Good morning, ladies and gentlemen. A very warm welcome again from us here in Zurich. Thank you for your attendance of the first half 2021 results presentation of EFG International. Unfortunately, obviously, also again, in a virtual format. Obviously, we, unfortunately, have gotten used to this format over the last years. As in the past, I'm joined by Giorgio Pradelli, CEO of EFG International, and Dimitris Politis, CFO of EFG International. As usual, I also point out the disclaimer on the front of our presentation as being read. As the operator just already announced, we obviously will have presentations, and afterwards we will have time for Q&A. Thank you very much again, and therefore I hand over to Giorgio. Thank you.
Thank you. Thank you, Jens, Good morning, everyone. I am very pleased to be here and to start this presentation for our first half results for this year, for 2021. As it is customary, I will start with the key highlights of our performance. After that, I will hand over the floor to Dimitris for a detailed analysis of our financial performance, and I will close with the outlook and our strategic priorities going forward. In terms of the key highlights, I am now on page four. We are very pleased with this set of results. We started the year well. We had a good first quarter, but actually, in the second quarter, we even accelerated in terms of growth. As you can see, our business growth was 5.3%.
This is a combination of a good first quarter, but an even better second quarter, where we were in excess of 6%. I am very pleased to report that this is the ninth consecutive quarter that we are growing, and this allowed us to achieve our all-time high in terms of Assets under Management at over CHF 170 billion. What is very pleasing, though, is that growth is also translating into profitability. As you can see, in terms of IFRS profitability, we tripled our net profit to over CHF 100 million, and in terms of underlying profitability, we more than double, at CHF 82 million. Obviously, these numbers are good. We are pleased with them. It shows the progress, and it shows from a quantitative perspective what we have been doing. Equally, we are very pleased with the qualitative aspects of our business.
We have been not only growing, not only improving our profitability, but also improving the quality of our business. We have invested over the last few years, a lot in investment solutions, in asset management, wealth solutions, credit solutions, to deliver content to our clients. We want to become more investment-led than just a figure. Two-thirds of our revenues are now net commission income. We have been growing the net commission income more than 35% over the last two years. While we become more investment-led, we continue to improve our efficiency and benefit from operational leverage. We improved our revenues by over 5%. We decreased our cost by 4%. Obviously this has a very dramatic impact on our profitability figures.
We continue at the same time to rationalize our global footprint while we improve the efficiency of our core centers, and we were also able to substantially de-risk our legacy position in the life insurance portfolio. Last but not least, and this for me is extremely important, obviously, for shareholders and investors, we continue to create organically capital, to generate capital, and this is obviously very important and gives also a strong foundation for future growth. To close, for our 2022 strategic plan that we announced two years ago, we are on track. On this note, I hand over the floor to Dimitris for a detailed presentation of our financial performance in the first semester 2021. Dimitris.
Thank you, Giorgio, and welcome to the people on Webex or on the telephone. I am very pleased to present this set of financial results for the first semester of 2021. What I would like to do before we go into the actual figures is underline four themes that you will be hearing throughout the presentation on financials today. The first one Giorgio already mentioned, is one about consistent growth. He mentioned the nine consecutive quarters. This is a very strong performance over the last 2.5 years. The second one is that operating leverage is now driving a step change in profitability. That was evident in the second half of last year. It continues in the first half of this year, and we expect it to continue going forward.
The third point is about quality of earnings, and this comes with a higher contribution of commissions, also with a higher contribution of the annuity business as part of the commissions. Finally, it's about active management of the legacy portfolios. We know these portfolios were generated back in 2007, 2006, 2008. It is our duty to actively manage, and actually, we have some positive results to mention in this set of results. Moving on to page nine, where we have the key figures. As you see, CHF 4.2 billion of net new assets, annualized growth rate of 5.3%, AuMs up to a record CHF 172 billion as at the end of June 2021, 36 new CROs hired. We'll go back to the CRO hiring pattern a bit later on. Very strong operating leverage. Revenues up 5%, costs down 4%.
This doubles the underlying net profit, plus the contribution from the legacy, we have a tripling of the IFRS net profit. Clearly, this performance is very good, compared to the first half of 2020, but it's also up compared to the second half of last year. We are 7% up on underlying profit and 32% up on reported IFRS profit compared to the second half of last year. Underlying cost to income at 79.6%, 8 percentage points down compared to the first half of last year. Clearly, we continue being very disciplined in cost management, and we have even more actions coming in the second half of this year and also carrying into 2022. We will talk about the substantial de-risking we managed to achieve through an agreement in principle with Transamerica, which also had a positive impact in our P&L. Finally, and not least, capital.
We generated organically 100 basis points of capital in the first half of the year. We also issued $400 million of Tier 1 in January 2021. All in all, we have a very strong capital position, 16.5% Core Tier 1, 22.2% total capital, which is also improving organically in the first six months of the year. We'll skip page 10, which is a summary of all the financials. Page 11 is a depiction of our performance. As we said, very consistent in growing net new assets at the top left, cost to income improving over the last few semesters. Underlying net profit, underlying profit, operating profit + 70% year-on-year, and a tripling of the IFRS profit compared to the first half of 2020. Page 12 describes the impact of operating leverage.
As I said, operating leverage is a key driver for us this semester, and we expect it to continue going forward. You will see that we increased revenues by CHF 29.5 million, and we decreased costs by CHF 19.4 million. This is compared to the first half of 2020. We managed to get our underlying operative profit up 70% to CHF 118.5 million. Cost to income at 79%. This is driven mostly by strong commissions on the revenue side, and also high quality of commissions. For us, the way forward is about managing this positive impact of operating leverage, and as I said, we expect it to continue in the semesters to come. Page 13 marks our performance in what we call the non-underlying items. As you see, we have a very strong contribution from the life insurance portfolio this time.
This largely stems from our settlement in principle with Transamerica on some disputed increases in COI in premium payments in the past and going forward. For us, it is not just about the managing and getting the result in the P&L. It is also about substantially de-risking our litigation risk in these cases. Transamerica represented about half of that potential litigation risk, so at least now half of that is off the books, and we still have ongoing procedures with another three carriers, which are coming up in the future. Page 14 is the progression of the net new assets. You see the CHF 4.2 billion of net new assets generated over the period, clearly favorable market and currency conditions.
One thing to note is that we would have been at even higher levels, but as you know, we have decided to exit some businesses, so we have a CHF 3.2 billion reduction in AuM because of disposals of the corporate and personal business in Ticino and of our subsidiary in Paris, Oudart. That brings us to CHF 172 billion of assets under management on the 30th of June. We are also mentioning here our pro forma figure of CHF 158.7 billion, excluding our participation stake in AYG, which is our Spanish subsidiary. We announced that transaction back in April. When that completes, we will be roughly at the same levels as at the beginning of the year. On the right-hand side, you see the mix of how these NNA were generated.
We've always mentioned, starting back in 2019, that we will now have three levers to pull to grow the business. Clearly, in this semester, the existing CROs have had a higher contribution than new CROs or new businesses. Overall, starting from the 1st of January 2019 to date, so in the course of the last two and a half years, we had about 40% of our NNAs from existing CROs, 30% of our NNAs from new CROs, and 30% of our NNAs from new locations. It's a very balanced growth over the last 2.5 y ears. Page 15 is the progression of our CRO numbers. Over the last five years or six years, we have been driving the efficiency of our CROs as much as possible. It is very critical for us.
The size of AuM per CRO is not per se critical, but it is a very good indication of how efficiently you can grow the business. It's the same as consolidating booking centers. The bigger the booking center, the more efficient you are, the larger the CRO, the more efficient you are, and it's a key parameter that we are following and we are driving through very strict performance measurement. What you'll see is that we hired 36 CROs in the period, hired or signed 36 CROs in the period. We have a net decrease of 22, but about half of that decrease is driven by the exits, and more importantly, we've managed to grow our AuM per CRO, excluding the new hires, to CHF 295 million.
That's at the bottom right chart, which is clearly a very big growth compared to 2015, but it's also a substantial growth of 24% compared to the same time last year under the same parameters. Page 16 is a breakdown of our regional growth. I think we are very happy to see Switzerland and Italy growing at the rates that we're growing. If you remember, two years ago, back in March 2019, when we were introducing the plan, we had a first step of stabilizing Switzerland and then growing it. Clearly, at 4.9% growth, we are in very strong growth territory. Also, the other positive development is that from all the regions, Switzerland has the highest return on AuM, so that will help us drive our margins higher as we move forward. I think the key point to note here is that we have a very good performance in Switzerland.
U.K. has come in at very high growth rates, also with a very high margin. Continental Europe and the FCAM business is also contributing. Asia was slower. It was in part due to deleveraging. As you'll see, excluding the loans, it was in positive territory, and we look forward to more positive performance by our Latin America business going forward. Page 17 captures our performance in the, what Giorgio called the investment-led part of the business. We have been growing our evolution and our penetration of advisory and discretionary mandates. It's now at 56%, excluding loans and also excluding externally managed assets. What gives us comfort is the actual performance of the advice that we're giving. We give you some indications on that. In terms of our discretionary strategies, we are in top quartile, over the one, three, and five-year period.
Our New Capital funds, we have 71% of our New Capital funds with four or five-star ratings for Morningstar, so 71%. You'll also get some more information on the following page. I think also more importantly, we have been investing over the last five years, but also even more recently in terms of developing our capabilities. We are now a lot more into the thematic product launches, which have gained a lot more momentum. We are more into the ESG discretionary side of the business, and we believe that this will help us further increase our penetration for the advisory and mandate part of the business. Page 18 is a graphic of the performance. I know there are many ways of depicting this performance, you'll see here how many New Capital funds we operate. Five years ago, we were at about seven. Now we are double that.
Even more so, if you see the last two years, the performance of these has been very good, and we have about always around 65%-70% or 75% of our New Capital funds in the four to five star category, as rated by Morningstar. Going into revenues on page 19. Revenues were up 5%. You'll see that this has been largely driven by commissions growing at 17%. The weak point is the net interest income, we all know that the low interest environment is not helping. We believe that we've seen the bottoms of the net interest income and the impact from interest rates, largely because the majority of our portfolio reprices on a one-month, three-month, and six-month period.
Given the fact that the rates dropped around April, May, June last year, we know that the impact is largely now reflected in the first half results of this year. We had some tailwinds, clearly. AuMs were higher. We had some good client activity in the first quarter of the year, although in the second quarter, that was not really the case. More importantly, in terms of the things that we can actually manage, on the top right, we will give you an indication of how the gross advisory and management fees, so what we call the annuity business, has been developing. You will see that there's been a significant jump in the first half of this year compared to previous years. Also, the repricing actions continue. We expect more to come in the second half of the year and to spill over into 2022.
We are very pleased to see that the commission margin went up from 44 basis points to 46 basis points when I compared the first half of 2021 to the first half of 2020. On the expense side, I'm sure that this will not surprise you. We've been cost managing for the last five years. We've managed to get costs down 4% year-on-year in the first half of 2021. This is all about discipline. This is about trying to figure out the last bit of cost management you can actually do. This is a lot about automation. It's about increasing the STP side of the business, reducing the manual work, and centralizing. There's plenty more actions that are in train as we speak, and we expect to continuously manage our cost base going forward.
Clearly, the biggest driver here is through the reduction on the personnel side, which is the bulk of it. Again, this is more about becoming more automating, becoming more digital, and taking advantage of technology. Having said that, we also embarked in late 2019 in a transformational project for EFG, when we revisited international footprint. What you see on the map is the core offshore private banking booking centers, including also Shaw and Partners. We have the eight core offshore booking centers noted on the map. What we decided in late 2019 is to launch a project to address the low margin and high cost to income booking centers. In the end of the day, the project scope comes to about 300 FTEs. Project scope comes to about CHF 70 million of annual expenses and encompasses about CHF 16 billion of assets under management.
We have some actions that we have already completed. Chile, the personal and corporate business in Ticino, Oudart in France. We also have announced another three actions, Luxembourg fund management company, restructuring our Guernsey business, and the disposal of our stake in Spain and in AYG. The first two are expected this year. AYG should be completed by the first quarter of 2022. I would say that the majority of what is included in the project scope will come this year and with the disposal of AYG in the first quarter of 2022. We are looking forward to improving our efficiency through all these actions. Again, there are two elements in this efficiency gain. One is the actual reduction in expenses or improvement in cost-to-income ratio through the disposal or the restructuring.
The second is releasing resources, other management resources, capital resources, liquidity resources, through these actions, so that we focus in our core booking centers, and these core booking centers can be a lot more efficient in producing profits than these smaller standalone and less efficient booking centers. A very quick look on the balance sheet on page 22. Clearly, a lot of liquidity, 52% loan to deposit, 202% LCR as of the 30th of June 2021. Really no issue in terms of growing the business because of liquidity. Actually, liquidity has increased over the last six months. Moving on to capital on page 23. You will see that our capital ratios under Swiss GAAP are 16.5% core Tier 1 capital and 22.2% total capital.
They have increased compared to the end of December, 30 basis points for core capital and substantially more for total capital because of the issuance of the $400 million Tier 1 instrument we issued in January. The story here is about organic capital generation, which we continue, and also the successful placement of the Tier 1. What you should note is two things. One, the execution of the footprint project will further add to these capital ratios, as especially Spain is expected to add 90 basis points of capital when it is closed. The second point to note is that we always included our IFRS capital ratios as a footnote because our regulatory requirement is under Swiss GAAP. You will see now that our IFRS ratios, 16.4% core Tier 1 and 22.4% total capital, are practically the same as our Swiss capital adequacy figures.
To close on capital generation was very strong. We had 100 basis points of underlying P&L. In the first six months, we had an effective reduction in risk-weighted assets. Also, if you take into account the currency movements in the period, and we have been accruing dividends worth 50 basis points. That on a net basis, it's 100 basis points capital creation. We also have some other items, which include the non-underlying incremental acquisition we made for Shaw and Partners on some other currency items that reduce it by 60 basis points. The net is a 30% increase in our core Tier 1 capital under Swiss GAAP. To close, I'll go to the same page that we've been using for the last two and a half years, which describes our execution of the plan. Giorgio mentioned we are on track, and we are on track.
I'll focus mostly on the right-hand side of the page. I think that the left-hand side is pretty much something in the past. It is about operational efficiency. It's about becoming more digital. This is all parts of the projects that we are running nowadays. We do have excess capital. We will create even more excess capital. We are willing to engage in discussion about acquisitions to figure out how we best use this excess capital going forward. Switzerland back to growth. It's growing by 5% annualized in the first half of this year. We expect it to continue growing in these rates going forward. Clearly, management of all the legacy positions is a must. It's something for us, it's a matter of avoiding the negative surprises and making sure we maximize the value we can get from these assets, and we'll continue doing so going forward.
On that note, I'd like to close and pass the floor to Giorgio for his final say on outlook and strategic priorities. Thank you very much.
Thank you, Dimitris. Now to close, we will focus on the outlook and the strategic priorities. Before that, I wanted to put this and the future quarters in the context of what we have been doing over the last few years and what we intend to do in the next few quarters and next year. We go back here on this slide. I'm on slide 27. We go back to the acquisition integration of BSI. We had at the time CHF 84 billion of Assets under Management, and over the last few years, we managed to over double that. 2019, when we announced a strategic plan, the 2022 strategic plan, this was the year when, so to speak, we had to warm up the engine for growth. We say here seeding for growth.
Last year, clearly, nobody expected the pandemic, but this was for us a test to demonstrate our strong resilience, both in operational and financial terms. This year, our objective was to maintain the growth momentum and also to achieve new levels of profitability. Dimitris spoke about step change in profitability. Obviously, from next year and beyond, we want to unlock our full potential. In terms of strategy and strategic focus, we remain focused on three areas, clients, content, and simplicity. If our strategy is sustainable and profitable growth, obviously, we need to be outward looking. Obviously, we need to focus on clients. You can only grow if clients like what you're doing. We are convinced that our client relationship officers are second to none in our industry to deliver a superior service to our clients. We want to be very close to our clients.
Clients' proximity is very important for us. We said that on one end, we want to rationalize our locations, our network, our presence globally. On the other hand, if we need to be close to our clients, we do not hesitate to open, like we did two years ago, an office in Dubai and an office in Lisbon. Obviously, what we do not need are new booking center, but proximity to client is extremely important. What do clients also like? They like open architecture, impartial, and independent advice. They trust us for that. Obviously, service is only one side of the medal. The other side of the medal is content. We want to deliver also the best possible solutions for our clients to manage their financial and family affairs. We have been investing over the last years a lot in comprehensive first-class investment, wealth, and credit solutions.
We want to maintain a very strong performance in everything we do. Obviously, ESG and sustainability going forward will be more and more important. It's all about clients, it's all about the next generation, and it's all about, for us as a financial institution, to allocate the capital and the resources to the companies that will identify the technologies and the innovation to solve the issues of sustainability going forward. Obviously, we want to do more in alternative investments in the new private equity fund that we're going to be launching, and private debt. Clearly, digital is critical, not only for improving efficiency, but also for delivering services to our clients. The last point is about simplicity. I think we talked a lot about operational efficiency, operational leverage, rationalization, simplification, reducing complexity.
We want to become leaner. This will allow us to be more agile and also faster in growing further. In terms of the outlook and priorities, we see that the markets remain supportive on the wake of expansionary, monetary, and fiscal policy. We don't see a material change in interest rates for the next quarters. Clearly, the investor sentiment remains sensitive to the pandemic and also to overall geopolitical developments. All in all, we are very positive for the next semester. In terms of our priority, clearly maintaining the business momentum is a must. Improving the efficiency and reducing complexity is a key priority. It goes without saying that regulatory compliance and risk management is and will remain a prerequisite for sustainable growth. I would like, in closing, to focus on the last two bullet points on the right-hand side of page 29.
I've been asked recently of what I was proud about the developments of the last few years, and I said without any hesitation that I'm very proud of our teams. I think our business is all about people, our business is all about talent, and therefore to attract, retain, and motivate the top talent is a key priority for us for the next quarters, but also for the next year to come. We want to attract the best and motivate and develop the best talent, not only in the client-facing areas but also overall across the board in all corporate functions. Also, we believe that obviously, EFG has a strong competitive advantage, and we need to promote more the image and the brand of EFG, and we want to achieve a higher brand visibility going forward.
At the end of the day, it's all about competitive market positioning, and this is what we want to improve in the next quarters and the years to come. With this, I pause, and I hand over to Jens for opening the Q&A. Thank you.
Thank you, Giorgio, and thank you, Dimitris, for your very insightful presentations today. As announced earlier, we will now move to the question- and- answer session. If I can ask the operator, please, if we can have the first question from the telephone line. Thank you.
The first question comes from the line of Daniele Brupbacher with UBS. Please go ahead.
Yeah. Good morning, and thank you for the presentation. I wanted to ask about costs and then also pricing actions and probably cash returns, if I can. On the cost outlook, together with full year results, Dimitris, you gave quite some detailed expectations or guidance with regards to this year, and I think it was something like that you would expect this year's costs to be somewhere between the annualized H2 2020 level and the underlying level of 2020 overall when it comes to underlying costs. Is this something you feel comfortable reiterating? That's the first question. Then you talked a lot about pricing actions in various dimensions. Can you just tell us how much that helped? Obviously, we only see the net numbers, but how much it helped and how much more you think you can do on that front.
Just last on cash returns, capital ratios are high and strong, and I was just wondering how you think about cash returns in general, also bearing in mind things like a relatively low free float and some other topics, how you think about cash returns from here onwards. Thank you.
Good morning, Daniele. Let me take the cost question. Yes. As you said, when we came out with the results at the end of the year, clearly we had an exceptional second half in terms of cost. We guided away from that and somewhere between the full year and the annualizing the second half. At this point, there are two elements which would lead me to say that we are going to be higher than that guidance. One is our revenue growth is higher than what we were expecting, primarily on the back of higher balances. This is not what we're expecting, the appreciation. That leads to higher variable compensation. That is one element which we'll add. The second one is slightly more technical, which is that since the time that we were talking, we had some very significant currency movements.
As you know, about 50% of our costs are in non-Swiss-denominated countries, and that leads also to some incremental hit on the cost line. Clearly, the currency effect on a net basis does not create any negative impact on the P&L because also your revenues benefit. If you're just looking at the cost line, we are easily talking from the time that we're speaking to about, on an annual basis, about CHF 15 million of additional costs simply because of currency translation. All in all, that's the two parameters which would differentiate any thinking from the time that we are reporting back in February, the full year results. Again, having said that, we maintain our 72%-75% cost-to-income target for 2022.
I think the target is exactly the same. Clearly, the journey getting to that target might be slightly different in terms of mix between revenues and costs because of the parameters that I just described. I don't know, Giorgio, if you want to take the question on pricing or-
On pricing. Good morning, Daniele. Nice to hear from you since we cannot see each other. In terms of pricing, well, for us, obviously, this is a critical element of our strategy. We are trying to attack it across various dimensions. One is obviously the penetration of high-margin products. We report on page 17 the penetration, as you have seen, of our mandates, obviously structured products, advisory, discretionary, and funds are, I would say, the higher margin products. We are improving on those. We will continue. I think as I mentioned earlier, and Dimitris as well, I think the quality of our investment solutions is improving continuously, and obviously, our focus is on net commission income. I think that we have been hit, obviously, by the net interest income, and clearly on that, we cannot expect much, so all the focus will be on net commission income.
We believe that these measures will improve the return on AuM quite substantially. The question is obviously the timing of that. The other dimension is for us clearly to look at the various businesses and the various client relationship officers and look at the average of their books and trying to have strategies to improve their performance. There is a lot of, let's say, performance management now, not only on the growth, that was what we were doing a few years back, but a lot, obviously, on margin, quality of earnings, as I was describing.
Thank you.
The next-
At very solid capital levels, we are also increasing through some of the footprint actions. Already back in 2019, we've always mentioned that our priority would be to find suitable acquisition targets to complement our organic growth with some non-organic M&A growth. We've done one, which was Shaw and Partners, and over the last couple of years, we have also topped up our participation, which is now at 75%. We are in the market and trying to figure out or identify targets that could work for us. I think that would be the best use of the excess capital that we have. In the absence of that, we could possibly discuss some return of this excess capital to shareholders. There are many ways of doing it. Depending on which side of the Atlantic you live, you prefer either a cash dividend, an extraordinary cash dividend, or a buyback.
You know that for us, buybacks are a bit more difficult because we have a more limited free float. Again, this is a discussion to be had after we have exhausted our possibilities of doing acquisitions, which could very much increment our ability to produce profits. It's a deferred discussion, if you wish, for the time being.
Thank you. Thank you very much.
The next question comes from the line of Nicholas Herman with Citigroup. Please go ahead.
Oh, yes. Good morning. Thank you for taking my questions. Yeah, I have a couple of questions as well. Firstly on net new money or NNA, just curious if you can talk a bit about what drove where was the biggest deltas in NNA in the quarter versus Q1, regionally or otherwise? Secondly, on your lending for what was part of the NNA in the first half, is this a run growth rate that you are happy with? Are you looking to do a bit more than that? Just curious there if we have capacity. Third question would be on your mandate, can I just confirm, you mentioned you're doing pretty well in terms of growing your thematic, there's no margin difference here versus other mandates, this is more just fair?
We cannot hear you very well. The line is a bit disturbed. I don't know.
We have heard your first two questions. You started breaking up the third question. We heard about NNA and about lending.
Yeah, sorry about my. On the mandates, can I just confirm?
No, you're gone.
We lost connection with the questioner. The next question coming from the line of Adam Terelak with Mediobanca. Please go ahead.
Yeah, morning. Thanks for the questions. Be conscious of not stealing too many of Nicholas'. One other question on loan growth. It looks like on FX-adjusted basis, loan growth has been really limited. I just want a comment there in terms of risk appetite, peers are saying actually that demand for loans is slightly higher. Just a comment on that would be helpful. Similarly, a question on CRO hiring. It's within kind of the right scope of your 70 net hires a year. Clearly, first off, it's slightly slower and whether that reflects anything in terms of the backdrop for hiring, whether it's any more difficult or opportunities are slightly less. Finally, just a quick question on the rationalization program. You've given us the total cost figure of CHF 70 million. Obviously, in the Spanish disposal, we've got some numbers from your annual.
I just want to understand how much more capital could be released from that, and then the phasing of the cost savings of that CHF 70 million, how much is attached to Spain, how much is in the run rate already in the disposals that are already gone, and how much is to come through the second half of this year? A comment on revenues opposite that. What's the P&L kind of contribution? Obviously, you've given us the cost, but not the other side. That would be great. Thank you.
Let me just give you some information on the growth rate of loans, just to set the scene before Giorgio takes it in the substance. Our net new assets, which includes loans, grew at 5.3% annualized. If you exclude loans or if you just look at net new money, the growth was similar. We have been growing our loans pretty much at the same rate as we have been growing our managed assets as well. There is no differentiation in the last months. If you look also at the back of the presentation, loans accounted for 12% of AuM in December, and they still account for 12% of AuM in June 2021. There is no differentiation in growth between the two areas. I'll pass it to Giorgio for more.
Thank you, Dimitris. Obviously, for us, lending is a strategic product or service. We believe that it's part of private banking offering. Obviously, with this level of interest rates, a lot of our clients like to leverage up their assets. We believe that it is strategic, both in terms of Lombard lending, which is about 2/3 of our loan book, and real estate financing, which is about 1/3 of our book. Clearly, we like lending, we are growing it, as Dimitris said, at the same pace of the rest of the asset classes. Our ratio is about 12% of AuM. We could grow a bit. For us, what is important is, number one, that we give the use, so to speak, of our balance sheet to strategic clients.
We want clients that do with us everything, the investment side, the structuring side, and the lending side. This is extremely important. Obviously, it goes without saying that the credit component has to be fair with us. Then pricing. We have a very clear target in terms of covering liquidity cost and capital charges, and therefore, we believe that for strategic clients with a good credit at the right price, we like to do lending. If some of these conditions are not there, then we will never, how should I say, subsidize growth through lending. Question, if I may, on CRO hiring, I would say the CRO hiring is, as you said, is within the range that the order of magnitude that we mentioned 2.5 years ago. I think we had 36 this semester.
Obviously, there was last year, in the second and third quarter, a bit of, let's say, the market dried up a bit given the lockdowns that we have experienced throughout the planet. I think that this year the situation has improved and we are hiring teams. We focus mainly on teams throughout the various regions. I think we have a good pipeline, but again, for us, as I mentioned at the end of my presentation, the focus has to be on talent, the focus has to be on quality. The 70-100, let's say, soft target that we included 2.5 years ago is more an order of magnitude. We believe, again, that usually in a normal year, we are within that range, but the focus remains target. Now, if you ask me, where are we recruiting?
I would say across the board in all five regions, all our teams are very much focused in attracting new talents in this respect.
To your third and fourth questions, which are generally around footprint, just to mention that the Spanish transaction will add 90 basis points of capital when closed, and we hope to get it closed by the first quarter of 2022. In general, on the footprint, in the footprint numbers that are presented on page 21. I would say that about 70%-80% of that relates to the disposal of A&G in Spain. Clearly, that is to come in the next few months. We expect that benefit to roll in later. In terms of what would all this mean to the bottom line, all these actions taken together are almost neutral to the bottom line. All taken together, we expect to have also an equivalent reduction in revenues.
Again, the idea of all these actions is that we reduce complexity, we focus management mostly on the offshore private banking booking centers, and we try to improve the efficiency of these booking centers through a set of strategic actions so that we improve the overall profitability and performance of the firm.
Great. Thank you.
I think we try Citi again, if the line got better. Thank you.
Yes, Mr. Herman, your line is open.
Hello?
Yeah.
Can you hear me?
Yes, Nick, we can hear you.
Okay, great. A couple of questions, please. On costs, I am just trying to understand how much did variable compensation increase by second half of 2020? I think you mentioned at the full year results that the true run rate costs for the second half was about CHF 460 million. We've had an additional FX impact, that probably takes you to around CHF 470 million, your cost came out at about CHF 465 million. Two is on the fee margin. Were there any performance fees in there, please? Finally, on your project footprint, you mentioned the 90 basis points capital benefit from the Spanish transaction. What is the net capital impact from the other transactions, please? Thank you.
Let me start with the cost question. The cost question, as you said, it depends because we never gave an exact figure on what is the exit run rate. As you say, if you take CHF 460, the actual number that we printed now is CHF 467, if I'm not mistaken. The difference you have there is simply accounted for by the movement in currencies. Well, CHF 466 is the number that we put out for underlying. That pretty much matches what you're saying, Nick, in terms of the performance of cost this year. Clearly, we've had some more higher accrual for incentives for variable compensation. At the same time, you have cost actions that happened last year which are kicking in terms of hitting the bottom line this year, so there's a lot of moving parts.
In terms of where we are now, I think that the CHF 466 million of underlying operating expense is a solid base, in terms of thinking about progression of cost, and it doesn't include anything which is either largely negative or positive, in terms of how you should be thinking about cost today or cost going forward. You ask about performance fees, if I heard well in the question. There's a very limited figure for performance fees included in the revenues. I'm talking about small single-digit figure included in the revenue line for the first half of 2021.
I think we had one question, where I have seen in writing that basically he was asking in the beginning from the NNA what the difference was between the first quarter, second quarter, and regions, if you can make any comments where we had success or if it was the same picture.
In terms of the NNA development, I would say that we had positive developments overall. In terms of now the regional breakdown, as you can see on page 16, we didn't have major differences between, I would say Q1 and Q2. I would say that we had a good, obviously Switzerland, continental Europe, and the U.K. We are very pleased that we have three regions plus the EFG AM side that are all growing over CHF 1 billion. All these three regions plus EFG AM, they all been growing both in Q1 and Q2. In LATAM, I think that we had actually some positive developments in the second quarter, and I think that the pipeline is very positive. We already commented about Asia Pacific, about the deleveraging, and also here, the pipeline for the second half of the year is very encouraging and quite good.
I think that there were no major differences between Q1 and Q2. I believe that in Asia and Latin America, we will see a better acceleration in the second half from the visibility we have today.
That's very helpful. Sir, can you hear me again?
Yes.
Great. One last question I had was, you've guided the 90 basis points capital benefit from the Spanish transaction. In terms of the other transactions, what is the net capital impact from those other transactions, please?
The total should be, on a net basis, 20, 30 basis points. Some of it was coming through the sale of the Ticino business, and it has already been included in the results that you see to date.
Sorry. Let me rephrase then. In terms of then the actions, the exits that you still have to come, so I think there's another CHF 13 billion. Does that mean then that the outstanding net capital impact is 90 basis points? Maybe I misunderstood it, or is it different?
Yeah, look. I think for the purpose of the discussion, the real impact going forward is going to be Spain, and Spain is 90 basis points. Now, the remaining actions going forward are really marginal in terms of capital impact. I think, in your mind, if you use 90 basis points as the net impact going forward, that is a reasonable assumption.
Very helpful. Thank you.
The next question comes from the line of Andreas Venditti with Vontobel. Please go ahead.
Yes, thank you, and good morning. Actually, most of my questions have been answered. Just actually one more technical or detailed one. You mentioned it when you discussed your capital ratio, the difference between Swiss GAAP and IFRS used to be quite large. I think last time, if I have correctly in mind, almost 300 basis points at the end of the year. This has disappeared in the first half. I did not have time to look through the Pillar 3 report because there was another company reporting this morning, but maybe you can guide us through why this step change there in terms of difference of the capital. Thank you.
Sure, Andreas. You're right, we had about 250 basis points -300 basis points difference in previous reporting dates. I would say the three major differences or the three major items that led to closing the difference was, A, the IFRS profitability is higher than the Swiss GAAP profitability, simply because or largely because the accounting for the life insurance portfolio is different. Under IFRS, we fair value the portfolio. Under Swiss GAAP, it's a hold-to-maturity approach. The gains that we've recorded this time are not there under Swiss GAAP. The second point is that if you look at our annual half year report in the other comprehensive income, we had about CHF 95 million of positive benefit in the other comprehensive income from the pension liability. This is because the assets in the pension fund have increased substantially over the last six months.
Finally, also in the other comprehensive income, there's about CHF 45 million of currency translation differences, which went our way. This is due to the Swissie weakening compared to other currencies in the first six months. Simply from the other comprehensive income, you have about 150 million Swiss francs of GAAP being addressed, and the rest is through profitability and some other minor items. All these things taken together bridge the gap between IFRS and Swiss GAAP capital ratios.
Okay. Thank you very much.
The next question comes from the line of Michael Kunz with ZKB. Please go ahead.
Yes, hello. Can you hear me?
Yes, very well. Thank you.
Excellent. More strategic questions, not so much number crunching. The first is referring to Shaw and Partners in Australia. This business seems to be detrimental for the gross margin, and it doesn't help the AuM per CRO either. Could you maybe elaborate a little bit how much they are contributing bottom line or where the big benefit is? In connection to that, you are exiting Spain, a business with CHF 13 billion in assets. What was making this not worth keeping? Is the profitability insufficient or is it regulatory risks that are looming or why have you decided to get rid of that one?
Just quickly to address the point on the profitability of Shaw and Partners in the first half of the year, you're talking about single-digit net bottom line contribution. I think it should be CHF 5 million or around CHF 5 million, CHF 3 million, CHF 4 million, CHF 5 million net. To remind you that for the majority of the time, we were holding 60% of the company, so this is not 100% of the profits generated by the company. This is the contribution overall of Shaw and Partners to the bottom line. Now, just on the technical part of it, and I know your question is more about strategy. The consolidation of Shaw and Partners is done in a different way than our other businesses. Because of the type of the business, we need to net off commissions paid to the producers from the revenue. It's a net revenue.
It doesn't go into the cost side as we usually have it for all our other businesses. This is the reason why including Shaw and Partners has a substantial impact to our revenue margin. It is completely technical. The business is generating, on a gross basis, 60, 70 basis points of revenues. Clearly, when you take out the payment to the producers, you end up with 30, 35 basis points of net revenue contribution. A lot has to do with the accounting and not with the actual business fundamentals of the company. Clearly it's a very different type of business than offshore private banking, and the actual assets per CRO or financial advisor that we have in Australia are much higher in the normal, typical private banking that we do compared to the business that we have in Australia.
We try to exclude these figures because they make comparisons a lot more difficult. That's the reason why I exclude them when we publish some of the figures that we publish for our financial metrics.
In terms of the strategy, I think that Australia has been for us a very good acquisition. It has been a market that has been growing. In terms of growth, actually they are ahead in all metrics of the initial business plan that we had when we acquired them two years ago. I think that it is also a market that from an institutional standpoint, is extremely attractive. This is one of the institutional markets where our institutional asset management is targeting. In terms of the synergies that we can achieve, you are right, you are saying that this is domestic market, but a lot of the clients, they are also operating in international centers and they want to benefit from a more international and diversified services, including exposure to international portfolios.
We have a lot of clients from Shaw and Partners in our other centers, and also delivering the lending that we discussed about. Frankly, Shaw and Partners for us is not international private banking, but is one of our strategic areas in the onshore. Spain is different, and as you have seen, we have increased our stake to 75%. In Spain, the situation was different. It was a market where we had a minority stake, and it was a market that from a domestic standpoint, different dynamics. Finally, after many years of partnership, we have decided to part ways. Obviously, we are still very close to our former partners. We will try also on the institutional side to maintain a strict collaboration. In terms of private banking, the dynamics were different both in terms of cost, income, profitability, et cetera.
Okay. Thank you.
For any questions, please press star and one. There are no more ques-- sorry. We have a follow-up from Mr. Herman with Citigroup. Please go ahead.
Yes. Thank you. I just thought I'd take this opportunity since you're talking about Shaw and Partners, if you could just talk about. It's good to hear that it's been performing above the business plan. What has been the ROI on that investment thus far?
ROI? Yeah. I couldn't tell you, Nicholas. I don't have that information. We can take it offline if you wish.
Sure. Yeah. That's fine.
Let me, just to set the scene, when we acquire, we have a hurdle of the investment having at least a 10% return on investment after three years of operation. After you go through integration, and you get synergies if you get synergies. The target is a 10% return on investment in the third year of the acquisition. That was met when we made the assessment for the acquisition, and as Giorgio said, it's performing better than that. It is higher than 10%.
Great. Thank you.
That was the last question.
Okay. Thank you. Thank you very much for attending the-
I can do some closing remarks.
...presentation today, and obviously, I hand over to Giorgio for some final remarks. Thank you.
I just wanted to summarize this discussion. From our perspective, we had a strong set of results. A few points that I would like to emphasize is that we accelerated the growth, we had a step change in profitability, we are improving the quality of our business across the board, and we are on track to deliver our targets while improving our capital generation. Overall, we find that this is a very solid foundation for the next phase of our growth. Thank you.