 456 billion or 31% from 2021. Over the past two years, our combined consumer and business banking loan book has been growing faster than institutional banking. Which is in line with our goals for growing the loan book. Loan growth has been strong across all segments, led by credit card, personal and microfinance loans, and we grew market share across all segments. From 118 basis points for mortgage to as much as 600 basis points market share growth for microfinance.
Notwithstanding the gains in volume and market share, asset quality improved with NPL amount, NPL ratio, NPL cover at more favorable levels than we had at the end of 2021. The addition of our of Robinsons Bank's loan book, which is 45% consumer, and the strong growth we expect from motorcycle loans and teachers loans, makes us confident that the loan mix will continue to shift in favor of consumer over the coming years. On establishing ourselves as a leader in digital banking, back in 2021, we mentioned that our goal is to leverage our digital assets and capabilities across our businesses. To do this, we need to sustain the growth of our platforms. Since 2021, we have delivered six digital user platforms. BPI's eWallet Vybe, where anyone can be a client, including those without any ID.
The new BPI mobile app, which features new-to-product and new-to-bank features. This is the first banking app in the country to feature AI-powered tracking and insights. The app offers financial advice, payment reminders, and actionable advice on financial wellness. This new BPI app is the key to the bank's phygital approach to make the bank more accessible to Filipinos through a combination of physical branches as well as digital channels and platforms. We recently fired up our BPI Trade app, where you can trade seamlessly on your mobile. It is currently in soft launch. We continued with enhancement to our BizKo and BizLink platforms to address cash payroll and payment requirements of small business and corporate accounts.
To be honest, improvements in these two apps has lagged what we wanted, but we continue to work on optimizing them to achieve the client experience that we want for our customers. Work is still ongoing on our seventh app designed for high net worth clients, and we hope to make it available soon. While we have lagged relative to our plans on some of our digital banking platforms, we continue to believe that we deliver a superior digital banking experience to the widest customer base in the Philippines. We also invested in our service platforms to increase our capabilities in open banking, real-time payments.
These initiatives enabled us to expand our client base to 11 million and enabled us to efficiently service 1.5 times the transaction count and 2.4 times the transaction value with a lower headcount than we had in 2019 due to our clients' strong digital adoption. On the role of new branches, despite the streamlining of branches that we have engaged in over the last couple of years, we continue to believe in the value of physical branches. We continue to open branches where it's needed in areas where we don't have a branch presence, even while consolidating and co-locating existing branches in oversaturated areas with an eye to not losing any territory coverage. From 2019- 2021, we have co...
To even more remote areas where it may be more difficult to build a full branch. For the BPI branches that remain, we will unlock the power of digital banking in delivery, in delivering a differentiated customer experience at the branch. We have already transformed nineteen. To further enhance their digital banking experience. We have meeting pods and meeting rooms equipped for virtual conferencing capabilities. This year, we are targeting to transform another 50 branches, initially with the potential to ramp up further in the second half of the year. We do not see the need to keep the same number of branches as branch transaction count has significantly declined and shifted towards digital channels. Average daily transaction count in the branch dropped 22% to 395 in 2023, from 507 in 2019.
Total branch headcount also declined 20% as we reduced the number of branches and the average headcount in the branch. Notwithstanding the lower number of branches, our deposit volume and market share grew as we grew average deposit per branch. We delivered this while incurring savings from having a lower number of branches and branch employees, which we estimate to be roughly PHP 2.5 billion per year. Last year, we introduced agency banking, which creates partnerships with convenience stores, department stores, supermarkets, gas stations, pharmacies, to make our products available to the customers served by our partners.
Agency banking instantly expanded the BPI physical network from the 709 branches, as shown in the red dots on the map on the left-hand side, to over 6,000, with 5,344 partner outlets, as shown in the green dots on the map on the right. Many of these outlets are located in municipalities and towns where BPI does not have a presence, and many are open on weekends and holidays 24/7. Our partners currently offer loans, credit cards, and insurance products, and by the second quarter of this year, they will effectively be able to operate like a branch that can process deposits, withdrawals, cash in, cash out, and transact cash in and cash out transactions and bills payment.
By becoming another channel for simple banking transactions, our agency banking partner outlets help BPI branches operate more efficiently by reducing the transactional processing load, dovetailing nicely with our branch optimization strategy. With regard to our goal of funding leadership, as of December 2023, total deposits stood at PHP 2.3 trillion, up 17.4% from 2021. Growth has been predominantly from time deposits, up 69% as clients shift to higher yielding products following the increasing interest rate environment. Over the same period, we grew market share in total deposits, though the increase was lagging key peers as we focused on managing our deposit cost by tempering growth in time deposits.
Over the last year, we did suffer an erosion in our CASA market share and are well aware that we have not achieved the same level of success in this aspect as we have in other areas of our business. For 2024, we have a renewed focus on further building up our CASA levels through a few key initiatives, focusing on things like payroll and high net worth, high net worth client CASA. By focusing on becoming the main operating bank with specific initiatives per customer segment, we believe we will grow out our market share with these segments. As a result, we expect to grow our CASA ratio in the coming years.
In the area of sustainability, guided by its vision of becoming a responsible bank, BPI pursued inclusive, innovative, and pioneering banking solutions that champion financial inclusion and sustainable finance. Harnessing its strength in digital banking, BPI continued making banking easier and more accessible for Filipinos, boosting the bank's client count to 11 million, up 1.7 million year-on-year. 52% of the new clients onboarded were via digital platforms and agency banking. The bank also continued ramping up its financing portfolio for sustainability with PHP 872 billion of the bank's outstanding institutional banking and business banking portfolio in support of the UN SDGs, representing 52% of the total as of year-end 2023.
PHP 277 billion in cumulative loan disbursements were made under the bank's Sustainable Development Finance program since 2008, financing renewable energy efficiency, green building, and sustainable agricultural projects. PHP 198 billion new agribusiness loans were disbursed for the full year of 2023, and PHP 15 billion new microfinance loans were disbursed under BPI BanKo in 2023, serving 213 self-employed micro entrepreneurs. Highlighting as well some other key ESG initiatives of BPI in 2023. We raised ESG-focused funding, including a $250 million IFC green financing deal, which is the largest deal of IFC with a Philippine bank. A PHP 20.3 billion RISE bonds supporting MSMEs, and a PHP 10 billion Green Saver Time Deposit, the proceeds of which were allocated to projects with clear environmental benefits.
BPI Bank also introduced new products for the underbanked segments, including the iNai app, empowering sari-sari store owners to quickly, easily, and conveniently order, manage and pay for their inventory. The Micro Agri Loan rewarding on-time loan repayments, which started as a pilot financing project for small-scale onion farmers of Jollibee. And then the InstaCash line, providing bridge financing for self-employed micro entrepreneurs. Finally, Max 500, a term loan supporting the expanding operation of self-employed micro entrepreneurs requiring higher loan amounts. BPI financed and arranged ESG-focused deals, including a PHP 11 billion sustainability-linked loan financed with ADB for ACEN Corporation and a PHP 25 billion green preferred shares also arranged for ACEN.
BPI also furthered its initiatives for responsible operations, shifting two of its corporate offices to 100% renewable energy, bringing the total number of these offices to three. BPI also had six new EDGE-certified branches, bringing our total to 11. In 2023, BPI garnered 14 recognitions from reputable foreign and local award-giving bodies, which surpassed the bank's 10 ESG-focused awards and recognitions in 2022. We've listed them here for your reference. Finally, the BPI and Robinsons Bank merger, we received the necessary approvals to formally merge the two banks effective January 1 of this year. Although Robinsons Bank is a relatively smaller bank, its potential to create value to investors is by no means small.
We expect the merger to accelerate key growth opportunities through market expansion to include the ecosystem of JG Summit and Robinsons Retail Holdings, and to some extent, to help us expand in the Fil-Chi market as well. The merger allowed BPI to acquire a loan book that has a high exposure in consumer loans and was growing ahead of industry averages. Lastly, the merger will expand the synergies across the products and service platforms, reaching out to more C-clients and enhancing the customer experience. The full integration will take some time, probably over a year. For now, the Robinsons Bank clients may bank as usual, and their deposits will be backed by the full strength and security of BPI. All RBC employees are now BPI employees, and we made sure that no jobs were lost in the process.
Robinsons Bank platforms and systems will be converted to the BPI brand and technology over time. The Robinsons Bank trust operations have been absorbed by BPI Wealth, and the Legazpi Savings Bank will operate as a subsidiary of BPI. We have a lot on our plates in 2024, but we are confident, with the combined resources of BPI and Robinsons Bank, that BPI will continue to deliver sustained growth and shareholder value creation. Let me stop here and open the floor to questions after we get ourselves set up. Thank you.
Thank you, Eric. While we'll have the chairs set up here, in the meantime, so that our senior leadership team can answer your questions, may I request them to come up here? Let me start with John-C Syquia , our Head of Institutional Banking. Maria Theresa D. Marcial, Head of our Wealth Management business. Maria Cristina Go, Head of our Consumer Banking. Gene Mercado, Head of our Enterprise Services. And Elfren Antonio S. Sarte, our new Executive Vice President, who joins us from Robinsons Bank. If you are joining us via Zoom, there are two functions at the bottom of the Zoom webinar screen you may use to queue. One is the Raise Hand function. The host will then prompt you and unmute your line for you to speak.
Alternatively, you may type your questions in the Q&A box, and we will read out your question on your behalf. For those on-site, you may use any of the microphones available at the floor, or you may raise your hand, and we will have someone hand the mic to you. Please identify yourself by your name and company, so we can address you accordingly. For the benefit of everyone attending this call, whether in person or online, we would like to encourage you to ask your questions during this session. Jojo Ocampo, our head of our Mass Retail Products as well, will join TG and Eric here in front. Okay.
Please take your seats. Before I ask, we have a few questions from our audience online, but before that, I would like to ask if there are questions here from our guests online. There's a mic over there, or we can ask anyone to. Can we hand the microphones to our leaders, please? Okay. While those on site are still preparing their questions, let me start with the questions from Aakash of UBS. He says, "Thanks for the presentation and the opportunity." He has five questions here listed. On NIM sensitivity, given higher deposit beta in the late stages of the rate hikes, will the NIM sensitivity on the rate down cycle be lower than average? What will be the impact to NIM per rate cut for the first four-five rate cuts? Eric?
Yeah. Yeah. Let me take a stab at that. My view on rate cuts and NIM sensitivity is that actually as the BSP starts cutting rates, that should be marginally positive for us. Deposit rates, particularly time deposit rates, will react much quicker. Our duration on our deposits, our time deposits is probably 30 days, probably less than 30 days, particularly for the very large items. Those will reprice very quickly, whereas our duration on our large corporate loans probably is on the average of 90 days. My view is as rate cuts begin to happen, you'll see NIMs expand marginally, and then over after the first 90 days, then it should come back to what you're seeing again today. Do you wanna add something to that?
No, I think that's well.
Okay. The second question is on loan growth. What drove it in quarter four? How much was seasonality driven? What will drive it from here in full year 2024?
Maybe here I'll ask first John-C Syquia to talk about the loan growth in the fourth quarter for corporate, 'cause we saw a good bump there, and then maybe ask Maria Cristina Go to talk a little about what we saw on the consumer side. Then finally end up with Marie Josephine Ocampo on, I guess, on the unsecured lending cards and personal loans. Because I'm also reading some of the questions ahead of time already. They can answer it.
Yeah. We aren't logged on. You are, TG. Good afternoon. I'll do the start. They are quite interlinked, you would all know, at least most of you in the audience or in the research discipline. Definitely it's connected. I think those who attended the prior earnings call that we had, I did say that we would expect inventory build-up in the end of the year, the last quarter, for the typical year-end bang or year-end growth in consumption. What happened this year is actually probably happened a bit later than we would see it as usual. There's always a tug of war between who stretches working capital and who has more leverage to stretch the working capital cycle.
Of course, the bigger operators do have that either on the supply or demand side. That's what we saw. Towards the end, while maybe the stretch in inventory management was done between suppliers and the distributors, in the end, either would have had to borrow from the banking system. That's what we saw. What we're hoping with the strong growth in consumer, and, in fact, in the longer term part, which Maria Cristina Go will talk about, which is more the capital investment side with future homes and the bigger ticket items, that will feed our growth more for 2024.
On the consumer side, we've seen very strong growth on the auto loans and housing loans on the fourth quarter, primarily driven by latent demand. I believe that a lot of the customers now are foreseeing that they can afford, with the consumer confidence improving, particularly since unemployment rate had come down. We've seen greater confidence also from the developers and our partner dealers and brokers, such that loan releases have been very strong in the fourth quarter. So that's on the consumer, both auto and housing side. I believe the demand also coming from the front lines, branch releases have been also very strong, primarily driven by our lending programs that had been very effective in improving accessibility to a greater number of our customers.
Third would be new products that we had introduced that made lending more affordable, particularly with MyBahay and MyKotse, going after the core mass market, bringing down monthly amortization through longer tenors. Those are the drivers of our loan growth.
At the unsecured side, on the fourth quarter, yes, there is a certain degree of seasonality on the card spending side. As you know, they spend for the Christmas season. Likewise on the microfinance side, because we lend to small businesses as they build the inventory for the fourth quarter. However, the large portion of it really
Is the result of our very aggressive acquisition efforts, which are driven really by strong card switch programs and the efforts at what we call universe expansion, which is democratizing access to our loan products, making it easier by having more pre-qualified programs. In 2024, we expect that loan growth on the unsecured side will continue to be strong double digit. Although of course, on the credit card side, not quite as strong also because the last two years were driven by revenge spending coming out of the pandemic.
Finally, I think the sentiment going forward. While I, in the third quarter results, I was a little bit down 'cause our numbers, loan growth was a little bit muted in third quarter. Seeing what I saw in the fourth quarter and the first three weeks of the year in our credit committee, we should have very strong loan growth in the first half of the year. The corporates are back. I think sentiment has come back quite well. In fact, we had three transactions that we were trying to close at year-end that are just supposedly slipping into the first quarter. I think there's some positivity here and some enthusiasm on our side on loan growth.
Okay. The third question is on microloans. Are you able to give more details? What yields and NIMs, what NPLs, loan as a percentage of target for full year 2025, and how big is the portfolio as a percentage of the balance sheet?
Okay. On microfinance loans, to clarify, we actually these are small business loans to micro entrepreneurs. At the moment, we do our outstanding balance is at PHP 9 billion, which has grown by 44% versus the prior year. We have our client base is about 280,000 new clients whom we have lent loans to. Our yields are at 45%. NPLs for microfinance is very strict. They are measured at 10 days past due. At 10 days past due, our NPLs are at 11%. However, at 90 days past due, they are at about 6%, which is consistent with our the NPLs of the other of like SME loans.
Thank you, Jojo. The next question is on cost growth. In full year 2024, would this be similar to full year 2023 level at 19%-20%?
We do expect cost growth in 2024 to modulate compared to our 2023 level. Do recognize that, you know, as the business continues to expand, we also expect operating expenses to expand with it. Something along the levels of about mid-teens is probably reasonable for us to expect.
I think just to put perspective into that, we do come up with a budget as to where we think OpEx is, but we're very cognizant of the fact that much of our revenues is also driven by our spend in advertising, marketing, and some technology. We just watch our growth in revenues versus our growth in OpEx, and just very conscious that for as long as we can deliver positive jaws, we wouldn't necessarily mind having OpEx go a little past what we had budgeted.
Okay. Thanks, TG. We have two related questions on ROE. First, from Akash, he's asking, what's our medium-term ROE targets once rates start to normalize downwards and settle? What needs to happen to hit that target? Yong Hong of Citi also on ROE is asking, considering BSP rate cuts and if there's any mitigation from fees or OpEx optimization, to impact ROE. Where will ROE be in 2024?
Let me start with that. I think hard to just give out and say what where we want ROE to be in 2024 because then that will be telegraphing what our budget is. I think suffice to say that our ROE for 2023 of 15.35 is a remarkable achievement that's higher than what we had thought it would be. I think going forward, we continue to aim to increase this ROE to a level higher. Mathematically, that works. If we have a 40% payout, then all we have to do is grow our earnings by 9% over the previous years. Certainly, I think our goal is to grow our earnings faster than 9%, which is 15% times the retention of 60%.
As our ROE going forward, more judicious in our use of capital. We will be looking at returning more capital this year to take our capital levels down. In fact, I think for this year, our capital ratios actually increased.
It 2023.
Yeah, it did increase in 2023, but it was supposed to go down. It gives us room to pay out more.
You wanna add? Yeah, maybe just add a couple of thoughts to that. I think Yong Hong does identify a couple of important points that help us possibility for the year. One is that the potential for Sorry, this wasn't on his follow-up. Anyway, there is the potential for rates for the reserve requirements to come down, and that will boost NIM. As well, the fact that we will continue to grow our consumer book more aggressively albeit in the lower interest rate environment. That should allow us to keep our NIMs fairly stable through the course of the year.
As TG mentioned, you know, we will continue to monitor our costs to make sure that we are spending efficiently as through the course of this year. Those will be some of the measures that we're gonna be implementing in order to try and continue to push our ROE upwards.
Thank you, Eric. We have two questions from Rachelleen Rodriguez of Maybank. One, how many of Robinsons Bank branches are you keeping? Second, can you comment regarding the increase in trust fees? Is this something clients are welcoming?
I think we continue to look at the Robinsons branches, where they overlap with BPI branches. We look at where there is a better location. In some locations, the Robinsons branch has a better location. In many areas, the Robinsons branch is present where we're not. We're doing that study now. Suffice it to say that's part of our rationalization process. I'll let Tere handle this, but we did make a decision to raise our trust fees on our mutual funds and our UITFs. Tere, why don't you talk a little about that?
Yeah. We announced an increase in trust fees for our UITFs and mutual funds effective February 1, and that's part of the regular review of the cost structure and pricing of our products. We deemed that it is important as we continue to invest in operational efficiency as well as technology investments in delivering our UITFs and mutual funds to the broader public. In terms of reaction of the market, we have really been monitoring, especially, social media posts. So far, based on our assessment, what we're seeing in social media is relatively low risk in terms of impact. We're also monitoring net flows on our mutual funds and UITFs, and so far, we're not seeing any negative flows.
In fact, for the last three or four consecutive months, we have been seeing a reversal. We've seen a reversal in terms of flows, which is really more a function of improvement in market as opposed to what we have seen in the past 12 months because of higher interest rates and lackluster performance in equity markets. We continue to see net outflows, but in the last four months we have been continuing to see net inflows. Lastly and importantly, a part of our delivery of products is we continue to show more channels and increase the ability of more people to invest in our UITFs and mutual funds. We have made available the ability to open an investment account digitally.
As we have seen in the last 12 months, we are opening an average of 20 accounts per day, and this has not abated despite the increase in fees. We've also reduced the minimum investment amount that allows you know, more access to more people to our investment products. This is still part of our continuing initiatives to improve delivery investments in our operational processes to make investments available to more people.
Thank you. Our view is that really the ability to attract investors into investment funds. It's not driven by the fees you're charging, but by the net performance of the funds. Happy to say that at the wealth side, we have been really trying to democratize the product. We've been making it easier to open accounts. We're lowering required amounts, initial balances, and the results speak for themselves. Last year, the wealth business AUM grew, Tere.
We grew by 19% in revenue and 15% in AUM. Our BPI Wealth — A Trust Corporation, which reported an AUM of PHP 1.24 trillion, is gaining market share. In fact, for the first 9 months of last year, we showed an increase in market share of over 300 basis points from about 16% to over 19% market share in the trust industry.
Okay. Thanks, Tere. Can I check anyone here in the audience who would like to ask a question? BA, go ahead.
Yeah. Daniel Andrew Tan here from JP Morgan. First, just a more broad question, I guess, going into this year. Jose Teodoro "TG" K. Limcaoco and team, what are your thoughts on the outlook? Three things I'm interested in specifically. One, loan growth. What kind of number are you looking at? Can we get to mid-teens? Non-interest income, how are you thinking for this year? As well as credit costs. Can we sustain last year's level of around 20-odd basis points? Okay. In terms of overall, I think you started off with expectations for loan growth. Currently, our expectation for loan growth is that it'll be stronger than it was in 2023, but maybe not quite to the level of 2021. 2023 was at 10, just over 10%, and-
2022, which was at 14.9%. We think it'll come somewhere in between there in the probably in the low double-digit range. To expect mid-teens, I think is probably a little more aggressive than what we expect. Of course, we'll see how the year evolves, right? Those expectations are given GDP growth kind of in the six, in the mid potential to overshoot in that respect. With regard to NIMs, I think. Yeah, the second question was on NIMs, right? On non-interest income. On non-interest income, you know, I think if you look again, as we pointed out, the one-off aside, if we strip off the one-off from last year, we actually saw good growth in our non-interest income.
I mean, there's reason for us to believe that kind of growth will continue moving forward. I think the drivers continue to be there. We're optimistic that we will be able to carry that momentum forward into the year.
Credit costs.
Credit costs. Credit costs, we think. Last year, our credit costs were quite low, again, because we believe that we had probably over-provisioned. In discussion with our auditors who felt that we were over-provisioning, we did decide to bring down those credit costs, or provisioning levels, and therefore, credit costs came down. Moving forward, we expect this to normalize somewhat, but at the same time, we're not really expecting any blowouts with regard to credit. We think that even at the current levels, we're probably quite conservatively provisioned. We do think that it will maybe move up a little.
Credit costs this year will maybe move up a little.
All right. Just to follow up. Oh, sorry. Please go ahead.
Let me just put some color there, Daniel, you know. I think one of the things that we watch out on the credit cost is also the sentiment of the market. I mean, if you go back to 2018, I was just reviewing some numbers. At the end of 2019, NPLs were about the same level. And NPL cover was 100%, right? Today we're here staring at 155% NPL cover, but that's the sentiment because everyone else is around that level. If you look at it rather clinically, if you look at the ECL models, you could say we're still over-provisioned today. I think you need to look at what the competitors are doing and what people are saying.
We're erring, if ever, on the side of being conservative. That's why Eric talks about slightly higher credit costs here. From my perspective, we are still over-provisioned.
Understood.
Because there's still collateral, right?
Yep.
The coverage is just provision coverage. You don't have collateral there yet.
Yep. That's my fear. Okay.
Yeah. Number two, on the non-interest income, I think give you more color where the tailwinds are coming from, where we think will continue to be very strong this year. However, I talked about raising the fees on AUM. Sorry, raising the fees on the funds. The trust business contributes about 16% of our non-interest income. The card business contributes about 36% of our non-interest income. We continue to see that growing strongly. We are also seeing very strong traction in our digital channels. I think that was up 18% this year. We have already announced that we are no longer giving the special on fees in InstaPay transfers for under 1,000 beginning March first.
March first.
March first. There's a reason for that, 'cause we're trying to propel people to use our own apps. There are things we are also doing on raising the revenue stream, going forward, on top of the natural, I think, momentum that we have on those businesses.
Great. Thanks for that. Just to follow up on the growth side, could you just break down on corporate, consumer, what you guys are thinking of going into this year as well?
Sure, yeah. Well, I'll ask John-C Syquia to talk about where he sees corporate growth coming from, 'cause he's about 70% of the book. Maybe he'll talk a little about what areas we might see that growth coming from, including the airport deal. Then Ginbee Go can give you some of the on the mortgage, I guess, and the auto loans in the next page too.
Thanks for the questions, Daniel. Yes. Since TG started that, we still—we do see our pipeline on the CapEx transactions being there. There's a real lag from what could have been done last year versus what might be done this year. That on the CapEx front, there's obviously the infrastructure, which includes not only the airport, but airports and also seaports for increasing the throughput of hard goods that come in and out of the country. We're also seeing more infra in the road network space that we hope to be able to capitalize on this year. Mass transport is not something I expect to happen this year, but I think there's a lot already of preparation going on in that space.
The area which I hold for last that we all need to think about is the power sector. For us to fuel the growth of the different sectors I yet have to talk about, we need to put a power capacity. We have to put power capacity in perspective. The space I'm talking about is like data center and the other expansion of telecoms or data highways. That part hinges on the ability to grow our power capacity and doing so without necessarily going to coal again. That space we're staying close to. In fact, for last year, the people from the call might not hear if I take the mic off. For last year, there was already a delay in some of the privatization transactions.
We're hoping for a big one that's coming this year in that space. That's for infra. We see some decline in areas that overexpanded in the last two years, but there's going to be more growth, I think, related to the consumer space that both Ginbee and Jojo already talked about. When I talk about the tension or the push and pull between suppliers, we expect this year to play a role in being the intermediary there, so that the pressure point is not between suppliers and distributors, but the bank staving that off and therefore being the facilitator for growth. In the supply chain and working capital space, we expect to do more also in lending, and that's, I think, good potential.
That gives me the chance to also refer to what we're expecting to do more with the Boyish team from RBank. We have to capitalize on that ecosystem that Eric talked about in the last two slides.
Let me talk about the consumer business because it's something that's very exciting, and I believe that BPI is very well poised to capture the opportunities that are very much available given the macroeconomic variables that are positive. Inflation rate that's coming down. You've seen the performance of the consumer business across the different products which are up. You've seen our aggressive acquisition customer base growth. As Eric reported, we now have 11 million coming from 9.3 million, which means that we grew by 1.7 million. We've been growing our customer base very aggressively the past two years, and that's really because of our focus on being very client first in our transformation.
Some have been very skeptical about our branch rationalization and optimization and questioning our ability to deliver on digitalization, but I believe that is no longer in question. We've been able to maximize our ability to transform both on the physical side and on the digital side, and we're very happy to report. On the physical side, you can see the branch network really pulling its weight with the level of cross-selling efforts. You've seen that in the loan growth. The unbelievably high consumer loan growth across products is really primarily driven by our very strong channels on the branch side doing a lot of cross-selling because they've been able to migrate more and more customers into the digital space. You've seen the growth of our digital customers. Our digital enrollment is now up at 6.6 million.
We now have 4.4 million customers out of the 6 million who are using us every three months. On a monthly basis, that's about 3.7 million monthly active users. That means that we're able to migrate more and more of the servicing transactions out of the branches, so we can have more time doing cross-selling. You've seen the upgrades and enhancements in our physical branches. That would only bring more and more of our more affluent customers coming to the branch so that they can get trusted financial advice.
With the products and breadth of products that we have on the wealth management side that Tere talked about, we are so encouraged that we can further deepen relationships, increase total funds, and not just total deposits, but even off-books investments, which means that we can holistically provide that advice and improve the stickiness. It's really no wonder that we've been able to increase our NPS and become the market leader in terms of NPS. That is a leading indicator of how well we'll grow the consumer business in 2024. Thank you.
Thank you. Great to see the market share gains on the consumer side. Just last one from me on the RBank transaction. Any costs, one-off costs we should be worried about? And on the revenue synergy side, anything that can offset those costs? Thank you.
On the cost side, we do anticipate obviously integration costs that will be incurred in the process of bringing the two banks together. To be honest, in the immediate term, those costs are not likely to be offset by the additional revenue that comes in because it does take a bit of time to build up that revenue. Over the longer term, we do expect it to yield a lot of benefits that will clearly outpace the cost incurred. Obviously we wouldn't have done this transaction if we didn't believe that.
I think as John- C alluded to, and I think I mentioned as well during my presentation was that kind of tapping into the ecosystem.
Of the JG and Robinsons Retail groups will allow us to optimize that. But if you look at that group, those groups, the companies within that group are all very large, with large supply networks. Therefore, I think there's a lot of opportunity to broaden what we're doing with them. Then obviously, in the later years as the system integrations are done, we'll be able to streamline some of that branch count as well.
Maybe the best way to also address that, right? There will be one cost, for example, the big thing that comes to mind is the carving out their network from the JG network, putting it in ours. As Eric said, there are positive gains to be made from this. One of... Maybe I'll ask Boy to talk a little about. Well, you see Boy is on board with us, part of the team today. One of his biggest responsibilities is to ensure that we get as much of the JG and Gokongwei business that wasn't with Robinsons because of Robinsons' small size, small scale.
With the BPI balance sheet behind it, Boy and I are very confident together with John-C Syquia that we'll get more and more of the business. Maybe that's what. That's one of the things. He's helping me on so much other stuff, but the Gokongwei relationship is the key one for us. Boy?
Yeah. Thank you, TG. I think in Robinsons Bank, if you know our history, one of the success that we have done is we're able to capture the ecosystem. For example, all employees of the group, the payroll is already with Robinsons Bank. All payments to suppliers are paid out of Robinsons Bank. Everyone is required to have an account with us. With that, auxiliary business came about like, we did a digital personal loan for the over 30,000 employees that is in our pay through our InstaBale, which we're bringing forward to BPI. Supply chain financing is something that we have introduced, but at a very early stage, and we're hoping John-C can expand that further.
Because one opportunity that I've always wanted to do is expand our exposure to the various suppliers. With the network of BPI today, I think we can tap that more. That's, I think, one of the values of the merger, aside from the other things that we have, some consumer businesses that are new to BPI. We'll include the personal, the teachers loan, the motorcycle loans, and hopefully we can expand that further also.
We can talk about the teacher loans that were only resident with Legazpi Savings Bank that, because of Legazpi Savings Bank's small balance sheet, was basically a loan book of PHP 4 billion, right? When the biggest player is at PHP 80 billion, right? Jojo Ocampo's goal is to be the biggest player.
Yeah. We're very excited about the teachers loans, which Legazpi Savings Bank, a subsidiary of Robinsons Bank, has. It's one of the accredited banks by the Department of Education to offer. Teachers loans is actually a very big market. It's about PHP 500 billion in total size. Today, Legazpi Savings Bank has about a little over 1.5%-2% share. Clearly, if we maximize the touchpoints offered by the Robinsons Bank branches, the BPI bank branches, as well as the BanKo branches, we hope to grow our share there substantially. That as well as motorcycle loans, as Boy mentioned, are clearly new categories which BPI has not yet tapped but is now available because of this merger.
Thank you, Jo. We have a question from Shane Matthews. Can you give any updates on how you're viewing the 50 million customer target? Can you remind us by when you aim to achieve it and any challenges or slowness in its, in achieving these targets?
What was the first part?
Updates on how you view the.
Oh, how we view-
Achievement of the 50 million customer target.
Yeah. I think we've not been shy about saying that 50 million is a big, bold, audacious goal that we've set out. I've been very open to say that if we had set it at 15 million, my team would have said, "Yeah, we can do that." We all agree that 50 million is a challenge. It's something that we continue to work at. To remind people and to keep ourselves honest, the goal was by the end of 2026, so we are three years away from that. There are challenges to that, but I think it's challenges that we can overcome. What we've spent the last year and a half doing is building a foundation to be able to serve those customers properly and to onboard them with the lowest cost.
We've worked on our customer obsession. We've made sure customer service works. We've worked on our digital platform, so now we can onboard on our mobile app very quickly. With five minutes, we have developed our wallet, which is for the very low end. We're working on our BanKo project. All across, we have now set the platform for acquiring those customers. We've set up arrangements, acquisition arrangements with GCash for both our-
GSave, GInvest, GInsure. We've set all those platforms in place. The goal this year is to focus to now begin to push customers through it. Let me remind people that in 2021 we had 8 million customers. We're up 3 million in two years. I think we have the momentum behind us. Is it a slam dunk? No, it's not a slam dunk. It is a challenge, but I think the team is poised to get to it.
Thank you, TG. We'll take a question from Melissa Kuang of Goldman Sachs. Melissa, you can unmute yourself.
Hi. Hi there. Thank you for taking my question. Maybe just moving on to your funding costs on. Oops.
Melissa, can you state your question again, please?
Perhaps we'll talk a little bit on the funding cost side. In terms of CASA, that we've seen CASA drop, you mentioned earlier that 2024 you will look to refocus back on growing CASA. Can you walk us through what strategies you have to do that? And also, are you still seeing outflows of CASA to TD at this point in time in January? And then following on to that, onto NIMS, how do you see funding cost this year? What are you expecting for rate cuts? And perhaps maybe you can give us some NIM guidance, would be great. That would be my first question. Then perhaps I'll just go quickly on my second question. In terms of OpEx, you mentioned mid-teens kind of OpEx growth. Is that right? That I heard.
Are you expecting cost-income ratios to stay stable or rise? Just wanted to hear your expectations on that. In terms of OpEx, where are we needing the growth for? How is digitalization playing a part in terms of, you know, reining in your OpEx? Thank you.
I'll ask Eric at the end to answer the OpEx questions. Jimmy will talk about the things we're trying to do on the CASA side. Let me remind again that in 2019, when rates were about these times, our CASA ratio was at about 69%. It's natural that when rates are low and the spread between CASA and TD is low, that you'll have CASA ratios going up. As that spread widens, you'll have CASA ratios going down. Let me ask Jimmy to talk about some of the things that we're doing this year to try to improve our CASA market share.
Well, thank you for that question. You know, CASA is the very core product of the bank, and we know how important it is in delivering the very basic banking services, and that's why CASA will remain to be the anchor of our Unibank strategy. How we're going to drive this is primarily to make BPI the main operating bank of our customers, and Eric talked about that earlier. To be able to do that, we need to have a segmented strategy approach. How we are a main operating bank for the institutional accounts will be different from how we will be a main operating bank or the preferred bank of the consumer or retail customers. John- C and I are very deliberate in our pursuit to improve our CASA levels and CASA ratios by working more closely together.
Our first primary initiative is really to go after payroll. Our payroll will be supported by the ability of both institutional banking RMs and consumer banking RMs and branches to go after new payroll corporate accounts. The second is on the consumer side, we're going to build up our high value clients by deepening the relationship and improving the utility value of our CASA through payments. Similarly, for our low salary, low income core mass base, we will continue to acquire more and more core mass market clients through our deposit offering. Interestingly, our core mass and our OFW segments and our mid-market, 95% of their deposit holdings are CASA. These are really good sources of CASA.
On the bills payment side, this is the other initiative that we would want to be able to put forward more deliberately, and I believe Boy is chairing our payments council, and this is going to be another synergy effort for the entire Unibank to really deliver our CASA aspirations.
Yes. As I did mention, we expect OpEx growth kind of in the mid-teens for 2024. In spite of that, we think that cost income ratio can continue to move downwards as long as our revenue grows at a pace that's higher than that of our cost, which continues to be the goal that we shoot for. I think there is going to be some additional attention to managing costs and cost efficiency. In spite of that, obviously with the growing volumes, that's gonna be one growth driver. We continue to want to invest in the business moving forward. Those two things will continue to drive.
Some amount of cost growth. Again, we expect
Eric, there are questions related to OpEx. One is on IT spend. What are we looking at in terms of IT spend? When do we expect to reach our cost-to-income ratio target of sub-50% or closer to 46%? Finally, can you comment on the fixed and variable nature of OpEx on a two-three-year horizon?
Yeah. On the first one, with regard to the IT, the IT spend. I think IT spend, we're probably looking at that continuing to grow more or less in line with that kind of mid-teens growth that I had mentioned. That should be fairly consistent. With regard to the cost-to-income ratio, you mentioned this 46% range, 46% number. That is a goal that we would like to hit. If you look at over the last two years, right? From 2021- 2022, and then from 2022- 2023.
Over these couple of years, we've been improving on a BAU basis, meaning I strip out the one-offs from those years. If you look at those years, we've been improving our cost-to-income ratio at about 1 percentage point per year. We would like to continue to show that kind of cost-to-income improvement that puts us maybe a little outside of the 46%. You know, obviously we're gonna continue to try to push in that respect. That'll continue to be our fighting target.
Okay. Thank you, Eric. There are a couple of questions on our securities book. What's the average duration and yield, and any color on trading gains for 2024, and is it sustainable or more of a one-off in nature? Maybe we can call on Dino, our treasurer. Dino, can you respond to that? There's a mic over there.
Hello. There you go. Thank you for the question. Duration of FVOCI. I think we ended 2023 with a duration of about, I think it's close to about 3.5 years. Trading opportunities, for sure, I think there will be some maybe coming in later in the year, given the expectation that rate cuts will probably be back-ended for 2024. There will be opportunities, maybe later in the year, though.
Okay. Thanks, Dino.
Thank you.
On the corporate side, the delayed infra projects, have these been baked into your 10%-12% growth outlook? Is this also inclusive of Robinsons Bank? On loan growth. Yes. On loan growth. The 10%-12% outlook, does this include the delay in infra projects? Is this organic and is it inclusive of Robinsons Bank?
I think in terms of the overall loan growth, it's our projection of what we expect this year to be, right? You know, delays in infra are not always unexpected, so it does happen. Given our outlook for the year, this is what we expect, and it's inclusive of everything that we've factored in through the course of the year. I mean, that we expect to come through the course of the year. Of course, you know, if growth turns out better or worse, then obviously that's going to affect our growth as well.
Okay. There are a couple of questions. I'm just combining these on asset quality. Do we have a target on NPL levels? How is the credit quality in Robinsons Bank shaping up in the run-up to the merger, and how will this affect our own BPI's credit quality portfolio?
Yeah. One second. Yeah. You know, from a where do we expect NPLs to be? You know, we ended the year, as I mentioned, at 1.84%. This has kind of been gradually creeping up through the course of the year, but very gradually, and we expect that trend. We don't expect that trend to deteriorate significantly moving forward. Meaning that we could potentially continue to see a slight uptick in NPLs before they start to get better, but we don't really see them blowing out. There's nothing on the horizon that leads us to believe that our book is under any kind of threat from that perspective.
Therefore, again, we believe that our provisioning level will cover us more than adequately, and that integrates as well our viewpoint with regards to the Robinsons Bank portfolio as well. You know, it's a small portfolio. Their NPL levels were a little worse than ours, but it's not gonna move the book very significantly. We think it's all under fairly well controlled.
Any questions from the floor here on site? Okay, if none, we'll take a question from Angelo Taningco. Angelo, you can, mute, unmute yourself. Angelo, are you there? Okay. There you go. Angelo, go ahead. I see you've unmuted yourself. Okay, if none. Karthik Challapalli. Karthik, can you go ahead with your question?
Yeah. Hi. Thank you for the opportunity. Am I audible? Can you hear me?
Yes, go ahead, Karthik.
Okay, great. I have three questions. I'll probably take it one by one. The first question is, out of your total loan customers, how many of them are yet to open a CASA account with you?
Zero.
How many of our loan accounts are yet to open a CASA?
Yes.
Yes.
Zero. They have to open a CASA with us.
Okay. Basically the cross-sell from loan to deposit right now is almost 100%, right? That's the way we should understand it.
Yes. Yes.
Okay, great. The second question is, when you look at the CASA growth for the system for 2024, what is your forecast for the CASA growth for the system as a whole?
M3 is about 8%-9%. It's usually in line with M3 growth, which is about 8%-9%.
Okay. The reason I ask this, because I think this year the CASA growth has been a bit challenged. If next year, it does grow in line with M3, is our base case that we should be growing at least in double digit?
It's the total deposits growing at M3. For the CASA, again, it has been largely affected by the movements in interest rates. As TG mentioned earlier, because of the significant rise in interest rates the past year, then you see a lot of the deposit which used to be in CASA moving to time deposits. That's why they shifted. It's natural, particularly in the affluent and in the institutional banking segments. Next year, will it remain to be the same? I think it would generally be the same, but that's why we would want to deliberately address the opportunities in terms of driving CASA through very segmented initiatives. Payroll, focus on payments, and of course, our portfolio actions, particularly on the core mass market, bringing in more customers.
Bringing in also additional functionalities and enhancements in our CASA products, so that the higher end of our depositor base would keep their CASA with us rather than move out.
Got it. This is helpful. My last question is on the microfinance book. I don't know whether you actually track this separately, but what would be the loan to deposit ratio on your microfinance book currently?
Yes, it's tracked separately because it is a bank subsidiary. Our loan to deposit ratio would be approximately for the institution, because there are other loans in that institution, BanKo, or other than microfinance. Our loan to deposit ratios would be 80%.
80%. Okay. Got it. Thank you. Thank you very much. This is useful. Wish you all the very best.
We have a question from Benjamin Tan. What is the NIM guidance for 2024, given the BSP rate cuts and the RRR cuts, if any?
Yeah. I think, as TG mentioned, may have mentioned, earlier, the immediate effect of a rate cut has a tendency to bring down the funding cost, our cost of funds, before it starts to bring down the cost of our or our interest, our loan yields. That's because many of our term deposits or time deposits are on very short terms, which means that it reacts more quickly to interest rate rises or reductions. The immediate effect of that will be for it to kind of dip downwards.
Eventually, because the amount of variable rate loans is higher than that of the variable rate deposits, the loans will catch up and it'll start to bring it down. Due to that lag effect, it should be more like if the rate increases or sorry, if rate reductions start in the second half of the year, then the real impact to NIMs, the real negative impact to NIMs, should only start to really take effect more in 2025.
Very, very tail end of 2024 into 2025. Then that means that our NIM levels through the course of 2024 should be and should remain fairly stable throughout. That also doesn't count the fact that we continue to push the consumer loan growth, which should be positive for NIMs.
Okay. Thank you, Eric. There's a question from Yong Hong. Should we get excited with agency banking to contribute to consumer loans mix, contributing to the 30% mix to the loan portfolio coming from agency banking?
I think the excitement from agency banking is the fact that it's what I would call the third channel for our business. We obviously have the traditional branches channel, and then we have the digital channels. The agency channel is a channel by which we're using other people's doors and other people's people to acquire customers and to service our customers. I think that's where we are making a big push in terms of initially our acquisition. Today we have close to 5,000 doors where people can actually onboard themselves onto our products. Hopefully by the second quarter of this year, these same doors will be able to do transactions for our customers, such as cash in and cash out. The agency channel is a way to acquire customers and to service our customers outside of the branches.
In many cases, the purpose of that is twofold. One, many of the lower-end customers are reluctant to come into our branches or may not have the confidence to do a digital transaction by themselves. That is the purpose of our agent, who is trained to onboard them using the digital channel and to guide them through the process. Secondly, as we gain more and more customers, we obviously don't want them coming into the branches and clogging our branches. Therefore, they either do it on a digital transaction, or they can go to our agents for cash in and cash out, and even things such as bill payments. We are using the agency channel to, I guess, add to our capacity going forward. Don't forget that our agency team is not only focused on physical partners but also digital partners.
That's why I am personally excited about the effort we're making with agency banking.
Thank you, TG. We'd like to check one last time with our guests here on-site if you have any more questions. I think we've answered most of the questions in one form or-
I do wanna ask a couple of words from Gene to address some of the issues that we've had in terms of our ability to onboard customers on the operations side, and to do operations, both digitally and obviously the traditional way we do it, which is not so digitally. Gene, as head of operations, is also leading a whole new process in terms of putting robotics process automation into the bank, and that's going to be key to keeping our costs down and our ability to service more customers and more transactions going forward. Gene?
Thanks, TG. I just wanted to mention that in spite of the increase of our OpEx, we were able to reduce significantly our unit transaction processing costs. This is because of our implementation of our robotics process automation projects. In 2023, we implemented 17 RPA projects, which allowed us to reduce our headcount by as much as 80 plus. In 2024, we plan to in our pipeline we already have about 25 in our pipeline to process our transactions via RPA. In fact, in all our digital onboarding, we had to make sure that when you do digital onboarding, you also automate the backroom processes. That's basically what we do in order to reduce the cost in onboarding accounts.
Okay. Thank you, Gene. With that, I think that's all for questions. Thank you everyone for your questions. We at BPI always welcome your feedback and take them into careful consideration. Before we end the call, may we ask TG for some final thoughts?
First of all, thanks very much to everyone who's come here physically today to join us and everyone who's joined us remotely to also participate in this briefing. To my colleagues who are here, let me first say personally that I am as excited today as I was in 2021 when I took on about the prospects that we're facing going forward. I think there's a renewed confidence in the domestic economy. The lethargy of 2023, I think is something that's passed. We're seeing it in the interest that we're getting from clients. We're seeing it in the kinds of transactions we're beginning to look at, and we're beginning to see it in our team as we ramp up some of the new initiatives that we're geared for in 2024.
Certainly there are some headwinds as we look, obviously as this rate cycle turns against the bank. We will have to face that, and we are facing that by growing our book, becoming more aggressive and focusing on non-interest income, basically looking at the fees. We remain committed to our goal of acquiring more customers, making BPI a bank that is focused on a broader segment of the population. We will do this by continuing our focus on customer obsession as well as our digital process. We are focused also on making sure that our costs grow reasonably and lower than our revenues. We're always a big believer in positive jaws.
We will continue to look at efficient use of our capital, and we look at returning capital that's not needed. With that, maybe I'll close there.
Okay.
Thank my colleagues, and thank you, Chinky, for arranging this.
Thank you, TG and Eric and the BPI leadership team. Ladies and gentlemen, this concludes today's earnings call. For those online, thank you, and you may now disconnect. For those on-site, we have some refreshments here for you to enjoy. Thank you very much.