Akbank TAS
IST:AKBNK.E
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Akbank TAS
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Dear friends, this is Hakan here, the CEO of Akbank. Thank you all for joining us today to hear about our 2022 performance and also 2023 and beyond guidance. I hope you are all well. Today, as usual, I have with me Turker, our CFO; Ebru and Gülçe from our IR department.
Before leaving the floor to Ebru, who will share the details of our full year results, I'd like to say a few words about the operating environment and also about our stellar performance.
The world economy recently has started to show some positive signals on both inflation and economic activity but is still struggling with elevated inflation and adverse repercussions of the world. According to many international institutions, the global economy is expected to slow down this year. More importantly, economic activity in developed countries, including our main export markets, is projected to be more subdued.
In this challenging global environment, the policy design implemented by Turkish authorities is putting a strong emphasis on economic growth and employment through negative real rates and targeted credit policies, which stimulated domestic demand and economic activity. However, in the second half of last year, the economy started to lose momentum, mainly due to the slowdown in major trading partners and deceleration in exports. In the more near term, we have started to see signs of a revival in domestic demand and economic activity on back of credit growth and recent fiscal measures. Nevertheless, we expect domestic economic growth to slow down from around 5% in 2022 to around 3% to 3.5% this year.
Regarding the inflation, it peaked in October at 86% and came down to 64% at year-end. Looking forward, annual inflation is expected to decline further not only due to strong base effect but also thanks to the stable exchange rates and moderating import cost pressures. As a result, we expect inflation to ease towards 30% by year-end.
Current account deficit has been increasing, but we expect an improvement in underlying trend this year. Despite the slowdown in economic activity of our main trade partners, which is a potential danger for our exports, we expect tourism revenues to exceed last year's record and reach $50 billion levels. And also, we forecast to have an improvement in energy imports due to lower oil and natural gas prices, resulting in an approximately 3.5% current account deficit.
And as you know, we have elections in the first half of this year. Elections in every country usually come with some uncertainty in markets. But given the hands-on macro prudential management of authorities and both the corporate and banking sectors' resilience with significant buffers, the Turkish economy has the capacity to successfully manage this period.
When we look at the banking sector, despite a very challenging year, the banks did quite well. Turkish lira loans were up by 77% for the sector. TL business banking loans was the main contributor with 88% growth while consumer loans were up by 39%. FX loans continued to decline by minus 16% for the sector with ongoing deleveraging of the corporates.
Following BRSA regulations and CBRT macro prudential measures, sector-wide NIM has started to narrow down recently. We are currently experiencing a decrease in our TL spreads due to an increase in TL deposit rates, while our lending rates, lending yields are almost capped as banks are trying to keep the fixed rate bond purchases imposed by the regulation at minimum levels.
CBRT emphasizes the importance of liraization strategy and may continue to implement further macro prudential measures if and where necessary. That being said, banks are well positioned. Banks remain healthy and resilient with solid capital buffers and liquidity.
For long-term success, though, the following will be the differentiating factors for banks: relative and higher capital levels; low cost base and efficiency; level of sophistication in digitization and advanced analytics; ability to attract and keep new clients through digital; talent quality and attraction; ability to focus on future while struggling with the daily challenges; and last but not the least, agile management. And here, I'm extremely proud to say that Akbank ticks all these boxes. I see an enormous and outstanding potential for Akbank looking forward.
Moving on to our bank in more detail. We ended the year on a very strong note with exceptional growth in earnings year-over-year. Our net income was up fivefold to TRY 60 billion, a record high in historical income even when adjusted for currency. And also, our pre-provision income tripled to almost TRY 90 billion. Our swap-adjusted and CPI linker, excluding net interest income, was up by 144%. While our fee income excelled by 96%, indicating a very solid core business growth. As a result, we ended the year ahead of our guidance at 54.7% ROE and 6.2% ROA. And despite the growth and market share gains due to high internal capital generation, our leverage still remained at a low level of 7.5x, indicating further growth potential.
Our robust performance was driven by, first, very strong organic growth where every business line contributed significantly, our customer-centric holistic organization structure implemented at the beginning of last year, our advanced analytical and digital capabilities, along with our state-of-the-art infrastructure, resulted in a record 2.3 million net customer growth in 2022. I repeat last year, we have achieved 2.3 million customer gains in net after attrition. I am extremely delighted to say that we have achieved an outstanding momentum in retail banking. Retail banking will continue to be a strategic focus area for us. We will not stop here and continue to invest, innovate and grow. The importance of our investments and especially investing through cycles has been even more noticeable over the last 2 years.
Secondly, we excellently positioned the bank with our outstanding agile balance sheet management for further strong financial results in the coming years. We are, for sure, one of the best-positioned banks in the environment. We are leveraging our robust capital, highest among peers; solid liquidity; low leverage; highest level of efficiency; low operating cost base.
Third, but not the least, while managing the daily challenges, our consistent, forward-looking and initiative-taking management styles, our years of investments in our people, culture, mindset, and our customer-centric organization, as well as our dedication to clients, puts us in a position of strength. I'm proud to say that today, Akbank is the most ready bank to smoothly wade through any challenge and generate long-term stakeholder value in an ever-changing world.
I'd like to express my sincere gratitude to all our people for rising to challenges, thinking outside the box, innovating, executing, raising the bars, supporting our customers and being a source of strength. I also would like to thank all our stakeholders for their consistent trust and confidence in us.
And on that note, I'd like to leave the floor to Ebru. And after the presentation, I'll be more than happy to answer your questions.
Thank you, Hakan-bey. Starting with the balance sheet, first of all, our TL loans. Our TL loans were up by around 78% year-on-year, meeting our full year guidance of around 50%. As shared in several occasions, the bank's motivation in the SME and consumer banking continued at full pace throughout the year. This motivation has resulted in a successful 200 bps year-on-year market share gain among private banks in the SME segment, reaching a cumulative 215 bps market share gain over the last 2 years.
In the consumer loans, during the same period, we have gained 220 bps market share among private banks. Maturity mismatch remains in focus. And thanks to our advanced analytics and excellence in AI-based loan decision systems, the PDs of the portfolio remained at low levels while growing. For this year, we expect to grow around 40% in TL loans, which will once again be driven by healthy market share gains in the consumer and SME segments. Our 360-degree customer-oriented, holistic organization structure as well as competitive products and advanced digital solutions will continue to be supportive factors.
On the FX loan side, demand remained muted throughout last year. Our net FX loans were down by around 9% to $10.7 billion, which is in line with our stated guidance. This year, given our already delevered FX loan book, we may observe a single-digit growth in our FX loans.
As for our securities, our treasury's proactive positioning in CPI linkers helped to mitigate the negative impact of inflation during last year. Our CPI linker portfolio stands at TRY 117 billion, with its real yield remaining unchanged since second quarter of this year -- or sorry, last year, at 1.4%. And our CPI linker portfolio equates to 76% of our equity.
As for the newly implemented regulations, we proactively purchased a sizable portion of fixed rate bonds for CBRT pledge at much higher levels during June and July, around 19%. The total size of the fixed rate bonds for CBRT pledge is around 2% of our assets. And going forward, we aim to keep it around this level. I would also like to add that our Eurobond portfolio is fully hedged against fed rate hikes. All of these underline our prudent ALM management. Coming to this year, along with our solid customer base revenue growth, CPI linkers will continue to be supportive for net interest income.
On the funding side, we maintain our focus on well-diversified and disciplined funding mix. Deposits continue to be our main source of funding with 63% share in total liabilities. Our TL deposits were up by a solid 144%, resulting in an eye-catching 35 percentage points improvement in our TL LDR to 106%. Thanks to our sound customer franchise and our success in gaining net customers of 2.3 million, our market share in TL savings deposits among private banks increased.
we added 130 bps market share in widespread savings deposits and 60 bps in demand deposits last year. Worth to mention that our sticky, low-cost TL time deposits and zero-cost demand deposits were also up by an outstanding 155% and 118% year-on-year, respectively. On the regulatory side, I'd like to underline that the TL share in total deposits is close to 60% for both consumer and business banking. And we feel comfortable in meeting the 60% ahead of the regulatory deadline of February 24.
Moving on to the P&L in more detail. Our prudent and proactive asset liability management, benign funding costs throughout last year as well as our strategic and timely positioning of CPI linkers have all contributed to our almost 5 percentage points year-on-year NIM improvement to 8.25%, beating our full year guidance of around 7%. Our fourth quarter NIM stands at 11.12%. Going forward, our solid customer deposit franchise, agile asset liability management and proactive CPI linker positioning will continue to be supportive for an evolution this year.
In that respect, as an indicator of responsible growth, with maturity mismatch in focus, around 80% of our TL loan book will either reprice or mature by the end of this year. We expect our swap-adjusted NIM to be between 4% to 5% for 2023. As for October-to-October inflation, our assumption is at 30%. While every -- 1% additional CPI will have around TRY 800 million net income, 7 bps NIM and 45 bps ROE impact according to expected average equity.
As mentioned earlier, we reached a record in net active customer growth of 2.3 million. 40% of our new-to-bank customers were acquired via digital onboarding, underlining the strength of our digital capabilities. Salary and pension customers almost doubled, enabling us to penetrate into demand deposits and the daily cash flows of our customers. We leveraged our digital onboarding capabilities and also revamped our value propositions holistically for youth customers between the age of 18 and 26, leading for this segment to increase 1.5x year-on-year. It's important to point out that our active product portfolio, which is a function of active customer base and average cross-sell per customer, has also increased by 30% year-on-year reaching all-time high. This solidifies our customer base revenue generation for the coming periods.
Our digital strategy rests on 4 strategic pillars: strong customer growth with fully digital, new customer acquisition for both consumer and SME; mobile-first experience with innovative applications such as Juzdan while also expanding mobile products and services in Akbank Mobile; open banking capabilities; and enhancing sales and marketing capabilities within our digital channels by leveraging AI and advanced analytics.
I wanted to share a bit more detail regarding one of the innovative applications our bank launched last year. Through our digitalization road map, the bank-agnostic digital wallet application, Juzdan, allows customers to add all their debt and credit cards, so in effect merging all of the customers' payment instruments into their mobile phone. In addition to this, it is also possible to pay with current account balances and different loan facilities. This app will continue to extend the payment experience in line with growing e-commerce and digital payment needs.
The success of our digital strategy, which is based on our customers' journey, is shown in the numbers. We reached 8.7 million digital customers while also increasing the traffic as the monthly average mobile login frequency is also at all-time high. Our active digital customer visits our mobile application more than once a day. Most importantly, mobile active customers conducting financial transactions increased by 14 percentage points over the last 2 years, supporting sustainable fee income.
As you can see on this slide, our customer growth has been reflected to our fee income. We further excelled our outstanding fee performance across the board, reaching TRY 11.888 billion, almost doubling year-on-year. Reasons behind this accomplishment can be summarized as customer-oriented solutions, leading to customer acquisition; product innovation and diversity; increased transactions; pricing due to either currency or inflation; and the success of our digital channels. All businesses have positively contributed to the revenue base, indicating the sustainability of our fee generation. We therefore guide for around 60% growth in our fee income for this year.
Challenges, obviously, remain on the OpEx side due to both high global inflationary pressures as well as pass-through of weaker currency. The main increase in OpEx last year was related with customer acquisition on back of marketing expenses, which we see as an investment for future growth. Also, HR expenses had an impact on our OpEx. Still, our relatively low cost base versus all of our peers give the bank significant competitive advantage and more flexibility. With our solid revenue generation, our cost to income remains best-in-class at 19%. This level is obviously not sustainable in the long term, but cost discipline will remain in focus. And hence, for this year, we guide for low 30% for cost to income with an improvement on a year-on-year increase in OpEx.
Moving on to asset quality. Our loan portfolio continued to perform well throughout last year. There was almost no net new inflow into Stage 2 when excluded for currency impact. And as you know, foreign currency provisions are hedged. Therefore, share of Stage 2 loans declined to 6.6% of gross loans, down by 3 percentage points year-on-year. As for Stage 3, the inflows were broad-based and collection performance also remained robust. We completed this year with 2.8% NPL ratio versus our guidance of below 4%. Coming to 2023, given our prudent risk approach and excellence in loan decision systems, we believe there will be a material increase in NPL inflows. Therefore, we expect our NPL ratio to remain below 3%.
Our cost of credit evolution underlines our proactive positioning as well as our healthy loan portfolio composition. We ended the year at 54 bps net cost of credit, excluding currency impacts, underlining our strong risk discipline through the cycle, well below our full year guidance of around 100 bps, excluding currency. Including currency, which we are hedged against, our net cost of credit would be at 81 bps. On top of 2 model updates in first quarter and second quarter, we had another model update in fourth quarter, yielding a total of 24 bps impact for the year, almost half of our full year cost of credit.
Despite our solid loan growth as well as improved collateral values, our coverage ratios have significantly increased year-on-year. For Stage 1, our coverage ratio was at 0.7%, which was at 0.5% at the end of the year. For Stage 2 and Stage 3 loans, our coverage ratios have increased by, respectively, 230 and 240 bps year-on-year to 16.4% and 67.6%. Adjusted for the TRY 1.4 billion write-off in the fourth quarter, our Stage 3 coverage would be at 70%, indicating a significant 470 bps increase year-on-year. Moving on to this year, we believe our robust provision build and solid collateral values will limit the need for additional provisions. We again expect our net cost of credit, excluding currency impact, to be around 100 bps.
Record high profitability has also reflected on to capital position as our internal capital generation added around 900 bps for the year to our total capital. As a result, our total capital is up by almost 360 bps year-on-year to 20.8%. And please note that this improvement was despite the temporary risk weight increases applied to some loan types as per BRSA announcement. Adjusted for these risk weight increases, our capital would have been 170 bps higher at an outstanding 22.8%. I would also like to underline the eye-catching 480 bps year-on-year improvement in our Tier 1 and core equity Tier 1 ratios at 17.7%. Our sound capital buffers served as shield against unprecedented challenges, volatility and also creates significant ammunition for sustainable profitable growth.
Before leaving the floor to Hakan-bey, I'd like to also give some details regarding our ESG performance. To start off, we are well on track for our long-term sustainment finance goals on both sides of the balance sheet. As of year-end, we have provided TRY 60 billion sustainable finance, totaling our support to TRY 87 billion over the last 2 years. On the liability side, our ESG-theme funding AUM reached TRY 2.7 billion with 62,000 investors. We have also continued our pioneered ESG-linked funding transaction, with 75% of our wholesale funding facilities last year being sustainability linked. This year, we will also continue to integrate ESG into all aspects of our offerings to support our customers in the transition to a more sustainable economy in line with our decarbonization ambition.
Our customers are at the front and center of our sustainability vision. That is why enhancing financial health and inclusion is one of our key priorities. Last year, we continued to empower our SMEs both through financial and nonfinancial support. Akbank's Transformation Academy, for example, reached 11,000 SMEs, providing training to prepare them for the future. As we have done so during last year, we will continue to take steps both for our people and our communities for a more diverse, socially and economic-inclusive future.
Last year, we also had a key milestone in our fight against climate change. We committed to become a net zero bank by 2050 and started to enhance our data capabilities for measuring Scope 3 emissions. This was an important year in terms of managing climate-related risks. We introduced our enhanced environmental and social risk framework, which includes changes such as increased portfolio coverage, sector-based environmental and social risk scoring, expanded exclusion criteria, updated policies for material sectors and issues and revised risk identification and monitoring procedures. You may find all these details on our website.
This year, we'll be launching our decarbonization road map for our portfolio and operations with interim targets to reach net zero by 2050. We will also enhance our capabilities to limit our Scope 1 and Scope 2 emissions by expanding environmental and energy management certifications to more branches. Our transparent and proactive approach in nonfinancial disclosure continues to improve our ESG ratings. In addition to double upgrade received by Refinitiv for our ESG score to A, we have also enhanced our CDP scores. Being a sustainable bank is an important component of our long-term ambition.
On this slide, you may find a summary of our solid 2022 performance. I don't want to go through every line one by one, but I can say that we entered the year, as Hakan-bey mentioned, on a very strong note and the momentum continues across all business lines. Throughout the presentation, I have already shared this year's guidance in detail actually, so I don't want to repeat one by one again. But as a result of all the guidance that I've shared, we expect to achieve around 30% ROE for the full year.
And now I'd like to leave the floor to Hakan-bey to share his thoughts on our 2023 guidance and beyond strategy.
Thank you, Ebru. 2023 is a particularly important year both for Turkey and Akbank. We will be celebrating the centenary of the republic as well as the 75th anniversary of Akbank. These are both very important milestones. And despite some challenges in the sector, I believe we are excellently positioned as we begin this important year to deliver for our clients and shareholders.
Along with very strong corporate, commercial and private banking, our strategic focus remains in consumer and SME with responsible growth. Prudent management of capital throughout the years gives us significant competitive advantage for growth and resilience. We will not only take advantage of our advanced analytics and digital capabilities but also continue with disruptive new products and services to further accelerate customer acquisition and activity.
I would also like to underline that ESG remains at the center of our bank strategy. As most of you recall, we had shared our ESG strategy at the beginning of 2021, becoming the first deposit bank in Turkey to set long-term sustainable finance goals on both sides of the balance sheet. I'm happy that we have taken bank-wide important steps in achieving these commitments in the last 2 years. While growing, we will continue to mitigate our environmental footprint and increase our positive impact.
As I mentioned at the beginning of the call, we will not stop here. There is a lot of dynamism, motivation at the bank at every level. Over the next 3 years, we aim to increase our net active customers 50% and our digital active customers 60%. In other words, putting another 5 million customers in net -- at least 5 million customers in net, on top of what we have today.
On top of last 2 years, market share gains of 220 basis in consumer, 215 basis in SME among private banks, we target to gain further 300 basis market share in each over the next 3 years. While setting those aspirational targets, I fully rely on my top-quality executive team, our ambition and coherence in our common goals, the exceptional talent at every level and infrastructure that we have built over many years.
You all know Akbank very well. We will always be responsible while growing. So do not expect us to grow at all cost. It will be a profitable and sustainable growth. And no doubt, we have all the advanced analytical and talent capabilities to deliver these aspirations.
Our growth will continue to be funded with customer deposits where we aim to gain further 300 basis market share in both TL demand and widespread consumer time deposits. Our customer growth, especially with digital customer cross-sell being 2x of non-digital, will contribute significantly to our fee base, leading to a fee-to-OpEx ratio above 80% within the next 3 years. While achieving these targets, we will leverage and maintain our #1 positioning in capital as well as best-in-class efficiency. As a result of our responsible growth, our ambition is to remain highest among peers in ROA and to achieve top performance in ROE while having the highest level of capital for future growth.
Yes, Ebru, maybe I'll turn the floor to you.
Thank you. Thank you, Hakan-bey. So this concludes our presentation. And now we're moving on to the Q&A session. [Operator Instructions] And for those of you who are joining us by telephone, please send your questions by e-mail to investor.relations@akbank.com.
And the first question comes from Alan Webborn.
Thanks for the presentation and for kicking off the guidance around for this year. A question, I guess, to Hakan-bey in terms of the -- this is a very special year with sort of a challenge in -- at some point in May and probably a degree of uncertainty as to what happens after that. In putting your guidance together for this year, how have you viewed the sort of the macro environment? 40% loan growth is still -- is quite a high level. And clearly, you've got some view of what your margin is going to look like over the whole year.
So could you just talk us through a little bit how you're positioning yourselves in the run-up to the election given the fact that you've got all of these regulatory constraints that are constraining your ability to grow and how you see things afterwards in terms of getting to these full year targets, which clearly are not as high as you've achieved in 2022? But I think we all understand that. But just to give us something of a context in terms of how you got to this '23 guidance would be really helpful.
Yes. Alan, thank you very much. I think this is a very important question. So between now and, like, until June time frame, actually, there is no clarity, so we can predict more or less the macro environment. But after June, of course, the election results actually will probably play a big role for the remaining part. But of course, we have to make an assumption. So when you look at our actually rate assumptions, actually, we are forecasting 30% inflation; 30% interest rate for CPI linkers; 9% for the policy rate; and 3%, 3.5% growth for the economy.
So one can ask this question, if things do change actually after June time frame and there's a different environment for interest rates, I mean, of course, this is not possible for us to predict. But what we are trying to do as a bank we are trying to actually minimize our maturity mismatches. So we have been trying to do this over the last actually couple of years. So when you look at our loan growth, especially in recent months, so there is more growth on the consumer side where the rates are relatively, let me say, acceptable, so towards like 30%, high 20s and so on. So still, we are making margin on that, okay?
But of course, there are limitations on the actually commercial side, so banks are having difficulty in creating margins. So we are actually also -- we would like to protect our, of course, NIM. So therefore, we try to maintain our profitability through trying to become the main bank actually of those customers where we are lending. So that is what we are trying to do. So when you look at the full year, we are projecting a 4.7% NIM. So I think this is possible. Despite all the restrictions on loan yields and so on, I think there is a possibility. I mean this is a very likely scenario, even if there is a rate hike after actually in June time frame.
And the reason I'm telling you this is because there is so much actually caps on our lending rates. So even if there's a rate increase, because as my friends -- as Ebru already has shared with you, deposit costs have already actually has been rising. So even if there is an interest rate hike in the country, the adjustments on the loans would be, I would imagine, much more than the adjustments on the deposit side. So therefore, the banks on the NIM side can have some room looking forward to improve their NIM. So therefore, no matter what happens after the elections, whether we have the same monetary policy, even if there's a change, I think we would be able to manage this.
So 4.7% NIM, I think, in both actually, options, I think that is something we can achieve. And this maturity mismatch management is something which is very critical. So that's what we have been trying to do. Demand deposit increases funding mixes, so these are all the things that we have been focusing on significantly. And we have been actually achieving extremely good results, having great market share gains. And I think that will be contributing to our NIM.
Okay. So in essence, you wouldn't disagree with the idea that even with the rate hike post the elections, that your margins could actually improve in the second half of the year given the fact of where market pricing is today. Is that -- do you think that's achievable?
What I'm trying to say is this 4.7%, even if that is the case, for the full year, that is something that we can achieve. Maybe for a quarter or so, there might be some additional pressure on the NIM. But eventually, I think it will be better because the loan rates will be higher than what we have today.
Okay. Super. And just one other question on the fee growth, I mean 60% is a good level. I mean are you -- is the market allowing you to keep putting through fee income increases in a more constrained corporate environment? Just to give a bit more understanding of where you got the 60% from.
First of all, this outstanding customer acquisition, that is a great source for us to improve our fee generation. So I mean 2.3 million in net, I think this is an outstanding figure. So -- and I think that the bank has a lot of momentum with all the digital capabilities and so on. So therefore, this year, we will continue to acquire customers. So this is -- this will be actually contributing significantly to our fees.
And what I'm very also very happy about, Ebru mentioned that in the presentation, we are not only growing our number of customers. But what I'm happy actually, we are also increasing the cross-sell ratio of the bank. So to be frank with you, I have been in retail bank for so many years, I have almost spent half of my life in retail banking, and I think this is something extremely difficult to achieve. You can earn customers, but you cannot actually typically increase your cross-sell during the same period. So this is what our friends actually at retail banking have achieved last year. So this is something very difficult to do. So therefore, this additional cross-selling -- improvement in cross-selling, together with the additional customer acquisition, customer activation, I think will give us this 60% increase. So it's not only limited to corporate, commercial and so on but throughout the bank.
So I'm aware of the fact that there are lots of restrictions, caps, competition and so on, but the bank has a lot of momentum in those areas, consumer, SME, other areas, and there's a lot of contribution for advanced analytics and digital.
Okay. Super. Well, it's going to be a very interesting year. So it will be fun.
Thank you.
Thank you, Alan. Thank you for your question. And now the next question comes from [ Simona Pedrini ].
I guess the next question then comes from Konstantin Rozantsev from JPMorgan.
I had 3 questions that I wanted to ask. The first one, could you please comment on the trends in the deposit rates in the market, the Turkish lira deposit rates and dollar deposit rates? How do you see this progressing in the coming weeks and months? And within Turkish lira deposits, if you could strip the FX protected scheme and the conventional Turkish lira deposits.
The second question that I wanted to ask is about the loan quality. So if rates get hiked at some point later, after the elections, and if Turkey enters into some kind of a period of slow growth for a number of years and next to zero growth over a number of years, how do you -- how sensitive do you see your loan quality over, say, like 3- to 5-year period of time in this condition?
And the last question, please reiterate your expectations about the call of the bank's subordinated bond in April this year.
About the rates, so as you know, we have a regulation now where we have to convert our deposits more towards local currency. So there are certain deadlines for this. So if you don't do this, then we have to actually purchase some fixed rate bonds, which we all are trying to actually avoid. So as a result of this, the deposit rates in the country has been rising actually, especially during the last couple of days, couple of weeks. And as of last week, central bank actually also removed the cap on this new deposit scheme.
So when you look at the ongoing rates, there are, of course, differences between the banks and there are also differences whether we have big deposits or small deposits. Rates do range a lot. So I have to tell you this, but anywhere between 15 to high 20s, you can observe actually in the system as of today. But I would imagine that -- there is this February 24, which is the deadline for that additional bond purchases. I would imagine that between now and then, this actually competition in deposit taking will continue. And after that, there might be some more actually, how should I say, normalization in the system. But in average, I can say today the time deposit costs is around -- I would imagine for the system, around 20%.
And for FX deposits, it's just the opposite. So interest rates in a global environment have been increasing. But when you look at the system in Turkey, since we are trying to convert our FX deposits into TL, FX deposit rates in the country have been coming down. So banks actually for a dollar account -- again, it depends on the size of the deposit, it depends on the bank. But what I can say, it is very typical for a bank to pay something like 0.5% or 1%, maybe 1.5%, for a dollar deposit. So when there is some pressure on our NIM on the TL side of the balance sheet because of the rising deposit rates, it's just the opposite on the FX side. So that is what we are experiencing on the deposit side.
The loan quality -- I'm not only referring to my own institution. And as you know, Akbank is a very cautious bank, and we do this risk management on loan quality side. This is part of our actually DNA for many, many years. But for the system, I think the evolution will be quite healthy. Even if there is an increase in the interest rates, even if we have relatively low growth in the coming months, I think the -- our clients and the clients in the system actually have the capability of active digesting this because the reason is the corporates, commercial customers, even SMEs, they have been actually quite profitable, so they had this access to lending at very affordable rates. And assuming that they have good business, good products, good services, they have been able to adjust their prices in line with the inflation but getting their loans from the banking system at a very low rate. So they have been actually accumulating a lot of buffer in the past.
So I think the companies, whether it is big or small, I think have these buffers. So looking forward, I'm not really worried at all even if there is a rate hike or a relatively low growth in the system. Of course, there might be some exceptions, but systematically, I feel actually very comfortable for the whole system.
This subordinated loan that we have, I think that was your last question, so last year, if -- we had a similar situation. And Akbank called that Tier 2 loan. So our goal is to do the same this year, and that will be in April. But as you know, of course, we have to get permission from our regulators. So last time, we had the permission and we repaid the loan, we called the loan. So again, we will apply and see what will happen.
Turker, would you like to add anything?
Hakan, yes, maybe on the asset quality side, actually, you have explained it very detailed. But also, not to forget, Konstantin, we always preserve our cautious stance. And therefore, actually, as Ebru had mentioned, also this year, despite the improvement trends actually in the asset quality in the system, we have continued to book further provisions. And as a result of which actually, our provisioning ratios have increased actually.
And also for the NPL portfolio actually, the value appreciation of the assets actually, which are our collaterals actually, there was a significant value appreciation. It didn't really lead us to make some provision reversals actually, quite the opposite actually. As I said, we want to stay on the safe side, so we increased the provision buffers further. So we will actually preserve this practice in the future as well.
Yes. Turker, I realize that I also forgot to mention this FX launch. So there has been -- again, for the system, of course, for Akbank as well, there has been a big deleveraging on the FX loan side. So when you look at the corporate and commercial customers of banks, so they have been actually reducing their FX exposure significantly. So year after year, FX loans have been decreasing in the system. So that is also a big plus for the healthiness of the system. So when you look at the FX loans today in the system, they are mostly exporters, for some actually other companies with long-term investments in the country. So therefore, there is also less risk. And some of these FX capped loans, for example, there is this government actually protection and so on. So that is also a very positive development for the banking system in Turkey.
Thank you, Konstantin, for the question. Thank you. And the next question comes from Mehmet Sevim from JPMorgan.
I have 3 questions, please. So first of all, Hakan-bey, you earlier mentioned that you're readying in your balance sheet for all eventualities later in the year, including a change in the interest rate environment post the elections, if that happens. And you also mentioned the decreasing maturity mismatch, for example. But maybe beyond this maturity mismatch between loans and deposits, could you also elaborate on how your balance sheet would react should there be a sudden and abrupt change in the interest rate environment? Specifically, would you see any risks arising from the regulatory framework and the interference that we saw recently, including the securities book and the recent bond purchases?
And then my second question would be on the revival in FX loan growth that we saw in the fourth quarter and also in your guidance, you're showing that, just a slight one, after the big deleveraging we saw in the first half. Where is that coming from? Is this just a normalization in the trend? Or is there actually some specific reasons for that?
And my last question, if I may, on Slide 25, you're showing that you target a fee-to-cost ratio of 80%-plus in 2025. I just wanted to make sure that this isn't typo or anything because it's an astonishing figure, if it's a net fee to cost figure. And if so, given you're currently at 58% and a very efficient cost base, where will the improvements come from? And also, of course, how would the yearly development be until 2025?
Okay. Thank you very much, Mehmet. First, about these bond exposures, so yes, there is this regulation in the system. But as I said earlier, we are trying to refrain from purchasing these bonds as much as possible. So far, I think we were able to do this given the size of the bank. So if you look at the size of Akbank and the amount of actually fixed bonds that we have purchased until today, so approximately, it's like 2%, actually, of the total balance sheet. So that is something I think is very digestible looking forward. So apart from that, I mean, the bank has been extremely careful with maturity mismatch management. So I understand your question, but what I'm trying to say, it is -- given the size of the bank, it is something relatively small as of today. So it is digestible.
Let me also answer your third question and then leave the second one to Turker, if you like, if that is okay with you. The fee side, yes, we are around now 58%. But I am relying a lot actually on the digital capabilities of the bank and also actually be already existing efficiency of our institutions. So I mentioned about this 2.3 million customers that we have increased in net this year. And Mehmet, we have done that with the minimum number of people among the peers and also with the minimum number of branches among the peers. So I think that is a very clear sign of efficiency and the level of sophistication on the digital front.
So we have done all those investments. So we have been actually investing something like $200 million, $250 million, sometimes $150 million, so something like $150 million to $250 million year after year over the last almost 10 years. And we were the first bank to adopt this mobile-first strategy. Now we are more into more sophisticated, bank-agnostic models and so on, open banking and so on. So therefore, I actually rely a lot because we can put the scale on top of what we have already invested. So we don't have to open new branches and employ thousands of people and recruit more people and so on to cater those additional, more than 5 million customers in our portfolio. So these digital capabilities, I think, will give us this opportunity.
And if you also examine our figures, a digital client versus a traditional client, when you look at the fee generation, the cross-sell ratios and so on, on the digital, it is twice as much as a regular customer, compared to a regular customer. So therefore, this is a journey. This is an aspiration. I understand, and I know that this is something very challenging, 80%, this is something very challenging. But I think our goal with my friends is to move in that direction. So you will see us traveling in that direction. Probably with a linear, let me say, progression year after year, I think there will be some improvement in that ratio in the bank.
Yes, maybe I can elaborate on the second question with regard to fixed loan growth. Actually, the FX loan growth was quite measured in the last few years, and we've seen this continued shrinkage. But actually now, we have come to a relatively low base, like USD 10.7 billion levels. And yes, in our guidance, we shared actually a limited growth of low-single digit actually. When you -- if you would translate it, it would just mean maybe a few hundred million dollars. We expect this growth much more to be happening in the second half of the year so -- because we hear from our corporate customers that they are delaying some of their investment decisions to the second half of the year, which may actually increase this demand actually for FX loans. But again, to repeat actually, even though we expect the growth, it will be actually limited in nominal terms.
Thank you, Mehmet, for your question. And the next question comes from [ William ].
Hakan-bey, my question is related to Juzdan and Tosla. Ebru specifically highlighted the importance of Juzdan. However, I couldn't understand the differences between 2 products, I mean between Juzdan and Tosla. Are these independently managed fintech companies or just another product or service of the bank? If these companies were set up as subsidiaries of the parent company, what kind of value are you targeting to create out of these fintech investments?
Thank you, [ William ]. That's also a great question. These 2 are actually totally different. Juzdan is a very visionary product. And the reason I'm telling you this, our approach to banking is very different than what we used to have before. So what we are trying to convert Akbank into actually is like a platform. So this Juzdan, so when you look at inside Juzdan, it is actually unique, in a sense, in Turkey. And it is the first bank-agnostic product. So Juzdan is not only for Akbank products. When you look at Juzdan, you see Wings cards, you see Axess cards, and you also see the cards of all other banks. So it is like a platform. It is bank-agnostic. So therefore, our vision from now on is to create those platforms.
And this is also in line with the open banking actually vision that was creating outside Turkey several years ago, and that has also come to Turkey as well. Especially with the new regulation change about a month ago, this like -- at the beginning of this call, earnings call, you have seen our advertisement. So this is the new trend. So therefore, we have lots of expectations out of Juzdan as a platform, okay? So this Juzdan today is inside the bank, but we can easily spin this off and create value. So there is a possibility there.
Tosla, on the other side, is a different company. It is like a fintech company outside the bank. We have a different CEO, a different management. So again, we are having a similar effort for actually -- this is actually a tech company. So Tosla is one of those products. But I know that my friends there also have the vision of putting some other products into their portfolio, again, with this bank-agnostic vision. So it does not really have to be actually Akbank's products or their own products. So now they are into POS business, for example. So they will not be only selling Akbank's POS terminals. So they will be able to sell other banks' POS terminals as well. So this is, I think, is the vision we all have to actually embrace looking forward.
But I'm happy that Akbank is the first bank to take those actions in advance so that -- I think this is something that we will probably be creating value earlier. So at least that is the aspiration that we have.
Thank you, [ William ] for your question. I see that there are no further questions online. But I think there are some -- there's one little question that we haven't answered. Gülçe, would you like to ask?
Sure. Yes, we have a number of written questions, but most of them have already been answered. And what remains, can you please elaborate dividend payout assumption used in your targets for 2023?
Maybe I can try to answer this question. Actually, you may -- actually, first of all, sure, it will depend on BRSA's approval, the payout ratio. But as you may remember, in the past, our payout ratio was in the range of 10% to 25% levels. But actually, surely, we would like to have the -- we would like to maximize the payout ratio but -- so we'll see how BRSA's decision will look like. But nevertheless actually, the impact of the changing payout ratio will have a limited impact on the ROE calculation. Since we already have, by the end of last year, more than TRY 150 billion of equity size. And so this year, with the current profit generation, the average equity will be much higher. Therefore, actually, the payout ratio will have a minimum impact on the ROE.
Thank you, Turker. It looks like we have no further questions. Once again, thank you all for your kind attention. And Hakan-bey, I'll leave the floor to you for any final comments.
Ebru, thank you very much. And again, thank you all for joining us today. So as I have mentioned many, many times, we have been through many cycles, and I have full faith actually in our people's capacity and execution. And I would like, once again, to express my ample gratitude for their exceptional efforts. And I also would like to thank you all, our stakeholders, our investors, for their consistent trust and confidence in us. Keep well, and I hope we see you all again soon. Take care, everybody. Thank you for coming.
Bye-bye.
Bye-bye.