Ladies and gentlemen, welcome to the Cembra Half- Year 2023 Results conference call and live webcast. I am Constantinos, your conference call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Holger Laubenthal, CEO. Please go ahead.
Operator, are we ready?
Please go ahead, sir.
Good morning, everyone. It's good to be here. We're with our CFO, Pascal Perritaz, Volker Gloe, Chief Risk Officer, and Marcus Händel, Investor Relations, myself, Holger Laubenthal. Good to be here. I look forward to walking you through the half-year results for Cembra this morning. Then we'll take your questions. On the first page, just the agenda as usual, I will talk about the highlights. We'll have Pascal and Volker talk about the financial results and the loss performance, respectively. Then we'll have a quick outlook for you in terms of going forward. Let me start on this page here with the overview. Look, I'd say, overall solid performance in light of a challenging environment.
We continue to grow the business. Net funds we received was up 2% or up 3%, respectively, adjusted for season effects. Net revenues were up 1%. As planned, we have been able to compensate for the funding interest rate increases through a mix of asset repricing and additional fees, particularly from the buy now, pay later business. Net income came in at CHF 75 million, 17% below the first half last year. This is really predominantly due to the expected normalization of the loss performance as envisaged and investment into our transformation and strategic programs. Cost income at 53%, again, predominantly due to the investments that I just mentioned, as well as the buy now, pay later, by Byjuno acquisition.
The loss performance, very pleased with the continued very strong performance here at 0.7%. We have previously discussed the normalization over time towards 1% or below. That delivers overall on ROE year-to-date at 12.2% and strong Tier 1 capital at 17.6%. Move on to the next page on the markets and products. Again, you know the slide. We continue to see growth across the core markets. In personal loans, we have grown very selectively at about 1%, with a strong focus on repricing. We'll have more on that for you later. Auto, again, here, too, pricing focus, but nice growth in net receivable at 3% in line with the market with a share of just over 3/4 in used cars.
Cards, look, we're pleased with the trajectory and revenues and assets, as we've guided you before, that's in line with our expectations while the total number of cards is down 1%, our own brands and active partners year-to-date are up 7%. Buy now, pay later, I think that's a great story. We're accelerating our delivery on the back of the acquisition and successful integration, fees are up almost 200%. Overall, I'd say good performance across the core markets. Let me get to a few operational highlights here on this next page. As I mentioned, right, overall, a resilient performance. Given the rate environment, we focused on selective growth, fees compensating for some of the interest, net interest income challenges as with previous discussions.
Continued strong focus on pricing measures, as well as discipline, as you know from us, in terms of risk funding, and at the same time, advancing the strategic transformation. Talking about the four programs that we put in place in terms of our strategy and Operational Excellence, progressing with the core banking system upgrade, so planning to launch later this year. We're pleased to have concluded the data center consolidation. We came up with further enhancements in our mobile application for better customer service and experience as well as efficiency. Business acceleration, we continue to chart a transition. We now roughly transition about 60% of the previous Cumulus portfolio, and we'll have a bit more detail on that later.
We also launched our instant onboarding solution for partners, which has been quite well received, with partners in the stores. On new growth, I talked about Cembra Pay. I think the launch went very well, again, well received. We had mentioned to you previously, the TWINT corporation. We're on track and we'll have some updates for you later this summer on this in terms of that process. Culture, as you know, this underpins what we're looking to do in terms of organizational readiness making sure we have the right skills, capabilities in the right places, a simplification program, and embedding cultural metrics as well to ensure success in this area as well, in addition to a bit of new employer branding with the new career website that we've launched. Overall, good progress.
Now let me hand over to Pascal to take us through the financial results.
Thank you, Holger, and good morning, everyone.
We report today a solid financial performance for the first six months. We are pleased with the asset and the revenue growth largely in line with GDP, the strong growth performance, and the continued resilience business performance. Let me explain. The net income in the first six months amounted to CHF 75.1 million. This is a decrease of 17% as you compare to the record results in the first six months last year. As already mentioned by Holger, on one side, due to the normalizations of the loss performance of the COVID-19 pandemic, as we expected, and then the continued strategic investment in Operational Excellence. The net revenue increased by 1%, with commission and fees income compensating for lower net interest income.
The net interest income declined by 3% to CHF 170.6 million. This is mainly due to the increased interest expenses. I will comment in a few minutes. This lower net interest income was compensated by a 12% increase in commission and fees to CHF 82.4 million. This is mainly driven by growth in buy now, pay later business. The buy now, pay later billing volumes more than doubled, both because of the consolidations of Byjuno and the organic growth of Swissbilling. As a result, the commission and fees income from BNPL business increased to CHF 19 million compared to CHF 6.5 million last year. The share of revenues generated from commission and fees amounted to 33%, compared to 29% last year.
The loss performance is at 0.7%. Volker will comment soon why this is strong. OpEx increased by 10% to CHF 134.5 million. This is driven by a mix of integrations and consolidations of Byjuno, and the investments related to the strategic initiatives, mainly our strategic program, Operational Excellence. As a consequence, the cost income ratio increased to 52%. I will also comment bit later. Return on equity of 12.2% and Tier 1 capital ratio of 17.6%. The increased interest expense were fully offset by additional income sources in the first six months of the year. As we guided in February, the net revenue increased by 1%.
The CHF 18 million increase into interest expense reflect the change in interest rates and environment since mid-2022, and additional funding required to support our receivable growth. As said in February, repricing measures is one of our priority this year. The year-over-year average pricing for new business, it means the average pricing of new business in the month of June this year, compared to June 2022, increased by 140 basis points for auto and 130 basis points for personal. As you can see on this page, there is a timing lag between the PNL impact of the repricing actions from the new business and the increased interest expense. Consequently, the net interest margin reduced from 5.5% to 5.1%, and this is expecting to stabilize at around 5.1% in 2023.
Finally, the increase of interest rates cap in May 2023 will support the NIM stabilization. On the card side, the following successful launch of the credit card, Certo, in June, the credit card business delivered a resilient performance in the first six months of the year. With our strategic plan 2022-2026, we indicated that we expect card assets and revenue to be at least in line with pre-COVID level, means, 2019, from this year on. The achieved results for the first six months of 2023 are broadly in line with our expectations, set two years ago, with card revenue of -1% to our 2019 revenue. We are pleased with the successful transitions of the Cumulus card portfolio with about 60% migrated to the new card offering, Certo.
As of June 2023, our card portfolio mix is around 50/50, business, B2C and B2B2C co-branding partnership. We continue to successfully grow its portfolio of co-branding partner for credit cards by 7% in the first six months of the year. Operating expense, o ur total OpEx increased by 10% to CHF 134.5 million, as mentioned before. The personal expense increased by 4%, this is reflecting over the acquisitions of Byjuno, with 44 additional employees. Fourteen employees integrated already as of late last year, then this year, 30 employees based in Latvia and forming now our nearshoring entity, Cembra Technology. The general administration's expense amounted to CHF 64 million, this is an increase of 18%, and this is related as well to the significant investment in strategic initiatives, and as mentioned before the integration consolidation of costs.
The investment into strategic initiatives amounted to around CHF 11 million for the first six months of the year, OpEx and CapEx combined, and mainly for infrastructure, workplace, and the core banking platform of our leasing business. Professional services increased by 26%. This is driven by higher temporary resources related as well to the Operational Excellence strategic initiatives. The collection fees increased by 51% and is related to the Byjuno acquisitions and the agreed outsourcing corporations in buying operator collections, as we communicated in September last year with the acquisitions of Byjuno. The cost for postage stationery decreased. It's reflecting our continuity for effort to further digitize our processes.
The retail expense reduced by 12%, the depreciation and amortizations increased by 12%, and this is the result of the acquired intangible assets by Byjuno last year and the corresponding amortizations. As a consequence, mentioned before, cost income ratio of 63.2%. For our 2023 full- year, we expect a stable cost income ratio compared to 2022, with improvement in second half of the year, mainly expected from a continued disciplined cost management, lower Byjuno integrations costs, and initial benefits from our Operational Excellence. I would like to hand over to Volker for an update on the provisions for losses.
Yes, thank you very much, Pascal. For the first half of 2023, we report a loss provision of CHF 25.1 million translated into a loss rate, it stands for 0.7%. With a 0.7% loss rate, we are clearly under the longer term average and also in line with our midterm targets. In a comparison with the first half of 2022, the loss rate, though, is 0.2 percentage points higher. Here, I just want to reiterate that last year's loss performance was still influenced by some individual items that relate back to the COVID-19 pandemic. If one would exclude these items from last year's number, the development into the current year would be obviously less pronounced as the pure absolute number might suggest.
A similar picture as for loss provisions is observed on portfolio quality metrics, illustrated here with the 30+ delinquencies and NPL ratios. 30+ delinquencies stood at 2.0% and NPL at 0.7% at the end of the first half. This is also in line with longer term levels, but slightly up compared to prior year. We have been very consistent in our credit risk taking and aim to maintain our prudent approach here, also in the current and more uncertain macroeconomic environment. We continually and cautiously monitor the creditworthiness and payment patterns of our customers in the portfolio, to make sure that we can react quickly in case the macroeconomic situation would lead to any adverse trends.
Based on the report numbers for the first half, we observed a very solid portfolio quality, and consequently, we currently continue to expect to meet our midterm targets of a loss rate of less or equal than 1%, and one might still foresee a further gradual move or gradual convergence to that level. With that, I hand it then back to Pascal.
Thank you, Volker. On the balance sheet, as you know, we adopted the U.S. GAAP current expected credit loss accounting standard over the first half of the year, 2023. As a result of these implementations, the allowance for losses in the balance sheet increased by CHF 64 million on the asset side, as you can see, as expected, also, with a reduction in equity on the liability side of the balance sheet, with no day one or no impact, day one, as well, on the profit and loss. The total net financing receivables amounted to CHF 6.6 billion. This is an increase of 2%, if you adjust for the effect of the adoptions of CECL, as mentioned before, the underlying growth amounted to 3%.
The funding increased largely in line with the growth in financing receivables. And finally, although the shareholder equity decreased by CHF 96 million, the decrease is attributable to the dividend payment in April of CHF 116 million and was partially offset with the net income for the first six months, in addition, a s mentioned before, we had the adoptions of the CECL standard, which resulted in an increase of CHF 54 million in retail earnings. Net financing receivables, i n the personal loan business, the financing receivable increased by 1% to CHF 2.4 billion. This was driven by solid volume performance with increase in market demand. Interest income in personal loans increased by 2% to CHF 82.5 million, with a yield of 6.6%. The net financing receivable in auto lease increased by 3%.
This was driven by strong volume performance, mainly due to vehicles price development. The interest income increased by 11% to CHF 71.8 million, with a yield of 4.7%. We see that the timely repricing on the auto business has already a material impact on the net revenue and on the yield. Finally, net financing received in card declined by 3%. This was driven by lower activities on the remaining Cumulus portfolio, offset by continued successful Certo migrations. Interest income in the cards business declined by 4% to CHF 42.1 million, with a yield of 8%. Funding, t he balance and diversified funding portfolio increased by 3% to CHF 6.34 billion, with a biz funding mix, 51% deposit, 49% non-deposit.
The deposit base decreased from CHF 3.5 billion to CHF 3.25 billion at the end of June. This is primarily due to a 14% decrease in institutional deposits and a 6% increase in retail deposits. The non-deposit debt increased by 18%. In May 2023, we paid back a CHF 250 million unsecured bond. In January and May, we issued the two unsecured bonds of CHF 235 million and CHF 210 million, and in May 2023, we entered into a not only asset-backed note of CHF 275 million. The weighted average durations increased to 2.5 from 2.1 at year-end.
The end-of-period funding cost amounted to 1.25, and the average funding cost in the first half of the year amounted to 0.97 or 97 basis points, compared to 50 basis points in 2022 financial year. We remain very well capitalized with a strong Tier 1 capital ratio of 17.6%. We expect the capital ratio to be slightly above 17% at year-end, including effects from the adoptions of the U.S. GAAP reporting for regulatory reporting. The company maintains its financial targets until 2026, including a dividend of at least CHF 3.95 for 2023, and growing thereafter based on earnings growth. With that, I hand over to you, Holger.
Great. Thanks, Pascal. As we move into the outlook, just a quick look here at our scorecard. We shared this with you in February. As mentioned during the presentation, I think overall, solid progress. A few things work in progress and Operational Excellence, w e're continuing towards the launch of lending platform later this year. That shifted a bit versus the initial expectations we shared a year and a half ago where w e do look to launch this later this year, as we said. In terms of the other key things for the rest of the year that we have on the right-hand side of the page here, again, we've shared this in February, looking to roll out the new Microsoft 365, initial decommissioning of systems.
On the business acceleration and new growth side, the continued cards migration, spend stimulation, activation on that portfolio, as well as, looking to work with our existing and potential new partners. We discussed the enhancements of the mobile app, which we continuously have new releases for efficiency, self-service, and better usage by customers. Buy now, pay later, quite pleased with the progress, looking to conclude that integration later this year, and then culture transformation. Look, we're proud to be, again, amongst the great place to work and the continued focus here on embedding our values in talent assessment, talent development, and that underpin our transformation with culture scorecards and metrics.
In conclusion, on the next page, in terms of the outlook, again, I think the agenda for the rest of the year is clear. You know, we expect continued resilient business performance, clearly delivering our key milestones, repricing, share to cards transition, and transformation with a continued focus on benefits realization, as well as the conclusion of the Byjuno buy now, pay later integration. What this means in terms of performance, as we said in the past, net revenue, at least in line with GDP, stable cost income ratio versus last year at 51%, and last performance, you've seen we're doing well, you can expect the same going forward.
Given some of the headwinds we discussed in terms of lag of asset repricing and phasing of the transformation benefits, we expect to be at the lower end of the ROE target range for this year of 13% to 14%. Some of these headwinds will likely extend to some degree to 2024, as we see some challenges on hitting the ROE target of 15% next year. However, we maintain our financial targets through 2026, including the dividend, as you see them on the right-hand side. With that, thanks for your attention and for listening and I look forward to taking your questions now.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star on their touch stone telephone. Excuse me, star and one on the touch stone telephone. You will hear a tone to confirm you have entered the queue. If you wish to remove yourself from the question queue, then you may press star and two. Questioners on the phone are requested to use only handsets and eventually, turn off the volume for their web, webcast. Anyone who has a question may press star and one at this time.
The first question comes from the line of Nemeth, Michael with UBS. Please go ahead.
Good morning. Thank you for the presentation, for taking my questions. I have three of them. The first one is on slide eight. I j ust wanted to confirm what Pascal mentioned, the 130 basis points increase in pricing in personal loans and 140 basis points in others. Could you just confirm that is essentially you saying that front book yield is going up by 130 basis points? That's as of June, so that was not necessarily the case in the first four to five months in the year. In this context, I was wondering if you could talk about the market dynamics in personal loans as well. You grew receivables by about 1%, the market did +5%.
I'm just wondering, is that due to your focus on repricing? maybe also selective repricing before the rate cap moved higher, and also keeping loss rate below historical levels, or is there any clear reason for that? That's the first one. The second one is on the 15% ROE target for next year. You mentioned that this might be challenging to reach. Could you elaborate a little bit on where exactly you see the key risk to reaching these targets? Is that volume development, is that funding costs, or this is mainly related to risks around the credit card transition where you're seeing perhaps some slippage in fees? Thank you.
Yeah, Thanks. T hanks for the questions, Michael. Let me just let Pascal, perhaps you start with the numbers on the pricing, and then I take the market dynamics as well as the outlook question.
Yes, Michael, you are right. Although this is on the new business, and this is basically comparing all the June pricing versus the June last year. That means, as you said, all that, obviously the pricing increase was lower the month before. Again, it's comparing the June last year with June of this year, one month of vintage during that period. Second one?
Yeah, yeah, thanks. Thanks, Pascal. Look, I think, Michael, you're on the right track in terms of the market dynamics, right? There is growth in the market but look, we want to stay true to our principles here, right? We, we do want to grow profitably. We do not want to grow share at the expense of margin. We've been very selective in terms of where we grow, both from a pricing, but also from a overall, let's say, loss and risk management perspective. That's what you're seeing here. I think, you know, again, we're quite thoughtful about this. That's the dynamics in terms of that situation. Your last question about the ROE target.
Look, I think it's really around these couple of headwinds that I alluded to, right? I mean, one is the somewhat of the lag of the repricing coming in. The good news here is, right, we have increased prices, and we continue to work on that, as we stand today, and depending on the interest rate development in the market, we'll continue doing that going forward, right? We've been quite clear and assertive on that. We will see the benefits coming through. There is a bit of a lag that's going to drag as well, a bit into 2024. As we alluded to with the shifting of some of the benefits on the transformation, a lot of the projects are going right to plan.
Some of them are, you know, versus the initial strategy we put together in 2021, shifting a bit back. The benefits will come, but again, a bit of a timing lag here. That's really the key items that we see, Michael.
That's very clear. Thank you.
Thank you.
The next question comes from the line of Regli, Daniel with Credit Suisse. Please go ahead.
Good morning. Thanks for taking my questions. First, I have four questions, if I may. First, on credit cards, secondly on the net interest margins, then third on costs, and then fourth on a little bit of follow-up on Michael's question on the return on equity target. First on credit cards, can you maybe give me some more color on the trends we have seen in H1 2023? Obviously, credit card commissions are down. Can you maybe elaborate a bit on how this kind of fits with, you know, seeing record passenger numbers on airport Zurich and so on? I would have expected, you know, credit card commissions to have been rather up than down, given, you know, the normalization of the whole COVID and traveling behavior.
Secondly, on net interest margins, you said there will be, or we have seen this compression up to 5.1%, and then should see a stable net interest margin of 5.1% during 2023. From when on can we expect, you know, kind of a recovery coming from this, you know, price increases you're talking about? To where would this recovery go? Should it go back to kind of 5.5%, or will we see something in the middle of where we stand now and maybe the point we started? Quickly on the one-off costs, can you maybe just quantify a little bit more specifically, what exactly was the Operational Excellence spent and what was the integration costs?
What was the kind of the non-recurring part of the operating expense line? Then last but not least, on the return on equity target, you obviously kind of softened a bit the guidance on return on equity, and I was just wondering what was the unexpected part, you know, that you kind of lower a bit the guidance, both for this and for next year? Thanks.
Good morning, Daniel. Thanks for the question. Let me take the first one, and then Pascal, the net interest margin and the one-off costs, and then I'll come back on the ROE, if that works. Look, I think couple things on cards, Daniel, right?
I mean, firstly, you know, as we said, what we're seeing in terms of the numbers, you know, as we had also articulated a year and a half ago, is that we are broadly in line with the expectations around assets and revenues. I think that's, you know, that gives us some comfort that what we've done, what we've implemented and how we've delivered on the transition is towards these expectations. Secondly, right, the subpoint to that, right? That migration at 60% where we stand today and we continue to work this by way, right? Again, we said we want to retain more than half. We're clearly firmly in that territory. We're also seeing the assets quite stable with interest income increasing, right?
Again, I think a lot of the work in that sense is paying off and confirming our expectations. In terms of fees, it's true, there's pressure relative to previous year. You know, look to some extent, right, we've always said on the transition of the portfolio, we want to retain the majority of the customers, and we're focusing on profitability, and that gets us in line with expectations. Clearly, you know, there are also some that use different cards or use them a bit differently than in the past. You know, this is where our activities that we're driving today and going forward come in, right? Which means continued transition, continued migration.
We've got activities that are ongoing in terms of driving activity on the cards, spend stimulation, you know, working with existing partners and also, you know, as you know, we always have a pipeline of potential new partners that we're working on. That's how I would talk about the card story at this point. Let me just hand over to Pascal for the following two questions.
Yep. Thank you. On the net interest margin, as you have seen, there is this timing lag between the PNL impact of the repricing actions, which have already been implemented, and the increased interest expense. As a result, as I showed before, the net interest margin reduced from 5.5% to 5.1%. First, though, for 2023, as I mentioned, as we expect this to be stabilized because of the measures already implemented. We would expect the net interest margin to slightly increase again, though, in the midterm. By the way, although if you look at our overall strategic plan and what we communicate, and as we were expecting some reductions in our overall strategic plan of the net interest margin.
This is why today, as we can confirm again as our midterm financial targets. On the OpEx, as related to the integrations of Byjuno, when we did the acquisitions and we announced, so we reported integrations of around CHF 4 million to CHF 5 million to be spent between 2022 and 2023. The first one is, I want to confirm again, this number. It's around CHF 4 million to CHF 5 million, and we spent OpEx around CHF 2 million for the first six months of the year. In terms of integration, not integration, in terms of strategic investments, I mentioned before, we have spent OpEx and CapEx around CHF 11 million for the first six months. I reported last year around CHF 13 million spent.
If you take CHF 13 million last year plus CHF 11 million rounded around CHF 25 million already spent on those strategic initiatives, OpEx, CapEx, out of the overall CHF 55 million strategic funding investments or funding for strategic investments announced so 25 out of 55 already spent after 18 months. Out of the CHF 11 million I mentioned for this year, usually, as we would expect, although, OpEx, CapEx, around 60% OpEx and around 40% CapEx for these kind of initiatives.
Thanks, Pascal. So let me take over again on the ROE point. So look, Daniel, I mean. So again, two key things, right? It's the lag and the repricing. Look, you know, we'll have to see where the interest rate increase by the national bank and resulting funding plays out, right? It's likely in a sense that it'll be peaking at some point, but it's also, as I think we all know, anybody's guess, right? I think what's important to note is that we have increased prices. We are increasing prices. I think we have proven that we are assertive, we're delivering on this, and so wherever that takes us from a market perspective going forward, we'll continue to do so.
Again, given some of this lag, you know, this is not purely periodic, right? There's some spillover into next year, and that creates part of the challenge for the ROE. Then the other piece, like I said, you know, we laid out a pretty granular plan, right? That we communicated to you guys in December of 2021, in terms of the programs that we're driving. We're delivering on these, as we've said today, right? Whether that's the mobile first app, whether that's data center move, a lot of the network consolidation and those programs you will recall, and also the transformation of the core banking system. The phasing of some of this, the core banking system as an example, is a bit delayed versus what we had initially planned.
Again, those two things, I think, create some of the challenges that we're seeing. Again, we're confirming the targets that we set, and we're working on delivering against them.
Okay, thanks. Can I ask two quick follow-ups, if I may? Quickly on this 60% migration means this 60% of previous Migros customers have already ordered and gotten and used the new card. Is this the correct interpretation of this? Secondly, just a little bit about, you know, the client behavior. You were talking about, you know, clients have changed the usage of their cards. Are they using the cards less often, or don't you see they recovering, you know, the kind of traveling part of the commission income or they dont fully.
Yeah. Thanks for the follow-up. Let me just take this. Look, you're right with the migration, right? The 60% of the customers have been migrated, so they have a card, and they're using the card. As I said, we will continue this migration, but as we've also said, right, we focused on the most profitable segments to start with. Which is why, again, you're also seeing at the 60%, we're confirming the guidance that we had provided in terms of 2019 asset and revenue levels. The fact that the assets are sticky, I think underlines and confirms that hypothesis that we've worked on with our migration program.
We'll continue to drive that, you know, I expect that number to continue to increase, but at a somewhat lower pace going forward. Look, client behavior, I mean, look, if you're at 60, then there's 40% on the other side, right? They're partially still in the portfolio. We continue to work on these clients, but the proposition there is a bit different, right? Some of them may be on a Migros card, maybe on other programs. It's not as easy to, I'd say, this is on a case-by-case basis, Daniel. What we are seeing, that of the customers that we are retaining, as I said, the behavior is broadly as we want it to be, right?
This is, hence, the stickiness of the assets, in that respect.
Okay, thank you.
Thank you.
The next question comes from the line of Andreas Venditti with Vontobel. Please go ahead.
Yes, thank you, good morning. From my side, just a few add-ons. Maybe you could give an indication in terms of funding costs, what we could expect for the full- year. Coming back on the cost income ratio, you reiterated your guidance for a stable cost income ratio for the full- year despite a higher one in the first half. I think that's obviously positive. If I look through the numbers, basically, it means that in the second half, you would have to reach the best level of cost income ratio over the last 4.5 years, mainly through the cost side you mentioned. What should we expect there in terms of this cost side improvement?
Where should this improvement come from? Thank you.
Yeah. Thanks for the questions. Pascal, you want to take those?
First of all, on the funding side, you know, the situation at the beginning of the year, we had CHF 6.1 billion of funding, 2.1 years durations, and we know although the interest rate development since June last year. The average funding cost was 97 basis points in the first six months. I would expect, although basically at all, to move towards some point for 2023, closer to the year-end period, where we were at 125, just to be 100% sure on the slides. Yes, 125. Slightly lower, probably as well, average funding costs for the full- year, 2023. This is what we would expect.
I think one, again, although I want to reiterate, although we should not look at all the interest expense only in isolations, but also compare with repricing actions, and ultimately, as we're looking at the net interest margin development, depending on how interest rates develop in the next couple of months, forward rates, we might have to take more or less actions on additional repricing actions. On the cost income ratio, you are right, if we are at 53%, we stay stable, as of last year was around 51%, 50.6%, second half of the year needs to be at lower than 50%. First, we have always demonstrated a very disciplined approach around cost management although it can be as in personal calls in general and administration costs.
An example as well, number 50% is, if you look at the reduce excluding acquisitions, CHF 934, CHF 916, CHF 904. First of all, is the usual normal costing cost management, so, and we are very tightening as all this. The second one, as I mentioned before, we discussed before, the integration cost, although I would say the large part of the integrations of Byjuno, although is done. We wouldn't expect all these costs though to reoccur the same way we have seen as well at H1. Finally, so yes, we start also to expect also some initial benefits out of all the transformations. We have started now 18 months ago.
We have already implemented quite a few things so in terms of workplace, in terms of infrastructure, and then as soon as we will have also basically the launch of the new core banking platform, we would expect to start to see first benefits already as in 2023. I want to reiterate firmly as well, we ambition so to have a stable as a cost income ratio for 2023, and then as well, starting 2024, reducing towards our long term or mid-term ambitions of 39 cost income ratio at the end of the strategic cycle in 2026.
Mr. Venditti, have you finished with your questions?
Yes. Thank you very much.
The next question is from the line of Kunz, Michael with ZKB. Please go ahead.
Yes, good morning, all. Thank you very much for having the opportunity to ask a question. I had a question around the buy now, pay later business. Could you provide some indication in terms of how large the organic growth was on an underlying basis, and particularly in terms of Swissbilling and also Byjuno? Also whether that organic growth is being stable, is it accelerating, is it decelerating? Secondly, on buy now, pay later, how the competitive environment is. Are you finding it easy to onboard new partners or is it starting to become more complicated, a bit more crowded? Finally, also in terms of performance, are you seeing similar trends overall that the performance is deteriorating or is it very stable? Thank you.
Yeah. Let me just start quickly with the competitive environment and then Pascal will talk a bit about the growth trends and the performance side. Look, I think, and thanks for the question, Michael. You know, as we articulated, right, Buy now, pay later, and better f inance, one of our clear strategic growth pillars, we continue to see a lot of potential in this field. And we're quite pleased with having made the acquisition, and also how the integration of the two businesses is going at this point. And our hypothesis about complementary skills, complementary customer set geographies, et cetera, is really coming to fruition, which we're quite happy about.
I n terms of the environment, you know, look, I think the launch on the Cembra Pay has been very well received in the market. We hear this a lot from existing customers. I also, you know, think the field, our presence is felt even more than it was in the past. I think relative to the competitive environment, we're very well positioned to capitalize. Now, you know, you also see some trends that are cyclical in a sense, right? O nline traffic or online e-commerce is decreasing a little bit coming out of the pandemic at the expense of more offline POS transactions, and we clearly are extending our presence in both areas to capitalize on that.
I think broadly, right, in terms of competitive environment, I think we're very well positioned. Just let me hand over to Pascal in terms of growth trends and performance.
Look at all the buy now, pay later commission and fees increased from CHF 6.5 million last year to CHF 19 million, as for the first six months of this year. The large portions of the contributions or the increase was driven as well by the consolidations of Byjuno. We are pleased with both businesses, which now form one as Cembra Pay. Basically, the way we have seen as all both on both sides of the continued growth on both sides of the business.
Can you just give some indication in terms of what the underlying growth is? Just so we get a feel in terms of how large the organic growth actually has been year-over-year.
This is an information so we have not disclosed yet and cannot not.
I think what I might just add, though, and concur with the comments, Pascal, right. Look, we've given you guys guidance on where we want to end up with this business, right. In terms of net income contribution, that guidance is firmly in place, right. The CHF 10 million-CHF 20 million over the strategic cycle.
Mr. Kunz, have you finished with your questions?
Thank you. Yes.
Thank you.
The next question is a follow-up question from the line of Daniel Regli with Credit Suisse. Please go ahead. Mr. Regli, can you hear us?
Good morning. Yes, here I am. Sorry, I forgot to unmute myself. Sorry, I forgot what I wanted to ask. Sorry.
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Good, I think,
Oh, apologies. Please go ahead. Yes.
No, no worries. Look, thanks for participating this morning and the questions and discussion and as always, happy to extend, you know where to find us. A couple of quick takeaways. Look, continued robust performance, all right? In a challenging environment. I think we're pleased that we've been able to grow the balance sheet in that sense. Solid net revenue growth, right? Compensating for the funding rate increases through a mix of interest rates increases. The pricing is in place and it's going to increasingly pay off, as well as fees, particularly from buy now, pay later. We're pleased with the turn and transition and Buy Now, Pay Later delivery, resilient business model as you know it, and we continue to deliver.
So thanks again for participating this morning, and, have a great day, everyone.
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