Ladies and gentlemen, thank you for standing by. Welcome to Leumi's fourth quarter and full year 2022 results conference call. All participants are present in a listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. For participants dialing in, please press star zero for operator assistance. As a reminder, this conference is being recorded March 14th, 2023. I would like to remind everyone that forward-looking statements for the respected company's business, financial condition, and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated.
Such forward-looking statements include, but are not limited to product demand pricing, market acceptance, changing economic conditions, risks in product and technology development, and the effect of the company's accounting policies, as well as certain other risk factors, which are detailed from time to time in the company filings with the various securities authorities. I would now like to turn the call over to Mr. Michael Klahr, Head of Investor Relations. Mr. Klahr, please go ahead.
Thank you, operator. Ladies and gentlemen, we thank you for taking the time to join us for Bank Leumi's fourth quarter and full year 2022 results conference call. Joining me today is Mr. Hanan Friedman, President and CEO, Mr. Omer Ziv, Deputy CEO and Head of the Capital Markets Division, and Ms. Hagit Argov, Head of the Finance Division. We are also joined by our colleague, Dr. Gil Bufman, Chief Economist. A presentation will be presented during the call for those joining by link and is also available on the IR section of the bank's website for those dialing in. I would like now to turn the call over to Hanan.
Thank you, Michael. Good afternoon. Earlier today, we published our 2022 results. For the second year, Bank Leumi reported record revenues, net profit, and ROE. Our net profit of ILS 7.7 billion is 28% higher than 2021 and reflects return of equity of 17%. Earnings per share of ILS 5.14 were up 25% year on year, even considering the successful equity capital raise that we completed in June, and is more than double since 2019. Our strong results and strong capital position allow us to announce an increase in our dividend payout in the fourth quarter to 30%, equal to an annual yield of more than 6%. These results are the outcome of the dedicated segment growth strategy that we launched three years ago.
This, combined with fast adoption of advanced technologies and AI and a strong capital base, is allowing Leumi to grow responsibly, focusing on targeted segments at a faster pace than the market, and to report these outstanding results. Such results are impressive given that they were achieved against the uncertain macroeconomic backdrop with high inflation, rising interest rates, and volatile capital markets, both in Israel and abroad. While we continue to experience challenging market conditions, we are confident that the important steps we have taken in the last few years will continue to serve us well in 2023 and beyond. I would like to take this opportunity to highlight a number of key areas of focus for the bank that have contributed to our strong results. Our growth strategy is focused on the mortgage, middle market, and corporate segments.
Here, a significant part is real estate, where loans are secured with good collateral and where we are comfortable with our credit exposure. We are recruiting new customers, taking market share, and winning missed mind share in each segment. In middle market and corporate, including real estate, we increased our loan portfolio by almost ILS 34 billion with existing customers and new customers. In mortgages, for example, where we set up a special purpose division in 2022 to support the group's rapid growth and to support the implementation of our strategy, we increased our share of new mortgages to more than 26% in December 2022 from less than 20 in mid-2020. The decision to merge our US subsidiary, Bank Leumi USA, with Valley National Bank, which closed at the beginning of April, is also bearing fruit.
Valley, where Leumi holds 14.2%, increased net loans by more than 15% in 2022, and is targeting high single-digit growth in 2023. We are also participating with Valley in deals in the U.S. This is a win-win partnership providing us additional growth with lower regulatory risk. On the funding side, we are focused on and succeeding in growing our deposit base from retail, institutional, and corporate clients. Deposits are becoming an increasingly important source of profitability for the bank in a higher rate environment. Excluding Leumi USA , we increased our depository portfolio by more than ILS 30 billion in 2022, representing an 8% increase from the previous year. More than half of this growth comes from consumers and small businesses.
Deposit growth is good for profitability but also strengthen the liquidity, enabling us to grow. We differentiate ourselves from the competition via many initiatives. We offer a unique value proposition to all customers 24/7 through multiple channels. We are the first bank to bring our bank and brand into the customer's home or work, launching a new service where customers can meet bankers remotely on Zoom and complete any type of transaction, including all paperwork and signatures. Customers are able to engage with bankers on chat, where they get a response within up to one business day. The customers successfully adopted this service, and we benefited from better customer satisfaction. We continue to leverage and expand the value proposition of our digital-only bank, Pepper, which continued to grow and recruit a significant amount of new customers year by year. Digital penetration level at Leumi continued to increase.
In 2022, more than 80% of our customers performed transactions on digital channels, up from 72% in 2021. Our mortgage by Zoom provides customers with a faster and more flexible mortgage service, enabling them to complete the process end to end within a matter of hours. The offering is supplemented by the increased use of AI and models. The advanced underwriting and pricing models for business customers took our 48-hour SLA, initiated in 2021, several steps forward and gave us winning differentiation. Again, the use of advanced data and automated models allowing for quicker credit decision is a key enabler here, also improving our risk management. We are the first bank in Israel to launch open banking, offering customers a service on our app that allow them to view their checking account and credit card information from other institutions.
We leverage this as an opportunity to use the information to offer the customers tailored financial products according to their personal needs. Investment in technology is at the core of our strategy and allows us to provide customers with innovative and better service offerings. We are doing so in all business lines, ensuring business use case with ROI for each and every initiative, upgrading customer service, improving sales efficiency, and upgrading the pricing and underwriting at the same time. Use of advanced technologies and data in the most efficient way is at the center of everything we do at the bank. For example, the case with our payment offer. We implemented into our bank app in order to make it safer, more convenient, and with a positive ROI.
Our extensive use of data analysis and models allows us to automate more and more processes. Substantial amount of retail loans granted in 2022 were fully automated with no human interaction on the part of the bank. We have worked hard to enhance customer journey capabilities in order to improve customer experience and increase retail sales. For example, using triggers from a customer's account metrics and activities to offer them a tailored loan or deposits. Our sales from customers' journeys have increased exponentially over the last year and have become a significant part of our sales. The increased use of technology and models also enables us to simplify processes and to continue improving efficiency, achieving a best-in-class cost-to-income ratio. We have many more initiatives in the pipeline that will help us to continue improving in both customer service and streamlining in the coming years.
ESG is an increasing important area of focus for the bank. Last year, the bank set its first green credit, a target of ILS 35 billion of outstanding green credit by 2030. In 2022, the bank increased its green credit portfolio by around ILS 6 billion to ILS 18 billion. We successfully placed $500 million in January of this year in our first international green bond offering, where proceeds will be allocated according to our new Green Bond Framework. Just last month, we announced a $500 million loan from the EIB to support green investment by Israeli SMEs. This is the first targeted support for climate action business financing by the EIB in Israel. In addition, in today's report, we disclosed that the total social credit outstanding at the end of 2022 was more than ILS 33 billion.
Lastly, in the 4th quarter of this year, the bank will complete the move of its headquarters to the new, more environmentally friendly campus near Lod. This move is good for the environment as well for cost streamlining. I will conclude my section by saying that the remarkable results we announced today are very important, but even more important are the innovative tools and procedures we have built over the last few years. This gives us the confidence to continue our journey while facing the challenges and leveraging the opportunities we choose. Leumi is a bank that suits itself to the customer's tastes. Leumi is a bank that expands year by year its tech capabilities that give us the flexibility to adapt any market changes. Therefore, we are a technology AI model and digital-based bank.
We'll continue to embed many more cutting-edge innovative products and services for the benefit of our customers and to differentiate ourselves from the competition. I'd like to take this opportunity of thanking our stakeholders, our employees, customers, and you, our investors, for your continued support in this journey. With that, I will turn the call over to Omer, who will walk you through the financial results.
Thank you, Hanan, and thank you all for joining us for the presentation of Leumi results for 2022 and the fourth quarter. Let's start with slide number 7. The net income of Leumi for 2022 reached a record level of ILS 7.7 billion, an increase of 28% compared to last year. After the strong year last year, this year was even better. The ROE for the full year of 2022 reached a level of 17%, and the ROE for the fourth quarter of 2022 was even higher, 19%. These strong results were led by a very low credit loss expenses for an annual basis and by significant improvement in our cost-to-income ratio. The cost-to-income ratio, as Hanan mentioned, for the total year of 2022, reached a level of 37.5%.
The cost-income ratio for the fourth quarter was even better, 31.8%. This cost-income ratio puts Leumi in the first line with in the efficiency ratio in global terms. The pre-provision net revenue increased year-over-year by 40%. The increase quarter-over-quarter in the fourth quarter was even higher, 88%. The ROA in 2022 improved significantly and reached a level of 1.2% for the total year and 1.3% for the fourth quarter. Before diving deeper into the analysis of 2022, I would like to present a wider picture of the improvement in our results in the last few years. Let's turn to slide number 8. In the last four years, we increased our revenue by more than 30%. In the same period, we decreased our expenses by 14%.
This is a great achievement. As a result, as Hanan pointed out, our net income more than doubled itself to a level of ILS 7.7 billion for the total year of 2022. On slide number 9, we can see that as a result of this improvement, our ROE increased from a level of 10% in 2019 to a level of 17% in 2022. The EPS increased by almost 100% to a level of ILS 1.5 per share, and the book value per share increased by 40% to a level of ILS 33 per share. On slide number 10, we can see the substantial improvement in our cost-to-income ratio to a level of 37.2% on an annual basis. In the bottom line, our core business improved significantly in the last few years.
We increased substantially our credit base, our deposit base, and in the same period, we reduced significantly our employee numbers and our other expenses. All of this puts Leumi in a very strong position looking forward. Continue on to slide number 11. In 2022, we increased our finance income by 28%. This increase was driven mainly by the increase in our net interest income. The increase in the net interest income was mainly driven by a substantial increase in our credit portfolio, 18% increase, and by the increase in the CPI level and in the interest rate level. The NIM reached a level of 2.2%. Fees and commission increased by slightly less than 5%. The increase was mainly in the finance commission due to the increase in our credit portfolio and in exchange differential commission.
Despite a significant increase in the finance income, this year, as in previous years, we've been able to decrease our expenses by 2%. The decrease was in the salary expenses, mainly due to the reduction in our employee numbers and also in other expenses. The pre-provision net revenue, as I mentioned earlier, increased year-over-year by 40%. On slide number 12, we analyzed the fourth quarter. The trends were very similar. The finance income increased by 66% compared to the fourth quarter in the corresponding period last year. The mean reached a level of 2.44%. Fee and commission dropped by 4%.
Having said that, I must mention that the commission in the fourth quarter of 2021 were exceptional due to a relatively very high securities commission, due to the rebound in the capital market in the fourth quarter of 2021 as a result of the going out from COVID. Operating and other expenses were very similar to the operating and other expenses in the fourth quarter last year. We see a slight increase in the salary expenses due to increase in the provision for bonuses due to the high results. In the other expenses, we see a decrease of 3%. The PPNR increased, as I mentioned earlier, by 88% quarter-to-quarter. On slide number 13, we can see that on average, we were able to increase our commissions in the last few years by 5.6%.
As I pointed out earlier, this year, the increase was focused in the finance commissions due to the increase in our credit portfolio and in the exchange differential commissions due to the change in the exchange rates. I'm continuing on to slide number 14. As I mentioned earlier, this year, we decreased our expenses by 2% year-over-year, our cost-to-income ratio improved to a level of 37% on an annual basis and to a level of 32% on a quarterly basis. On the next slide, we present the significant reduction in our employee number in the last few years. As in previous years, consistently, also this year, we reduced our employee number by hundreds of employees. As a result, the income per employee, as well as the net loans per employee, increased significantly by 55%-60% increase.
I'm continuing on to slide number 16. This year, we increased our trade portfolio by 18%, this is on top of an increase of 16% last year. As in previous years, consistently, according to our strategy, we focus our growth in middle market, mortgages, and corporate, including retail. We didn't increase almost our trade book in unsecured retail and also in small business. We prefer to focus our growth in this segment because the collateral in this segment are much stronger and because we're known as On slide number 19, we present the increase in our deposit base that Hanan mentioned earlier, 8% increase year-over-year. Our credit to deposit ratio remain very conservative, 69%. On the right, we can see our deposit base. You can see that We can see that it's very well diversified.
We are not dependent on one segment. Our liquidity ratio remains strong at a level of 130%. As Hanan mentioned earlier, we announced this morning a dividend of ILS 700 million, an increase in our dividend payout ratio from a level of 20% to a level of 30%. This dividend reflects an annual yield of 6.4%. The total payout for 2022 was ILS 1.8 billion.
I would like to draw your attention that even though this year our dividend payout ratio in the previous quarter was 20% and in the fourth quarter rose to 30%, in terms of ILS, the dividend this year was ILS 1.8 billion, very similar to the level of the dividend in 2019 of ILS 2.1 billion, even though the dividend in 2019 reflects the dividend distribution ratio of 16%. This number reflects the significant improvement in our core profitability. On the next slide, we present the robust equity ratio and leverage ratio of Leumi. We are much above our regulatory requirement across the board. You can also see the significant increase in our pure common equity in our total capital ratio during 2022.
Before ending the presentation, I would like to review the main macroeconomic parameters in Israel. I would like to say that despite the uncertainty in the market due to the global slowdown and the political debate in Israel around the legal reform, Israel's main macroeconomic parameters remain strong. Israel GDP growth rate continued to outpace that of the OECD average. According to our forecast, Israel economy will grow by 2.7% in 2022. Growth is expected to be driven by ongoing rapid population growth, a rise in the residential construction in order to meet the demand, cybersecurity export, and a growing natural gas sector with export to neighboring countries.
This year, unemployment rates remained low at a level of 3.7%. We expect that next year, in 2023, it will reach a low level of 4.5%. Inflation in Israel was 5.3% in 2022, lower than in most countries. Market expectation for 2023 is for inflation rate of 3.3%. As for the Bank of Israel interest rate, it increased from a level of 10 basis points earlier this year to a level of 4.25% currently. I would like to end the presentation by concluding that Bank Leumi, again, present a very strong result, a very robust re-result across the board. We present a 17% ROE for the total year and 19% ROE for the fourth quarter.
On top of the significant increase in our trade portfolio last year of 16%, we increased this year our trade portfolio by 18%. Within this growth, we present a very strong parameter that reflects the quality of our trade portfolio. Significant improvement in our NPL and significant improvement in our problem debt ratio. We present best-in-class income ratio, not only in the banks, in the banking industry in Israel, but in global terms. We are not familiar with lot of banks which present cost-to-income ratio of 37%-32%. As a result of all of that, we increased significantly our CET1 ratio year-over-year and quarter-over-quarter.
Our strongest Core Tier 1 ratio in the sector will support us in the following quarter in our ongoing growth and with a capital return for our shareholders. All of these parameters puts Leumi in a very strong position looking forward. I would like now to thank you again and to open the line for questions. Operator.
Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. If you are dialing in via phone, please press star one to ask a question. If you wish to cancel your request, please press star two. If you are using speaker equipment, kindly lift the handset before pressing the numbers. If you joined the call via link, please click on the chat button at the bottom of the screen and send your question. Before the question, please write your full name and company. Your questions will be polled in the order they are received. Please stand by while we poll for questions. The first question is from Chris Reimer of Barclays. Please go ahead.
Hi, congratulations on the strong results, and thank you for taking my questions. First, just looking at asset quality, is there any segment in your portfolio that you see most at risk when it comes to repaying your loans?
Hi, Chris. Thank you for your question. As I mentioned in the presentation, we focus our growth in mortgages, middle market and corporate, mainly real estate because of the strong collateral and because we know the customer in this segment very well. The segment that we prefer not to focus on is the unsecured retail and small business, which are the most exposure segments for a slowdown in economy. These segments have the lowest collateral. This is the reason why we prefer, as in previous years, to focus our growth in the sectors that I just mentioned, and this is the reason why you see a consistent improvement in our NPL as well as in our problematic debt.
Got it. Yeah. Looking at the, at the global market, it seems that investors are kind of concerned about the impact of the failure of, sorry, Silicon Valley Bank. Do you have any general thoughts you can share around the bank's collapse?
We prefer to focus on this call on our results and not in other banks. I can say clearly that when you look at Leumi deposit base, when you look at Not only Leumi, only all the banking industry in Israel, they are acting in a completely different way than Silicon Valley Bank.
Mm-hmm.
Silicon Valley Bank was focused only on the IT sector.
Mm-hmm.
Silicon Valley Bank was exposed significantly to interest rate risks. In the Israel economy, it cannot happen. I presented earlier in the presentation our deposit base, which is very diversified. There is not even one segment that is more than a third with the total deposit, and the biggest exposure in our deposit is for retail, which is, you know, a very small number in huge amount of customers. The banking industry in Israel is completely different than in the banking industry in the US.
Mm-hmm.
I can elaborate on it much more, but I would rather to prefer on the results here in this presentation.
Sure.
That's it. Also, maybe, I will mention the LCR that I mentioned earlier, which are very strong, you mentioned to me, one in 10%. Also, the regulation instruction in the US are completely different than the regulation instruction here in Israel in terms of what you write to the regulatory capital, what you are not write.
Mm-hmm.
It's completely different, and it puts the banking industry in Israel in completely different place from the US bank. We are very proud that within this conservative approach that the Bank of Israel takes in the Israeli bank, we are able to present very high ROI.
Mm-hmm. Great. Okay, thanks. That's good color. That's it for me.
Thank you, Chris.
The next question is from Micha Goldberg of Psagot. Please go ahead.
Hi, Good afternoon. Congratulations on the outstanding quarter and year. A couple of questions for me, if possible. First of all, I mean, I should tell on you on the 30% dividend this quarter. I'm just wondering, you said that GDP next year is gonna grow around 2.7%. Your loan growth in this quarter was significantly lower than in previous quarters. If you have 11.5% common equity or one, which is over 1% above what the Bank of Israel requires, when will you consider increasing that payout to above 30%?
Hi, Micha. Thank you for the question. I will say it as well. First, we expect next year a GDP pace of growth, 2.7%. This is in real terms. In nominal terms, if you add to that the CPI expectations that I just mentioned, we are talking about a 6% increase in nominal GDP. You mentioned the pace of growth in the fourth quarter, which I agree was lower than the previous quarter, but it, if we put aside the capital market, which is technical reduction, the pace of growth in the fourth quarter, it makes the pace of growth of 8% on an annual basis. This is regarding the pace of growth.
Of course, we don't expect the pace of growth to be higher as it was in the last two years, high double-digit number, but we expect our pace of growth to be more than GDP, which is the nominal GDP is 6%, as I just mentioned. Now, you are completely right that our tier-one equity ratio, which is currently 11.5%, enable us, if we want, if we would like to increase our dividend distribution ratio. Instead that, I would just like to mention again that the ILS 1.8 billion that we distributed in 2022 in terms of shekel is equal to the 60% that we distributed in 2019.
Also, I would like to say that you are right that our equity levels allow us to increase our dividend payout ratio, but because of the uncertainty in the market, we prefer at this stage to be more cautious. And to increase it to 30% in the following quarters, according to the macroeconomic environment, of course, we're considering again.
Okay, thank you very much. Another question, if I may. I noticed that when I compare the margin expansion at Leumi, both in the quarter and over the year to some of the other banks, it's significantly lower, and I'm just wondering why that is.
Okay. This is a great question, Micha, I would like to elaborate on it. First, the structure of Leumi balance sheet is a little bit different from the structure of the most of our competitors. As I mentioned in the presentation, our credit to deposit ratio, we preserve it at a very conservative level of 69%. That means that the other 30% are invested in our investment portfolio. If you will look at our investment portfolio, this is a very conservative investment portfolio. I mean, more than half of it is depositing in the Bank of Israel, the other is, I don't know, around 90% is either a government bond and a treasury bond.
Because of this structure, because our loan to deposit ratio is very conservative, when you look at the NIM, it's a mix of the credit in which we have credit risk and the credit and the investment portfolio in which the returns are lower because you don't have a credit risk in the investment portfolio that I just mentioned. That's first. Secondly, when you look at the at the mix of our trade portfolio, you will see that more than a third is in mortgages. In, in mortgages, the yields are very, very low, but the risk is very, very low as well. The LTV is low, is 48%. The loans that are in arrears of over 90 days are less than 0.5%.
Because of the very low yield, with the low risk, the ROE in the mortgages is very high because the equity requirements regarding mortgages are relatively low. When you look at the NIM, from my perspective, first you should differentiate between the investment, which is very conservative and don't have credit risk, and the credit portfolio. When you look at the mix of the credit portfolio. We prefer to be focused on segments that I mentioned, which has a lower margin, but much lower credit loss expenses. You know, if you compare our credit loss expenses in the fourth quarter with the other banks, you will find that our credit loss expense ratio was the lowest.
This is because we focus on lower risk segments. When you look on all of the picture, and if you look segment by segment, you will not find that our margin are lower than our competitors.
Very clear. Thank you very much for that.
Thank you.
Another question, if I may. You know, you very strongly make the case for a very good cost-to-income ratio and really impressive. I'm just wondering, towards 2023 and maybe 2024, I mean, you guys are ahead of a new wage agreement, and inflation obviously is significant. Your profits were very high. I think it's probably logical to assume that there's gonna be a nice wage agreement. I'm just wondering how much of that cost-to-income ratio is sustainable when you look forward.
Okay. I will tell you that, first, you are right. There are pressure on costs on 2023 due to the CPI, across the board, not only on the rate that we just mentioned because of the, because of the CPI, which was 5.3% in 2022, and it's expected to be 3.3% in 2023. I would like to mention a few other factors. First, regarding the income. As for the income, we increased our credit portfolio by 18% this year. The impact of that on our income is only partially in 2022. You will see the total effect on that mathematically only in 2023. This will increase the income. Secondly, the interest rate level is expected to be significantly higher next year than this year.
The average, we started this year, you know, it's still, it looks like a year ago, but we started this year with 10 basis point interest rate. The average interest rate in 2022, I don't know, it's around 1.6, 1.7, something like that. Even if we will not assume further increase in the interest rate, the interest rate next year is expected to be significantly higher, the average interest rate, than the average interest rate in 2022. This will also impact positively the income. Now, when talking about credit growth, we discussed it earlier, and the GDP nominal pace of growth is expected to be 6%. This is also will contribute to the income.
Going back to the expenses, on the one end, we will see the CPI pressure. There is a collective wage agreement that we are going to renew it at the beginning of this year. We are in a progressing negotiation with the union. Of course, it will impact the expenses as well. When I take all of these parameters and maybe we mention another parameter. We are moving to our headquarters from Tel Aviv to the airport in the fourth quarter. This is going to decrease significantly our office space cost. We moved only partially this year to a hybrid model of working. 20% have to work from home.
Every day.
Every day. Next year we'll see the full effect of that. There are different parameters. In the bottom line, of course, to improve our cost-to-income ratio for a level, from a level of 37% is very high because there are not lots of banks in the world with this cost-to-income ratio. According to our expectation, we will be able to even improve it, not significantly, but we will continue to go towards the 60, the 35%-34% on a for a long term. The 32% for the fourth quarter doesn't reflect yet our position. The 37%, we are there.
Because we will continue to reduce our employee numbers as we did consistently in the last two years, and because all of the other parameters that I just mentioned, I expect that we will be able to preserve the 37% and even to improve it slightly next year.
My turn, it's Hanan. Maybe one more comment regarding this. Micha, sorry, regarding this question. As I mentioned in my remarks, we invested a lot in technology, and using technology enable us to do much more with fewer resources. Our streamlining journey is expected to continue even though we expanding our activities and our portfolio. This, together with all the parameters that Omer mentioned, gives us the confidence that we will continue with this journey. As Omer said, the 32% is not reflecting yet our position, but we are aiming to continue the journey in reducing the cost-to-income ratio from the 37% that is our yearly ratio, and make it better going forward.
Thank you, Hanan. Very, very clear. Thank you very much, Omer. I'll go back to the end of the line. Thank you very much.
Thank you.
The next question is from the chat, from David Coyne of Setanta Asset Management. What was the NIM in Q4, and can you give an outlook for NIM in 2023? Can you comment on the slowdown in new home sales and whether you need to adjust your lending strategy to the residential construction sector? What level of deposits you have through LeumiTech?
Hi, thank you for the question. First, as I pointed out in the presentation, the NIM for the fourth quarter was 2.44%. As I mentioned. Also, as I pointed out earlier, the interest, the average interest rate next year is expected to be significantly higher than the interest rate, the average interest rate this year. Having said that, you know, with any additional increase in the interest rate, the portion that we will be able to preserve in Leumi will be lower. Because when the interest rates go up, you see an immediate effect on our loan, because the vast majority of our loan book is in variable rate.
The impact of that, the negative impact on the results, which coming from increase the interest on the deposit, it takes a little bit time to happen. It mainly happen because of the movement from current account to deposit, which takes its time. This, in this interest rate level, as you can understand, more and more customer will prefer to move their money from current account to deposit base. We expect increase in the, from the 2.44. It's very hard at this stage to. And I don't want to go into specific number, of course, in this call. Now, regarding the residential construction.
Maybe it's worthwhile to mention that the natural demand for a new unit in Israel is 50, is around 55,000 units per year, based on the high pace of growth of the population in Israel, more than 2% per year. Now, when you take into account the fact that we are currently in the lack of supply of around 200,000 units, you can understand that for sure in 2023, as well as in 2024, this lack of supply is not going to be changed immediately. Because of the lack of supply, there is a real demand in the market.
Of course, the interest rate, the high interest rate level cool down the demand. Still there is strong demand because of the figures that I just mentioned. We expect that if we talk about mortgages or the residential construction loan, it doesn't matter, it's the same answer. Yes, next year we will see a decrease in the total market of about, I don't know, 15%-20%, depends. As Hanan mentioned in his opening remarks, we've enabled this year to increase significantly our market share in mortgages. This will take you to the other side. There was a third question, I don't remember.
LeumiTech.
LeumiTech. In the presentation, there is a slide about that the total commercial deposits, bank loans are around 10% of our total deposit, and only part of it is related to LeumiTech. It's not significant a portion of the total LeumiTech deposit.
If there are any additional questions, please press star one or click on the chat button on the bottom of the screen. Please stand by while we poll for more questions. The next question is a follow-up question from Micah Goldberg. Please go ahead.
Hi. Just a short question about your exposure to real estate financing. In your report, you provide some significant numbers, you know, ILS 14 billion-ILS 15 billion for the exposure to development. I'm just wondering, in LTV, with over 80%, I'm just wondering, according to what's going up right now outside in the market, where prices are coming down significantly, is this something we should be worried about? Is there additional collateral that is not included in the LTV? How should we look about that and what's your risk to cost of it? Thank you very much.
Hi, Micah. Thank you again for your question. I would just say that the numbers that you mentioned are according to the very conservative approach of the Bank of Israel. This approach doesn't allow us to take into account other significant collateral that we have regarding this project. Because, you know, at the end, we have recourse to other project assets, accounts, and also the LTV was measured on the day that we granted the loan. Since then, as you know, the land price and the apartment price in Israel increased significantly. The economic LTV is much, much lower than 80%.
If you would like, you can see the effect of this loan on our requirement, on our equity requirement, and you will find out that it's very similar to other banks which reported on that on different way. There's nothing to worry about. Nothing significant.
Thank you very much, and congrats again on a great quarter year. Thank you very much.
Thank you.
There are no further questions at this time. This concludes Leumi's fourth quarter and full year 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.