Good morning, ladies and gentlemen. A very warm welcome to our first half 2024 results presentation in Zurich. A very nice, warm summer day for a change, no rain. So at least the weather has everything that we can hope for. I'm very pleased to have with us, as usual, our CEO, Giorgio Pradelli, our CFO and Deputy CEO, Dimitris Politis, who will present the results today, as usual. And then we follow up with the Q&A afterwards, so we have enough time for questions of people in the room and also on the phone lines. So, as usual, the disclaimer on the presentation I point out to be being read, and then I hand over to Giorgio for his presentation. Thank you.
Thank you, Jens, and good morning. Good morning, everyone, and a warm welcome to our presentation for the first half results for 2024. And welcome to the people that are here present in Zurich, as Jens said, in a nice summer day, and to everyone who is attending via the webcast. Now, before going into the presentation, I would like to say that actually we are obviously very, very pleased with our results of this first half. I must say it has not always been plain sailing. I must say that the environment is still quite complicated. I mean, there are many uncertainty factors and a lot of volatility. So I would say to remain in the sailing metaphor that, you know, it has not been plain sailing and the waters were quite choppy. Having said that, we have navigated pretty well.
In terms of the highlights, you can see that we were able to post a record profit at CHF 163 million. This is +10% compared to the previous year. Also we have posted an accelerated growth figure in terms of net new assets annualized at 7.3%, which is obviously much better than our target range in terms of our 2025 targets. Now, regarding the NNA, many people know that I'm very focused on this metric. We are obviously very pleased, and this is for us a testament that not only the bank is obviously very strong, but also a testament of the trust that our clients place in us and our client relationship officers.
Also, this figure shows that actually, you know, the strategic investments that we have done in 2023 are bearing fruit, and clearly the new client relationship officers that have joined us recently have had a significant contribution in this growth of 7.3%. Now, by the way, this is our 11th consecutive semester of asset inflows, and this shows also that clearly we are able to execute our strategy in a very, very consistent way. Now, in terms of profitability, I already mentioned the figure, CHF 163 million. I would like here to point out that, first of all, for us, it is extremely important that the growth translates into profitability. Our strategy has been predicated now for the last five, six years about sustainable and profitable growth, and we have been able to do that.
Clearly, this shows that our business model is well diversified and that our top line is quite resilient. The last point I'd like to make about profitability, and on this we are very pleased, and I'm sure that shareholders and investors as well are record profitability translated into a return on tangible equity of 19.2%. Obviously, we have one of the strongest CET1 ratios in recent history with 17.5%. With this, I pause here and I hand over to Dimitris, our CFO and Deputy CEO, who will give a comprehensive overview of our financial performance for the first half of 2024. Thank you, Dimitris.
Thank you.
The floor is yours.
Good morning, everyone. And, you know, it's always a pleasure to be able to start this presentation by announcing record results. We've done it now a few times. This is for the first half of 2024. We have managed to increase profits by 10% compared to the first half of 2023. And over and above the actual number, I think what is very important is to have a look at the chart, which is on the page. The chart is all about consistent delivery towards our targets. This does not happen by accident. This is diligent execution of a solid plan. It's happening year after year. And in this case, we've had resilient revenues. They have supported the profitability in the first half. Revenues were up 3% compared to last year. They were up 5% compared to the second half of 2023.
Clearly, there is a change in the revenue mix. I'll discuss that later. Also, costs at this point reflect the full investment that we've done in new resources, new hires, new talent that joined us in late 2023. Despite the investment, cost-to-income ratio held at 72.6%. This is better than last year at 73.3%. As Giorgio said, the return on tangible equity came in at 19.2%. This is beyond our target of 15%-18%, and we're very happy with that result. I think, though, it is the opportunity to step back. We are midway through the cycle. We are doing well compared to our plan. 2024 for us is a stepping stone year. What do I mean by a stepping stone year? In 2023, we made a very large investment. That large investment translated into higher costs in 2024.
Now we are fully bearing the cost of that investment. But that investment has not yielded yet its full potential. Actually, in the first half of 2024, that investment is creating a drag on our profitability. And this is what we expected. New CROs take 12 months to 18 months to break even. We are not at that point yet because most of the hires were in the second half of last year. So at this point, we are bearing all the costs. And what we are also doing is we are building the scale to make sure that investment pays off. We have good indications of delivery in that respect. We've seen it already in the first half of 2024. We even had indications in the second half of 2023.
We're looking forward to building our scale to make sure that we can realize the full potential of our additional investment in 2023. Now, on page 11, we have the highlights. 7.3% NNA growth, 97 basis points of revenue margin, holding very close to previous semesters. We've added 42 CROs. Actually, we are going towards a normalized hiring rate compared to what we did last year. Very importantly, revenue-generating assets are now at CHF 159 billion. Profitability was marked by growth in revenues of 3%, cost to income ratio better than last year, and CHF 163 million of IFRS bottom line. On the right-hand side, not to be ignored, capital and liquidity are at the best levels ever. Cost to income ratio is 17.5%. Sorry, CET1 ratio is at 17.5%, and LCR is now at 250%. Going straight to page 11, which is all about consistent delivery.
We are midway through the cycle. As I said, we are ahead of the game. If you look at all the metrics in net new asset growth, we rebounded in 2023, and now we are over and exceeding the 4%-6% range per annum that we had as a target. The revenue margin is holding at 97. The cost to income ratio is fairly balanced given the amount of investment that we did in 2023, and return on tangible equity has been increasing throughout the last three semesters. That is now at 19.2%. A bit of color on net new assets and the growth. This is on page 11. CHF 5.2 billion net new assets. This translates to an annualized growth of 7.3%. You'll see on the right-hand side how the contribution came in. The majority of the net new assets came from new hires.
A large portion of that CHF 4.5 billion that you see from new CROs is coming from the hires that we did in 2023. So these are the CROs who are driving the growth in the first half and also are giving us confidence that these hires will continue to deliver remaining of 2024, 2025, some of them even in 2026. Very importantly, AUM, the nominal AUM, have grown by 12%. You'll see that all the levers, so NNA, market, currencies, have been positive in this semester. We've gained CHF 12 billion from market and currencies. People can say that this has been clearly a positive element for us. Let's not forget that in 2022 and 2023 combined, we lost CHF 26 billion from those two elements. So we are in a recovery mode. What is also very important is that the pipeline for the second half remains very strong.
Going to page 12 on the regional performance, we had strong performance across regions. This is the benefit of running a diversified business model because this clearly supports performance. All regions were positive. Switzerland and Italy had growth supported by new locations, Gstaad and St. Moritz. It's a great result for that region. Last year, that region experienced outflows because of deleveraging and de-risking. So we are very glad that it is now back in positive track. Asia-Pacific is the strongest region in terms of absolute number of NNA. It is the second year that Asia-Pacific is leading the pack in terms of absolute results. And also, we have Latin America, which is posting the highest growth rate. And actually, it is the second year in a row that Latin America is posting the highest growth rate in terms of our overall regions.
On page 13, we have the indications and the information about new hires. I will focus mostly in the middle part of the page. You clearly see that in 2023, we took the opportunity to do some strategic hiring. It was triggered by a market dislocation. Clearly, we hired significantly more than the 50-70 new CROs gross hires that we have been communicating to the market. In this semester, we're returning more to normality. The numbers are closer to the 50%-70%. Overall, we have increased the number of CROs to 707. We clearly aspire that our new hires are going to be key drivers for our growth going forward. On the right-hand side, we have the usual information about what we call the CRO load or AUM per CRO. You'll see that it has been going up.
For us, this is a very important metric for many reasons. One is quality of CROs, but also because a higher AUM per CRO means that we are a lot more efficient internally in terms of being able to deliver the services and make sure that we maximize profit. Moving to page 14, where we go into the P&L items, these are revenues. As you'll see that in the first half of 2024, revenues were resilient. We are +3% compared to last year, +5% compared to the last semester of 2024. And the performance here goes very much in line with the approach that we communicated to you already back in February. And that approach is that for the remaining of the cycle, we expect that our approach is going to be build scale. So take the benefits of growing AUM and defend margin.
This is what we have been doing in the first half of 2024. You'll see that our average AUM has gone up from CHF 145 billion to CHF 153 billion, while the revenue margin has been maintained at 97 basis points. Clearly, we had a decrease in net interest income that reflected the conversion of deposits to interest-earning products and also some price competition coming from the larger banks. That conversion into interest-bearing deposits has now stopped. So we've been flat over the first six months of 2024. I'll come back with some more information on NII on the following page. And in reality, what we've seen in terms of NII is that the actual figure has been flat throughout the first six months of 2024. Commission margin increased by two basis points. This is actually very important because commissions are the core part of our business.
Commission revenues have gone up 11%, supported by AUM growth. We've also seen an increase in foreign exchange transactions from our clients, which have supported net other income. On page 15, we have some additional information on the interest-related components of our revenues. So here on the left-hand side, we have broken down our margin between commission income, net interest income, the income from swaps, which is recorded in net other income, but in reality, is fully related to interest rates and net other income. You'll see that the interest-related income part went down from 41 basis points to 33 basis points. This is an eight-basis-point drop. 2/3 of that drop relates to conversion of deposits. This is something that we were clearly expecting.
If you look at the chart on the right of the evolution of our sight deposits, you'll see that clearly the trend has been for those to reduce. They're now down at CHF 11 billion in sight deposits, starting from CHF 24 billion-CHF 25 billion at the end of 2021. The encouraging bit, as I said earlier, is that conversion is now over. Sight deposits are flat at CHF 11 billion pretty much throughout the first half. So that downward pressure has now subsided. The remaining one-third of the drop is from pricing pressure. And for us, in terms of going forward, there are a few parameters that we are watching and acting on. The first one is the conversion, but I think that we've already discussed. Organic growth is going to be a positive for us overall. Interest rate cuts are expected to be a drag.
We've given some information on the page on the top right on the sensitivity of interest rate cuts. So 100 basis points on all currencies will cost us CHF 62 million in revenues. But there are several positives. The first one is releveraging. We are pretty much at the lowest level of lending penetration that we've had in the last 10 years. This is the result of high interest rates. This is the result of an inverted interest rate curve in many currencies, which is actually not making it reasonable for clients to borrow to enhance their returns. Now, as all these things start to normalize, we do expect our clients to start releveraging. And that will clearly have an impact on net interest income. The second element is the redeployment of our investment portfolio.
The investment portfolio is there to mitigate large movements in net interest income, which means that we continuously invest over time to maintain some stability in the interest income line. We have invested at times when interest rates were low. So we have locked in at this point some low yields. As soon as these actually get released, and this is going to be happening mostly in 2025 and early 2026, we will get an uplift in our revenues. And I can tell you that uplift is quite significant if you were now to translate it into a possible revenue uplift at the current rates. The last part that we are working on is optimizing our deposit pricing. There were some pricing pressures at the end of last year.
They have reduced in the first half of this year, but there's still in some locations we see large banks pricing deposits at very high rates. We believe that as interest rates also start dropping, we will see also some easing on that deposit pricing. Page 16 on commissions. Commissions are our bread and butter. We are very pleased to say that commission margin has gone up to 43 basis points. Clearly, in the past, we've seen even higher numbers at 45, or if I go even further back at 47 basis points in 2014, 2015. So this is helping revenues. Commissions were 11% up year-on-year, supported by AUM growth. The mandate penetration has reached a new high, 58%. This is the bottom chart. The target is 65%-70% by 2025. And also very importantly, we have increased the share of higher value products.
Advisory penetration is now at a record high. The discretionary mandates are re-accelerating on the back of improved performance. Structured products are now 40% up in revenues compared to last year. And we've launched an additional vintage of our Private Market Series product in the first half of 2024. To conclude, also the portfolio performance trends are now a lot more positive, which are helping investors and clients put more money into advisory and discretionary mandates. A few words on operating expenses. This is on page 17. Clearly, we have been in an investment phase that has led to our costs going slightly up. Personnel expenses are 3% up. G&A expenses are also 3% up. And we have a one-off CHF 5 million additional cost coming from tangible assets reclassified from held for sale, from prior period charges.
So it was a catch-up of CHF 5 million that we had to take in this semester. That brings overall cost growth to 4%. Despite that, cost-to-income ratio improved. We are now at 72.6%. And as I said earlier, all the strategic investments are now fully reflected in the cost line. This is both strategic hiring and investments in new locations and new technology. And we clearly have an operating platform and resources which are in place to support a much higher business volume than the business volume that we're serving on today. We have been investing, but we have not forgotten cost management. We are very active on it. We are very glad to have a very strong track record in managing costs. The way we think about it is we need to make room to grow.
So every dollar that we can take out from our run-of-the-bank costs can actually be redeployed to investment to grow the bank. This is the only way we have found that we can consistently create operating leverage. And what you see in the chart is what happened in the first half of 2024. Clearly, we added CHF 27 million of running expenses because of hiring, so personnel expenses and also some investment in G&A. We clearly had some inflation, which increased our costs. We had the one-off depreciation on the tangible asset, the CHF 5 million that I described earlier. But still, cost management actions took out CHF 18 million, which is 3% of the cost base in the first half of 2024.
These are actions that we're taking already maybe back in the first half of 2023 or in the second half of 2023, but they printed CHF 18 million in reduction in the P&L in 2024. We continue. We have our Simplicity program running. It's on track to deliver the CHF 60 million of savings that we've set ourselves for the end of 2025. We are now at a level of execution of CHF 44 million out of the CHF 60 million. At the end of 2023, we are at CHF 33 million. So we've added CHF 11 million in the first half of 2024. And clearly, we are confident that we will achieve the CHF 60 million by the end of 2025. Page 19, turning to the balance sheet. Not too many changes on the balance sheet. It's a very strong balance sheet.
If you look at the picture on the left, you'll see that we have about CHF 21 billion of liquid assets. Roughly half of the balance sheet is now placed with liquid assets. In terms of the capital metrics and the liquidity metrics, CET1 ratio grew by 15 basis points. It's now at 17.5% at the half year. The liquidity coverage ratio is now at 250%. Both of them are record levels over the last 10 years for sure. We also bought back some treasury shares. We bought 5.1 million treasury shares in the first half of 2024. The board has also approved a continuation of the buybacks.
So the board has approved 6 million shares to be bought back in the next 12 months with an option to go for an additional 3 million shares if those 6 million shares get exhausted before the 12 months get reached. Page 20 on the evolution of CET1 ratio . We are a capital-light business. It's not the first time you hear that. Strong profitability is the biggest driver. We have a gross capital generation of 270 basis points in the first half of the year alone. Where does the money go? The money goes into primarily dividends. We have a progressive dividend model. And we've also, as I said earlier, bought back 5 million shares. Combination of the dividend, which is roughly a 5% yield, and the share buyback is enhancing the return to shareholders.
If you were to take the two together, we would be talking about roughly an 8% return to investors between dividend and the share buyback at these levels that we reported in the first half. To close, what are the key takeaways from the first half results? Look, we are midway through the cycle. We've been consistent. We've been successful. We're ahead of the game. So we are very confident about delivering our 2025 promise. We are confident in being able to even exceed that promise. It doesn't come with a lot of work in terms of making sure that we actually do it. We are very vigilant for the 2024. The priorities are clearly in the business development area. In terms of improving recurring revenues, it comes with clearly effort on the commission margin.
Defending the revenue margin, it's not on the list, but clearly defending the revenue margin is a priority. And last but not least, cost management. We've done it for the last seven years. We will continue being active on it to make sure that we can hit all the financial targets that we've set ourselves for in 2025. On that, thank you very much. And I'll pass the floor to Giorgio.
So thank you, Dimitris. And now let us focus on the outlook and the key priorities for 2024 and beyond. Now on page 23, we want to make the clear message that we are very well placed to navigate this complex environment. And let me elaborate a bit on the environment because we continue to say that the environment is complex and then all the banks come out with record profits. So obviously, some commentators are saying there is a contradiction, but I don't think this is the case. Obviously, if I look at the environment, I would say that we still have a lot of uncertainties. If I look at what has happened in the last 12, 18 months, I don't think that we have solved a lot of the macroeconomic issues that we have inherited from 2022 and beyond.
We know that half of the world population has gone or will go to vote. So there is a lot of volatility from that perspective. Geopolitical tensions continue to remain quite high. Now we might have been used to them, but they remain quite high. Now, having said that, somehow the markets have found an equilibrium. We feel that this equilibrium is quite unstable. But for the time being, this situation is quite supportive for us. Markets are doing great. Sentiment is good. Clients are trading. Dimitris has pointed out to our operating income. Markets are almost at all-time high. Clearly, the AUM are supporting our commission income. Given the uncertainty, many of the clients come to us for advice. So, as you have seen, advisory penetration is going in the right direction. Now, obviously, in this environment, things can change very quickly.
It's sometimes very difficult to predict. So the only thing we can do is basically to be very vigilant, to be very agile, and react very quickly. But, and I now come to the priorities. We need to focus on the factors that we can control. Basically, we can control three things, or we want to control three things. First of all, growth momentum must be maintained. We want to build scale. We are doing very well, as you have seen. I think that this we need to continue doing in the next six months and beyond. Having said that, I think the key priority for us remains always to deliver the best possible service and the best possible investment solutions to our clients. Therefore, we want to increase the penetration of our value products for our clients. This, in turn, will increase our recurrent revenue.
Now, as it was mentioned earlier, cost management is always key. This is key not per se, but it's key because we want to increase the efficiency in order to invest more. Because we believe that generating operating leverage in an environment which can be quite uncertain is key to protect the franchise going forward. This is a bit what we want to focus on in the next six months. These are all levers that we can control to a certain extent. We are very much focused on that. I must say our execution has been very consistent over the last years. Now, looking ahead regarding the outlook, I must say that we have a very positive outlook about the future. We believe that we have a very strong and resilient business.
We have a resilient top line also in an environment of easing interest rates. And we are very confident about the investments that we have done last year. As Dimitri has said, all the costs are already in the P&L, but we will see over time in the next 12-18 months basically these investments yielding the full potential. And clearly, this will be delivered in a sustained growth and increased profitability. Now, looking, and I'm going now to page 24, we are midyear through the cycle. We are bank 18 months after the beginning of the new 2025 strategic cycle. You might recognize this page. This is a page that we have presented on the 12th of October 2022 during the Investors' Day.
We basically said that our new cycle, the new 2025 cycle, was predicated on growing the bottom line, the net profit by 15% year in, year out. Now, looking back to the last 18 months, as you can see the trajectory here, we have done obviously last year extremely well. We grew actually by almost 50%. This year, we grew 10%. And if you look at over the period, we are running at almost 30%, which is basically double of what we set ourselves as a target. Now, I'm not suggesting that we will continue to grow at 30%. Obviously, we will do every effort possible to do that. But we are very, very confident that we can continue to generate double-digit bottom line growth for the next 18 months and the rest of the cycle. And also, I pointed out at the beginning, Dimitris has elaborated on that.
For us, the returns to investors are very important. To shareholders are very important. Return on tangible equity, as you can see here, the trajectory has been extremely positive. We are ahead of our 2025 targets already with 19.2%. Clearly, our focus is to maintain this momentum. Now, to sum up, we are on track. We are confident for the second half of 2025 and for the rest of the second half of the 2025 cycle. Now, I'd like to close looking at these three buckets. It's basically the past, the present, and the future. If I look back about the past, it's obvious that the last six months, but also the last few years, we have delivered a very resilient financial performance. We have accelerated our growth, and we have achieved in this semester, but also earlier, record profitability.
The focus today and for the foreseeable future is obviously to make sure that our investments will deliver the full potential and that we will continue to focus on sustainable and profitable growth, managing the levers that we can control. We cannot predict the external environment, but we can focus on our business. Looking at the future, we are very confident, and actually our confidence is increasing that we can meet and exceed our 2025 ambition. With this, and before closing, I'd like to thank the EFG colleagues for their delivery, which has been strong this semester, but over the years, and obviously our clients and shareholders for their trust and support. With this, thank you very much. And Jens, back to you.
Thank you, Giorgio. Thank you, Dimitris, for your insightful presentations as always. We would move obviously now to the Q&A session of the webcast. I would, as normal, start with people in the room if there's any questions, and then we move to the telephone line. So do I have a question? Michael, please.
Yes, good morning. Thank you. I had two questions to start with, please. Firstly, you mentioned Lombard loans that's starting to come back again. I think the delta was CHF 1 billion. Should we expect for the second half and beyond the similar sort of momentum as we have seen in the first half? Or how should we think about Lombard loans? And also, what was the motivation of clients to take out Lombard loans that we have seen in the first half of the year? And then the second question, you mentioned the hiring of CROs should be normalizing. You also mentioned that the bulk of net new assets was coming from new CROs hired since 2022. Should we expect therefore net new assets to continue for the foreseeable future to still be above the target range of 4%-6%?
Or should we expect this to come down in line with the normalizing of the hiring? Thank you. And also maybe some guidelines in terms of what the normal time lag would be here. Thank you.
No, thank you. Very good questions. Regarding lending in general and Lombard lending in particular, I would say that, as I think Dimitris mentioned earlier, the situation is normalizing, stabilizing. We have seen that the cycle, the interest rate cycle, is in an easing, let's say, path. Not everywhere. We have not seen, obviously, the U.S., the Fed cutting, but the expectations are there. And as you know, 45% of our business is in U.S. dollar. But what we can see is that, first of all, the deleveraging has stopped. And this is already a good sign because we have been suffering for the last 24, 30 months about deleveraging. So we believe that, and as Dimitris said earlier, we are at the lowest level in terms of lending penetration. We believe that lending is an asset class, and this is something that a lot of our clients like.
Now, clearly, a lot will also depend about the shape of the curve. We believe that at some point, the curve will start becoming positively steepening again, which would be good, I think, for our business and our clients' business. So in a nutshell, we expect that deleveraging should stop and releveraging should restart. Now, how fast and what kind of size it's when you are at an inflection point is very difficult to predict, but we are confident that this should be supportive to our business. I don't know.
Can I make a bit more of a technical comment? Because you mentioned CHF 1 billion increase in Lombard loans. That increase is primarily due to currency translation. So we have not seen the releveraging happening yet. I would say that 90% of that figure is probably currency related, and only 10% is real net growth. So going back to what Giorgio was saying is we've seen a stop in deleveraging, but we've not seen the reversal of the trend where people are actually levering up again to take advantage of a carry trade or to invest in different. So we are still waiting for that to happen.
Now, regarding the CROs, yes, we expect the environment to normalize. To be very fair, repeated every single time, we don't have a target. The 50-70 is a guideline, is an ambition, but it's not a target. We don't give budgets to our regional CROs in terms of hiring because for us, quality of the teams that we can attract is more important than quantity. And we don't want anybody to feel pressured to hire at any cost. But obviously, last year was a year of dislocation, and we managed to do very well. This year is getting more stable. Again, 50-70 gross for us is a good, I would say, ballpark figure.
Clearly, what I must say, I mentioned it also this morning earlier publicly, I must say that I'm very, very pleased with the quality of the teams that at the moment we are talking to and that they have decided to join us. I think this is very encouraging. I think that obviously this is a function of the fact that we have done pretty well over the last few years. Also basically our branding is being improving. Regarding the NNA targets, we are very pleased, obviously, to be at 7.3%. We could not write percent. We could not write record because if you go before the great financial crisis, there was a semester that was higher than that. But if you look at the last 15 years, this is again a record.
Now, again, we try always to be ahead of the game, but we are also, we try also to be, how should I say, realistic. So as long as we are within the target, possibly at the top end of the target, 4%-6%, we are pleased. If we can do more, obviously, we'll go for it. So we see some regions doing extremely well, other regions that should accelerate. But all in all, if we can be within the range, possibly a bit top end, it's fine for us. Also there, and this is maybe the last point I'd like to make on NNA, I'm very pleased about the quality of the NNA that we have seen. It's been very diversified across regions. All regions were positive. And across segments in terms of clients, not a concentration. So this is very, I would say, encouraging for the future.
Great. Thank you. I don't see an immediate question. Then we move to the first question on the phone line, please.
The first question on the telephone comes from the line of Nicholas Herman with Citi. Please go ahead.
Yes, good morning. Hopefully, you can hear me okay. So, thanks for the presentation for taking my questions. I'm a little bit cheeky and ask before, if that's okay. Let's start on, do we do this one by one or should I do all four at once? What's easier?
I'm sorry, Nick. The sound quality is not very good, so we cannot really hear the question.
Can you hear me now? Is that better?
A bit better, yeah.
Slightly, yeah.
Okay, let me try. If it doesn't work, then I can try and.
It looks better. It looks better.
Okay. Cool. So I had four questions, please. The first question, first couple of questions are on M&A and capital. So I guess pro forma for the 6 million buyback, it looks like you have CHF 400 million-CHF 450 million of capital surplus. It seems like there are a couple more assets on the market. But how optimistic are you of being able to use your surplus capital? And I guess just more broadly, do you expect industry consolidation to pick up from here after obviously a bit of a lull over the past couple of years? And I'd be interested to know if you could talk about what kind of revenue dissynergies do you typically see and assume when you think about larger deals, if any, revenue dissynergies? The third question is on net interest margin. So you called out that there are still some deposit pricing pressures.
Can you quantify those, please? And therefore, do you see the 24 basis points NIM in the first half as a good run rate, or is it lower from here? And then finally, you said that you are increasingly confident of hitting your targets. Consensus does not give you credit for that, even though it assumes a 92 basis point gross margin next year. But just curious how you explain that or reconcile that. And I guess would you agree with my assessment then that this suggests that consensus costs are too high? Thanks.
Should I take the first? Thank you. Thank you, Nick. Let me take the first set of questions about consolidations, M&A, excess capital, etc., and synergies. Well, first of all, I would mention that for us, as you know, the focus is organic growth. But as we said in October 2022, we like M&A. The possibility to grow and achieve scale via inorganic transactions is something that we always look at. Clearly, the last transaction that we have done, as you know very well, is in 2019. So the last five, six years, we have not had a lot of opportunities. I would say that the M&A landscape has been quite, I would say, dry, obviously with the big exception of a forced transaction last year here in Switzerland. Now, conventional wisdom says that our sector should consolidate.
I would say that at least as far as international private banking, I would say that the wealth management ecosystem is very healthy, is doing pretty well. Now, consolidation at some point should come. There are some green shoots that you see a bit more movement, but for us at the moment, nothing on the horizon. As you said, we have excess capital. I think we have the know-how. We have demonstrated that in the past. Obviously, we are talking with a lot of actors in terms of investment banks and others to see if we can identify targets. But as I said, nothing on the horizon for the moment. Now, the three criteria that we mentioned in October 2022 in our Investor Day remain valid.
The three criteria are, number one, that we want to make acquisitions in the locations where we are already present because we want to increase the scale of the specific business, of the specific location, and achieve synergies. The second criterion is that we need to have a business which is compatible from a cultural standpoint with ours. And the third, obviously, the deal has to be accretive and our target is 10% of return on investment over three years. So as long as we can satisfy these three criteria, clearly we are open. You mentioned the question, what are the synergies in larger deals? Again, I think every deal is very specific. It's difficult to make generic assumptions.
I can tell you that when we did the BSI transaction at the time in 2016, 2017, which for us was quite a larger transaction because at the time both entities were more or less of the same size. We went in targeting 30%-35% of the target cost base at the end of the day. But I would say that the developments of that integration were a bit specific. At the end, we achieved much more than that, but this was the starting point. Now, I cannot really talk about other potential transactions, but this is, I would say, the ballpark. Maybe I'll take the point on net interest income where you mentioned, if I heard you correctly, it's a question about the pressure on deposits and deposit pricing.
We saw that pressure towards the end of last year, so November, December. It went a bit through into Q1. What I can say that overall are the revenues from all the interest-related components, so both NII and swap income have been practically flat throughout the first six months. There are pluses and minuses. We're not seeing that pressure continuing at the same force. Overall, the revenue lines combined are giving us confidence that we're not facing more pressure and hopefully by optimizing. It's in the previous cycle, also in this cycle, we never changed our financial targets. We kept them there. In some areas, things work for you. In other areas, things work against you. We've clearly made a very big investment that we wanted to make sure that we want to make sure that yields on what we've done.
I think you focused your question mostly on the cost-to-income ratio. For me, what is very positive is that despite the investment, the cost-to-income ratio actually improved in the first half of 2024. It's not business as usual. It's improving while investing. This does not happen easily. So I am positive that that trend that we've seen in the cost-to-income ratio, remind you that five years ago we were talking about cost-to-income ratios were close to 90%, and now we are at 72.6. So that trend to 69%, which is a target, will continue. And we're looking forward to achieving all our financial targets by the end of 2025.
That's really helpful. If I could have a follow-up to that, please. So on the NII point, is it fair to say that the decline in overall NII margin is also a function of a strong growth in the denominator as much given that we've seen stable absolute NII contribution through the first half? So I think that's your point about then hopefully should start to rebound in the second half onwards. And then I guess it's just you called in your outlook.
Sorry, Nick. I cannot hear the question.
Sorry. Can you hear me now?
A bit better.
Yeah. Sorry, this is very frustrating. I was saying that it sounds, coming back to your point about NII, like the fall in NII interest margin is as much a function of a strong growth in the denominator as it is about kind of more, given that the absolute denominator was pretty stable. And therefore, coming back to your point about growth in the second half. And then, as part of that, you called out in your outlook that falling rates will provide a headwind for NIM. But you also called out a number of factors that should be supported. I appreciate that there are a lot of moving parts here, but can I ask you just if you could be a little bit more specific about how you see all of these factors netting out over time?
Yeah. Look, I think the timing of how these things will evolve is very difficult to figure out. I think that our visibility is a lot better when we're talking about 2025. In the second half of 2024, you can have some of these things happening. I'll give you an example. We don't know exactly when interest rates will be cut, which can be a driver, clearly, in the performance of the interest-related income. The way we think about it is a bit broader because clearly we have many things that will be supportive of NII, but our overall view is how do we defend the overall revenue margin? It's not just about NII. There are clearly actions in NII, actions in commission income. But in the end of the day, the question is how do you make your revenue margin as sustainable as possible?
Now, we are now at a revenue margin of 97 basis points. That is clearly one of the higher levels that we've seen. We have a through-the-cycle average of 85 basis points. This is what we've witnessed in the last 10 years. But the through-the-cycle average of 85 basis points came at a time where interest rates were primarily low, not the expectation that we have for the next couple of years. So we think that where everything is going to land is probably somewhere in the middle of those two numbers or around that range, with some of the elements giving up and some of the other elements actually improving as we also increase a share of our higher-value services and higher-value products.
Now, I think the other difference that we have compared to the last 10 years is that the level of products and the level of services that we have are better. So we are better equipped to serve our clients, and that should command also some additional premium or some additional revenue, which will support the revenue line.
Maybe, Nick, to complement just from an overall strategic standpoint, I think that, as Dimitri said, the strategy on NII is clearly defense. In an easing interest rate cycle, we need to defend, and we have some positive elements because the changing mix of the deposits has stopped. This is extremely positive, and this is why we are quite confident. But it is a defense. Where we are playing offense is on the net commission income, which is related to all the services and products we can offer to our clients. And as we mentioned, our offering is much better. We have been investing a lot. Last year, we have not only hired CROs, we also hired investment counselors, product specialists, and the like. And I think that our suite is much better, much more comprehensive.
If you can see on page 14, you see that actually the net commission margin is improving. We are going back to the pre-2022 levels, and our target is obviously to continue there. Now, how fast these two forces will move, this is an art more than a science. But you can be sure that we are going to do everything possible to defend NII and to increase the net commission income. Now, net-net, clearly we are talking about a situation where our margin at the moment is very, very good. Hopefully, it's clear.
That's really helpful. Thank you. Thank you very much for the color. Sorry for the audiences.
And Nick, and to close the equation, let's not forget in volume. Obviously, we are defending NII, playing offense in the net commission, and playing very strong offense on the volume on the NNA because obviously the volume plays a big factor here.
Very clear. Thank you very much.
Thank you, Nicholas. Then we move to the next, please.
As a reminder for your questions, please press star and one on your telephone. The next question on the telephone comes from the line of Mate Nemes with UBS. Please go ahead.
Yes, good morning, and thank you for the presentation. Two questions, please. The first one is on capital. I think you mentioned, Giorgio, that you have nothing on the horizon in terms of near-term M&A opportunities, and your CET1 ratio is at 17.5% with continued high profitability. That presumably means you're generating additional capital. I'm just wondering if you could talk a little bit about how you think about excess capital and capital management in this context. What can you see, what opportunities you have if you can't realistically deploy excess capital into acquisitions or in organic growth in the next six to 12 months? What is the level of CET1 until which you're willing to expand or increase the CET1? Any thoughts on capital management would be appreciated. The second one is a follow-up on NII, and I apologize, appreciate the long answers.
I just wanted to clarify, Dimitris, did you say potentially you're expecting a rebound in NII in the second half of this year? And if that's the case, should that rebound potentially come from a return of volume growth, potentially repricing downwards off the liability side, or what would that be driven by? And anything you can share on that kind of near-term outlook would be helpful. Thank you.
Thanks, Mate. Let me take the second question first. So what I said is that all the interest-related components are flat in the first six months of 2024. We have on page. I'm sorry, I think it's page 14 of the presentation. On page 15 of the presentation, we have the factors that could go positive or negative. Now, again, as Giorgio was saying, the timing of how these things will impact is not something that we can easily predict, especially if you're looking at the next six months. Where we feel more confident is looking out 12, 18 months where most of these elements would have played out. We are confident that we can defend quite a bit of the pressures coming from lower interest rates.
So I would say that the only guidance I can give you is based on the fact that I've seen now, which is that NII and swap income in the first six months is practically flat every single month. And for the second half, we will be working on deposit pricing and on organic growth to help support the NII revenue line. Now, on the question on capital and M&A, as you say, look, we have a capital-light model. We generated 50 basis points of capital in the first six months of this year. We have been consistently generating capital throughout the last two to two and a half years. The capital management policy that we have is actually we actually put it out publicly in October 2022, where we said that we have a management floor for a capital ratio of CET1 , 12%.
If we are at CET1 , which exceeds 15%, subject to market conditions, M&A possibilities, or prospects on other factors, we would consider returning part of that capital back to shareholders. Now, the first element in the utilization of the excess capital is, are there M&A targets? Because as management, we believe that we can create a lot of value by doing reasonable M&A within the three parameters that Giorgio described earlier. There has not been much. It has been a bit of a dry period in the last few years. We've seen a couple of transactions actually coming up in the last 12 months. So I'm more hopeful that there's going to be more transactions coming to the market. I would say that in the last I've been following M&A for now 25 years.
The last five have been the driest season I've seen in the last 25 years. So it is not that I would expect this to continue. There are very good reasons for consolidation in the Swiss banking sector. You have a tail of smaller banks that actually should be willing to engage in discussions like this, but we haven't seen. So I think on the first part, I think that the M&A was not something that we could do in the last five years, but I'm hopeful that the M&A targets will pick up. Now, on the fallback, if that doesn't happen, clearly the only tool we have is an extraordinary dividend. We are doing limited buybacks. They are very targeted to support and to cater for equity incentive plans for employees. As you know, our free float is not very large.
Going further than that would not be very constructive for EFG. I think at some point, if we see that there is no other alternative, we do have the option of doing extraordinary dividends to our shareholders.
Thank you, Dimitris.
I think do we have another question on the phone lines? I don't think at the moment do we have another question in the room, maybe for Laurent? Everybody happy? Then I hand over to Giorgio for his final comments.
Well, thank you, Jens, and thank you, everyone, for the questions. Just to close, I would like to say that clearly we are pleased with this performance in the first six months. We have delivered record profitability and accelerated growth. In the next six months and beyond, we will continue to focus on executing our strategy and our strategic plan and focus on what we can control. I think we are mastering that pretty well. And so we are quite confident that we will be able to meet or exceed our 2025 ambition. With this, thank you very much. Thank you for your attention.