CIB

Good afternoon, everyone, and welcome to CIB's 4Q 2025 Earnings Call. Thank you for dialing in. This is Noor [indiscernible] from CI Capital Research team, and we are happy to be hosting today's call. From management, we have with us Mr. Hisham Ezz Al-Arab, CEO and Executive Board member; Yasmine Hemeda, Head of Investor Relations; and Nelly Zeneiny, Investor Relations Manager. As usual, we will start off with a summary of 4Q 2025 performance, and then we will open the floor for questions. I will now hand over the call to management.

Good morning, and good afternoon, everyone. This is our customary disclosure statement. This call is intended for investors and analysts only. As such, if any media representative has gained access to this call, kindly hang up now. Certain information disclosed during this earnings call consists of forward-looking statements reflecting the current view of the bank with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of the bank to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including worldwide economic trends, the economic and political climates of Egypt, the Middle East and changes in the business strategy along with other various factors. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may materially vary from those described in such forward-looking statements. The bank undertakes no obligation to republish revised forward-looking statements to reflect changed events or circumstances. And this ends the disclaimer statement. I'll now hand it over to Mr. Yasmine Hemeda to give a brief overview of the full year 2025 results. Yasmine, please go ahead.

Thank you, Nelly. Let me start by saying that while everyone was expecting 2025 to be an adjustment year where we would continue to see the same trends as we had been seeing in 2024, it turned out to be a year filled with very, very positive surprises. It was a year of great economic improvement and consolidation with the easing cycle hitting its stride. Inflation dropped to 12% and cumulative rate cuts reached 725 basis points by year-end, resulting in a much more business-friendly environment. In addition, foreign currency inflows hit new heights and tourism, remittances and exports, which more than compensated for the drop in the Suez Canal revenues. CBE reserves reached EGP 50 billion. NFAs in the banking sector exceeded the EGP 20 billion mark. And consequently, the EGP strengthened against the Dollar reaching 46.47 EGP but more significantly was the constant availability of the interbank market, which was and is critical to company's operations. As a result, CIB was able to grow its loans by EGP 177 billion or 44%. 56% of this was in local currency and 50% was in the form of CapEx, which was a very, very positive surprise for all of us. Gross loans reached EGP 576 billion, and our LDR hit 52%, with the local currency portion reaching an all-time high of 71%, further confirming the long-awaited economic revival. Consequently, we're very happy to report yet another outstanding performance that is driven by genuine growth in core business activities with CIB growing its top line by 19% year-on-year and a very healthy balance sheet growth of 19%. All this was achieved while maintaining NIMs at 8.95%, which is a very contained compression that came in by 53 bps and this was mainly due to the bank's deposit base, where deposits grew by 14%, but more importantly, local currency deposits grew by 21%, and CASA now stands at 61% of the total deposit base. This helped mitigate NIM compression and supported margins and spreads despite of the aforementioned 725 basis point cuts. Credit quality remained very solid. And with the ratification of the new ECL model, the bank reversed EGP 13.1 billion of excess provisions. But what is more important to note is that moving forward, the newly calibrated ECL will more accurately reflect the bank's asset quality. NPLs recorded 1.67%, with a coverage ratio of 358%, but what is more relevant is that the performing loan coverage ratio hit 7.1%. Costs remained very much stained with a cost to income of 15%. And all of this came together to register an all-time high of net profit after tax of EGP 82.2 billion, representing 49% above 2024. And even upon normalizing for the impairment reversal, we still recorded an all-time high of EGP 70.6 billion and the 41.5% ROE. On the capital front, CAR reached 27% and given the rationalization in the macro environment and our adequate level of capital, the Board is proposing a cash dividend of EGP 6 per share, which translates to a payout ratio of 30% of the distributable portion of the 2025 profits. Moving into 2026, we remain very, very positive about the economic outlook for Egypt in general and about the ability of CIB in particular, to safeguard and create value to all its relevant stakeholders while remaining at the forefront of change, and we're very, very excited to be embarking on our 5-year journey ahead. On that note, I think we can open it up for Q&A. Thank you, Noor.

[Operator Instructions] Our first question comes from Rahul Bajaj.

This is Rahul Bajaj here. Congratulations, first of all, on the very strong set of results. I have three questions, if I may, please. The first one is on the fee income line. We've seen the fee income line, the fee line grow quite materially in the fourth quarter compared to the run rate of the previous few quarters. If I look at the last few quarters, the run rate has been around EGP 2 billion to EGP 2.2 billion every quarter, but fourth quarter was around EGP 2.8 billion, EGP 2.9 billion. So is there a one-off there? What is driving this big increase, and should this level sustain into 2026 for a quarterly modeling point of view? So that's my first question. My second question is on margins. As Yasmine kind of pointed out, very strong performance on margins despite the fact that there was some significant rate cuts. How should we think about margins going forward? I mean, first of all, there is this decoupling of the sovereign rate which helped, I think, initially on the margin point. We're talking -- you're now talking about deposits also helping. Should we expect these gains to continue? Should we expect margins to continue to be flattish into 2026? Or you expect a pressure to come in as rates continue to go down? How should we model margins going forward? So that's my first -- second question. And my third and final question is on the guidance. Any specific guidance you could provide for 2026, that would be extremely useful. Thank you.

Sure. I'll take the first -- the second and third question, and then I'll hand it over to Mr. Omar El-Husseiny to cover the margin bit. For the fees and commissions, I mean, yes, there was a one-off that was recorded in the fourth quarter of around EGP 1.5 billion, which was realized from the sale of an asset settled for debt and when you normalize that, growth quarter-on-quarter was around 112%. And no, you shouldn't expect one-offs of the same magnitude moving forward. Having said that, I mean, now that we're sort of expecting grow1th from genuine core commercial banking activities, and with the expected loan growth that we are sort of budgeting and expecting over the coming 5 years and specifically in 2026 as well, definitely should expect an increase in the net fees and commissions line. And the overall contribution of the fees and commissions and the noninterest income to the overall revenues, it should start inching up a bit, which is really long, long overdue. And that's all on the back of the expectations in terms of loan growth, which I'll delve into now when I'm talking about the guidance and the typical fees and commissions that are typically associated with that. I'll hand it over to Omar to cover the margins, and then I'll come back with the guidance.

Good morning and good evening, everyone. So for the margins, it's a bit complex because there are lots of moving variables that you need to take into consideration. One, the balance sheet mix between the local currency and the foreign currency; two, on the local currency, specifically, we have been on the asset side and the liability side. So on the asset side, we have been stretching the duration on the fixed side during the past period of time. And the composition of the liabilities, as Yasmine was mentioning, we have around more than 60% CASA to term deposits. So that is helping us whenever interest rates is coming down, the easiness of reflecting this to our customer liability pricing is much more easier and faster when it comes to our pricing; third, when we started a couple of years to shift from the sovereigns to loans because we're expecting interest rates to come down. And as soon as interest rates will be coming down, we will be more dependent on noninterest income, that's from one side. But by virtue of nature, when you shift from sovereigns to loans, that's in itself hurts the NIM because of the withholding tax. So for instance, if you're buying 1-year T-bills at 25% and you're shifting to a loan right now priced at offer corridor at 21%. So on the NIMs, you have the gross of 25% versus the loans of 21%. So whenever we're shifting from sovereigns to loans, that in itself is dragging the local currency NIM down.

And if I may add just one point. I mean, yes, definitely, although loans are not that NIM accretive as compared to the sovereigns, the whatever compression that we should expect on the NIMs will be more than compensated for by the growth on the ROE that would be mainly driven by the fees and commissions. If I just answer the guidance question, let me start off bottom up. So we're expecting growth of between 15% to 20% over the EGP 70.6 billion bottom line. And what's more important to note is that most of this growth will be coming from, like I said, core commercial banking activities. Thus, you see more contribution coming from the noninterest income as compared to the net interest income, which was the typical growth that we've seen over the past few years. On the deposit side, we're expecting to see between 15% to 20% growth. But what is more important to note is that at least 50% to 60% of the growth and the deposits will be coming in the form of CASA, current and saving accounts. The ROE, definitely, the 40s are somewhat behind us now, but we are very, very comfortable in maintaining ROEs above the 30% mark. And again, it's a function of how much loan growth will be coming through and specifically how much CapEx versus working capital facilities. In terms of loan growth, we're expecting between 30% to 35%. And we're expecting the trends that we've been seeing in 2025 to continue in 2026. So we're expecting to see CapEx coming through, albeit it will -- we're expecting to see more of expansion re-CapEx more towards the second half of 2026. But all in all, we're expecting very healthy demand coming through. For the -- what else, NPLs will remain pretty much under control, cost to income, I have the CEO here with me, and I'm trying to push him to pay me more, but he wouldn't. So I mean, unfortunately, it will remain well below the 25% mark. What else, you should pay me more.

The point which is very important when you talk about the CASA and the increase as a percentage, you have to keep in mind that the investment we made in the digital platform was the key driver for increasing the CASA account and the saving accounts because now it became easier for people to move money and became more friendly for them to be exposed to the different products that could suit their life cycle or the financial requirements. On the past, it was deposit or CDS. Now we can see I can get interest on my saving account day to day or monthly or whatever. So the -- I think personally that the more digital-friendly platforms, the more business growth we're going to see. And that is very obvious when we analyze the reason behind the increase on numbers.

So you won't pay me more?

I look after you. I look after you and the 8,000 people. It's not me, it is the Board who decides.

This is clear. Just one quick clarification, the 15% to 20% bottom line growth. This is taking into account the big write-back you had in 2025 on the provision line. So that is in the base?

Yes. So this 15%, 20% is above the EGP 70.6 billion, which is basically normalized for the EGP 13.1 billion.

And by the way, when we spoke about the ECL model, we went through a very rigorous process that we learned a lot of things that why -- if we see change in dynamics and the assumptions, we -- most likely when we look at the numbers once more. That's an ongoing process. It's not one off.

We also have another question in the Q&A box on the launch of the Digital Bank. So when can we expect the launch of the digital bank how should we think about its contribution to the group's profitability over time? And do you see any scope to scale the digital bank into other markets over the long to medium term.

Well, the digital bank, we just applied for the license. I think our application in my opinion and other people opinion was a solid application. The value proposition there is practically cost saving for the bank. And meanwhile, leveraging on the -- what you call it, the I wouldn't say unprofitable, but high-cost customers that we can make much more money from understanding the lifestyle in different profile, plus the Gen Z is looking for lifestyle application. They have a plan, and I think their plan, they are talking about 10 million customers within the coming 5 years. That's good. I think the number will be north of that. It will be higher. This is my personal, by the way, not the bank projection, my personal view because what I have seen in preparation for the digital bank is outstanding, to be honest with you. Plus, I had a meeting during the day of time with several people are involved in this industry. Some of them are international players without naming names. And practically, I feel very comfortable after validating our business model and technology and the go-to-market strategy.

In terms of the contribution of the digital bank to the overall group revenues, I think like we presented in the Strategy Day, by year 5, it should contribute to around 10% to the overall revenues of the CIB.

It's not only the revenues. I have to tell you something because our agreement here, we want to launch before the end of '26. And if we launch before the end of '26, most likely sometime later in '27, early '28, you're going to go for a capital increase, and you may involve other minority investors there. Your valuation will be very different. You're a small investment there. We have to look at the market valuation of this industry. It's by far higher multiple than the traditional commercial banks. And that will definitely reflect in your valuation, plus the -- what you call it, in year 3, while after kicking off and start to show results, most likely we'll look at other markets. We haven't decided yet what are the other markets. We have some idea about other markets. There are some lessons I learned from other international players when you expand in different countries, what you should look at, and this was really an eye-opener. So that will save us trial and error in deciding which is the next market.

Thank you. We have another question on capitalization and dividends. So what are your thoughts on the bank's capitalization trajectory? And what is your dividend policy over the medium term?

Well, the dividend policy, as you can see now, the risk tolerance and the -- what you call it, the risks within the macro is by far -- and several of you when I met you about 10 months ago or so with other investment bank and road show, I said that 70% of the risks in our balance sheet are related to the monetary and exchange policy. And now there is no doubt that everyone, including yourselves, are comfortable with the exchange and monetary policy. And that's the key risk that I'm not going to go through the past and the hyperinflation and now things are very different. And because they are very different, our ability to take more risk and assess risk and capital requirements is better than before. If we have a buffer between the 20% capital to the end of year before dividends or after dividends, that buffer is practically to cover the expected very strong growth in the loan portfolio. And on top of that, I don't know how to put this. Just a second because I want to put it right, not to make the wrong statement. We are assessing potential opportunities seriously and we are close to assess, to start with certain opportunities. I need capital for that. Practically, our policy is based on projection and then excess capital is -- I don't want to have excess capital under the current circumstances, so I keep the capital that is needed to hedge the bank and keep the resilience and meanwhile, fund our operations.

Thank you. We have another question on trading income. So would annualizing 4Q 2025 trading income be a reasonable estimate for 2026's trading income?

No. I mean, because like we said before, there was a one-off thing. So I mean you shouldn't be annualizing for that. And you should actually be modeling for more contribution from the fees and commissions line versus the trading income to the overall noninterest income.

Maybe I would add, Yasmine, for the transaction we did in the last quarter of the year. This was the normal -- honestly, it's normal course of business and recovering non-performing loans, okay? We did the right job, the team worked very hard on the recovery and it made good money for us. It's a part of our commercial activities. And when you have a written off loans or fully provided loans for, we don't let go and that's it. We try to use our experience in terms of investment banking for our network, how can we recover that asset? And this was an example of asset recovery profile.

We also have another question on cost-to-income. So can you please confirm if the cost-to-income guidance of below 25% is administrative expenses or total operating expenses. Also, how should we think of other operating expenses or income given the volatility in the last 1 to 2 years?

1 to 2 years, we have serious challenges with the exchange rate. And that was the key. I mean, for example, contracts at $100,000, nothing changed. But from the $100,000 at EGP 9 or at EGP 17 or at EGP 50, what was challenging to manage and project. Now we have a stable exchange market. I don't see those spikes anymore. As for the cost of income, this is the cost of income for the operation and administration as well. So practically, the 25% is a decent ceiling to have, taking into account the strong earnings because expenses are going up. And don't believe Yasmine, she's getting paid well. I'm not going to discuss her package on public, but the cost is going up, but the revenues touchwood are beating the cost increase. I hope that would answer your question.

Thank you. We also have another question on loan growth. So what were the key drivers behind the sequential loan growth in 4Q, 2025?

The main driver was loan growth -- for the loan growth was the local currency loan growth. This is why our loan to deposits jumped from about -- on the middle 40s about a year ago to about 71% in the local currency balance sheet. And 50% of the loan growth was in CapEx, but that confirms our view about the economic condition.

There is also another question that says, which counties rank highest in terms of potential M&A opportunities as you look to expand beyond Egypt? Will this expansion be for corporate banking or retail or digital? And can you discuss your experience thus far in Kenya and the lessons learned?

Don't drag me to make statements, correct? So I will be very careful again. The things we are working on are [ more than ] Egypt, but I cannot specify what we are doing is the fintech bank, retail, corporate, whole institution, whole finance company or whatever, but it's part of our own day-to-day operation. As the lessons from Kenya, now Kenya is -- we have a new CEO that took over at the beginning of -- the previous CEO did a good job in stopping the bleeding, putting the house in order, hiring the right people. Now we have a new CEO coming from the local market. He's a local guy, very well regarded. You can see his bio on their page. The lesson learned in Kenya is that you cannot buy something and let it run by itself, okay? But practically, when you buy something, you have to have the shared service and you have to help the team there, you are buying it to improve it. So I haven't seen a private equity buying a company and doesn't sit at the Board and help the management. And this maybe was our mistake, but the change happened, and we're on the right track now.

Thank you. This is very clear. We also have a question on the ECL provision reversals in 3Q. So at what point in the future does the [ exit ] ECL add reserve of EGP 13 become available for potential distribution or qualify as CET1 capital? What threshold criteria needs are needed to be fulfilled before this becomes part of your core capital? And does this leave scope for any potential increase in payouts in the future?

Okay. That EGP 13, which is on special reserve now, we are doing certain studies. And practically, I'm confident that if we go with a good story to our regulator and we feel comfortable with what we are doing, they may allow us to release it into the capital or whatever, maybe this year and the next year, but I really don't know, but I wish I can do it within the coming 3 months, 6 months. I wish -- I hope so, but I'm not going to make promises, but the only thing I promise you, we are working very hard to prove our point that this one is in excess and should be added to our capital adequacy.

[Operator Instructions]

I expect someone to ask me about Yasmine package. So no one has been asking about this, but you are the one who started this. That's going to be the talk of the town.

We actually have a question on cost of risk. So following the new ECL model, what are the expected cost of risk levels going forward, and should we expect any further provision reversals?

So I mean, for a more normalized run rate for cost of risk, as we guided before, it will be somewhere between 0.5% to 0.7% per year. So this would translate into -- in terms of absolute terms between EGP 1.5 billion to EGP 2 billion in total, both direct and contingent. And like Mr. CEO has previously mentioned that we're constantly relooking at the new recalibrated model to assess its accuracy, to assess its adequacy and whether it is indeed reflective of the actual asset quality of the portfolio and the operating environment. And on a need basis, I mean if we need to do any reversals, we would do that. If not, I mean, the run rate would be between 0.4 -- 0.5% to 0.7%. But definitely, you shouldn't expect any reversals with the same magnitude as the EGP 13.1 billion. That's for sure.

Thank you. There is also another question on margins. So can you please detail the latest NIM sensitivity to interest rate cuts?

It's very hard to give you a certain gauge as to the sensitivity of the NIMs because like Omar said, I mean, there are a lot of factors that come into play, and it's mainly driven by the management decision and I mean, basically how to manage assets and liabilities. But I mean, we can -- from where we're standing and from a cost perspective on the liability side because of the 61% CASA and because of the composition of the sovereign portfolio and how it's broken down into 50% bills and 50% bonds, with average maturity of 2.5 to 2.8 years. So this will sort of act as a cushion against any sort of steep compressions, which are typically associated with the declining interest rate environment. So I mean, the compression in the NIMs, although it will happen, but it will be more of a gradual one as opposed to steep movements.

I may add, on the NIMs. Our low-hanging fruit is the loan deposits and foreign currency, and that runs at about 32% with more opportunities and focus on the foreign currency lending. That means that we have a hedge coming from the foreign currency, very low NIM to more expandable ones. That is my low-hanging fruit on the balance sheet.

Thank you. We also have a follow-up on the NPL coverage. So should we expect NPL coverage to be in the 300% range.

I will answer that. But because every time I bring it down, it goes up.

I mean -- and that's why -- I mean, we make it a point to always point out, and we always say what's more relevant for you to keep a track on is the coverage ratio for the performing portfolio. If you remember, at its peak, it reached 14.5%, 15%, and now it's down to 7%. If you want to position that, position it against the regional average of 4% to 5%. So I think we are in a very, very good place. Again, the coverage ratio is a function of NPLs and a lot of factors. I mean the recent increase in the 358%, it's not due to anything but because of upgrades and reclassification of NPLs from Stage 3 into Stage 2. So in essence.

And it is a good problem to have.

That is very clear. We have another question on the CDs. So the CIB recently raised the interest rates on its 3-year fixed rate CDs offering up to 17.25% per annum in December 2025. So are these still valid? And if yes, what is the expected time frame?

We are targeting a certain balance there. And when we reach that point, we'll close the program.

[Operator Instructions] We have another question on OpEx. So why did other operating expenses declined from EGP 4.8 billion to EGP 3.7 billion?

It's because of accruals, expense accruals.

We would pause for a moment for more questions to come in. Since there are no further questions, would management like to make any closing remarks?

We'd like to thank you all for your support. And I still believe that we have a long way to go in terms of growth, market cap and maybe when I said that always my ambition is higher than what people look for. I mean a year ago, people were talking in the bank, we need to reach EGP 7.5 billion market cap. Now we are in excess of EGP 9 billion. And I think we'll carry on our market cap to be fair with you in terms of comparison to the other Africa large players like ourselves or the Middle East, our market cap should not be less than $13 billion, $14 billion, and we'll get there on time.

Thank you, Noor. Thank you, everyone, for dialing in. Thank you so much.

Thank you, management, and thank you all for attending CIB's 4Q 2025 Earnings Call hosted by CI Cap. Have a nice day.

Good afternoon, everyone, and welcome to CIB's 3Q '25 Earnings Call. Thank you all for dialing in. This is Sherif El Etr from CI Capital Research team, and we're happy to be hosting today's call. From management, we have with us Mr. Hisham Ezz Al-Arab, CEO and Executive Board member; Mrs. Yasmine Hemeda, Head of Investor Relations; and Nelly Zeneiny, Investor Relations Manager. We will start off with a summary of 3Q '25 performance, and then we will open the floor for questions. I will now hand over the call to management.

Good morning and good afternoon, everyone. This is our customary disclosure statement. This call is intended for investors and analysts only. As such, if any media representative has gained access to this call, kindly hang up now. Certain information disclosed during this earnings call consists of forward-looking statements reflecting the current view of the bank with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors can cause the actual results, performance or achievements of the bank to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including worldwide economic trends, the economic and political climates of Egypt, the Middle East and changes in the business strategy, along with various other factors. Should one or more of these risks or uncertainties materialize or should any underlying assumptions prove incorrect, actual results may materially vary from those described in such forward-looking statements. The bank undertakes no obligation to republish revised forward-looking statements to reflect changed events or circumstances. And that ends the disclaimer statement. I'll now hand it over to Ms. Yasmine Hemeda to give a brief overview of the financial performance.

Thank you, Nelly. Good afternoon, and good morning, everyone. Thank you for joining our earnings call, and thank you, CI Capital for hosting it. I'll give a brief overview of the macroeconomic backdrop. Then I will give a brief on the quarterly financial results. The macro picture continued its steady and broad-based improvement across all fronts, and this was mainly supported by disciplined monetary policy. On the inflation front, the rate dropped to 12% as of September 2025, which allowed the CBE to further cut the policy rate to reach 21.5% by end of October, bringing the total rate cuts since March to 625 bps. This in and of itself has further improved the macro landscape, creating additional room for more cuts throughout the remainder of the year while still maintaining a real interest rate of around 10%. The decoupling of the sovereign rate persisted, continuing to offer the banks lucrative returns on their excess liquidity and helping mitigate the natural NIM compression, which is typically associated with a declining interest rate environment. On the currency front, the exchange rate has remained within a 6% to 8% trading band throughout the past period with the EGP strengthening slightly versus the dollar, hovering around the 48%, 48.5% range. But more importantly, foreign currency availability has remained consistent, supported by record highs in remittances, tourism and exports over the past period and dollar sales were surging across the system. And if this says anything, it underscores the market's confidence that the current exchange rate reflects the fair value of the EGP. As a result of this favorable and improving macro environment, CIB delivered another very strong set of results. Loans witnessed a growth of around EGP 119 billion, translating to a growth of 30%, which was driven by local currency loan bookings of 38%, together with foreign currency loans growing by 17%, with corporate loans growing by 34%, of which around 40% came in the form of CapEx and with the bank's share of lending to SMEs recording 25.4%. This fed into strong growth in the sustainable stream of noninterest income with fees and commissions income growing by 22% year-over-year. On the funding side, the bank's deposit gathering strategy continued to yield results. Total deposits recorded EGP 1.04 trillion, growing by 8% or EGP 75.3 billion year-to-date. And more significantly, the healthy share of CASA to total deposits grew from 55% last year to 60% this year. Local currency deposits added 11% or EGP 61.3 billion, while foreign currency deposits grew by 10% or USD 787 million. Consequently, our loan-to-deposit ratio reached 49.7% by end of period, up from 39.4% last year and recorded 52.3% upon further accounting for securitization deals with the local currency portion reaching a record high of 66.6%. This resulted in local currency NIMs recording 13%, showing balance sheet resilience despite the aforementioned interest rate cuts. Costs were tightly kept under control with improved efficiencies leading to a cost-to-income ratio recording 14.3%, up from 12.2% in 2024. CIB's new recalibrated ECL calculation was approved, resulting in a onetime release of a total provision amounting to EGP 13.1 billion. The release provision amount has been transferred to a special reserve in shareholders' equity through the bank's P&L statement, hence, crediting a before tax amount of EGP 13.1 billion to the P&L and to the provision balance sheet line. It's worth noting that in line with CBE's instruction, this reserve will not be recognized in the bank's capital base or CAR or distributable profits and cannot be utilized or distributed without prior consultation with the CBE. With this recalibrated model, which more realistically and accurately reflect potential credit losses and the quality of the loan portfolio, coverage of NPLs remains at a very comfortable level of 281%. And more relevantly, coverage of the risky performing portfolio [Audio Gap] profits for the 9 months 2025 reached EGP 62.1 billion. And after adjusting for the one-off reversal, year-to-date profits reached EGP 50.5 billion. ROE recorded 45.9% and upon excluding the one-off provision release, it's 37.7%. Throughout the bank maintained a strong capital position with a CAR of 30% and a CET1 ratio of 26% by end of third quarter 2025. Finally, our results this quarter reflect more than just a strong financial performance. They demonstrate the strength, the resilience and the disciplined execution that defines CIB. We remain focused on enabling growth and opportunity for our clients, our people, our shareholders, while maintaining the financial strength and solid fundamentals that underpin our leadership and success. With a clear strategy and a strong balance sheet, we will continue to invest in technology, talent and trust to ensure we continue to deliver sustainable long-term value and support the broader economy. On that note, I'll hand it over to Mr. Omar El-Husseiny, our Chief Global Markets, to give a brief on the past quarter.

Thank you, Yasmine. Good morning and good afternoon, everyone. Just a few updates. From a market and balance sheet perspective, our focus remains disciplined growth, expanding quality assets while protecting spreads and liquidity. This reflects solid pricing discipline and balanced mix between loans and sovereigns on the asset side and CASA and term deposits on the liability side. On the credit front, we continue to see healthy growth from the private sector with lending activity broadening across sectors that wasn't there during the past period of time, namely petrochemicals, chemicals, automotive manufacturing and port development, though at a slightly slower momentum than tourism and food industries. Year-to-date, we have added around 99 new credit commitments, including 55 during the third quarter alone, signaling both growing business confidence and CIB role in financing new investment cycles. On the noninterest income side, because we know that will be part of the questions that will be asked. On the trade finance volume, it has been increased by more than 30% year-on-year, yet profitability declined due to higher concessions offered among strong foreign currency inflows, particularly from households, tourism and exporters. This dynamic reflects our strategic decision to prioritize client relationship and flow retention during a time where we have excess foreign currency liquidity. Finally, the synergies across the global markets, treasury, GTB, financial institutions, enterprise and capital markets, debt and capital markets continue to strengthen our base of recurring fees, proving how far our integrated markets platform has evolved during the past period of time in a key growth and liquidity engine for the bank.

Thank you, Omar. On that note, we will now open the floor to Q&A.

[Operator Instructions] We have a question from [ Waruna ] from SICO Bahrain.

Am I audible?

Yes, [for me it is] fine.

So I have 4 questions, if I may ask one by one. The first one is on the loan growth. So the local currency loan growth, like you said, was very strong, 38%, but year-to-date, I'm saying. But foreign currency, I think it is -- if I -- correct me if I'm wrong, it's slightly down for the year-to-date. And so my question is, what is your expectation for 2025 this year, I mean, where can we see loan growth ending both foreign currency and local currency? And what's your expectation next year? Do you expect the similar momentum to continue? That's my first question. Secondly, I think you mentioned that the government -- the sovereign yields, I mean, that kind of protected your margins when corridor rates are falling. My question is what kind of treasury bill yields -- I mean you have -- I mean, treasury yields have been very resilient. In terms of government bond yields, long-term bond yields, have they been also resilient? I mean just want to get an idea as to what kind of yields are you been able to get? That's my second question. And third question on the NIMs. So what is the outlook? I mean, so far this year, NIMs are very resilient at around 9%. So can we expect that to continue at least for one more quarter and I mean -- and for the next year, if possible? Fourth question is on the IFRS, the model, the ECL model, now we can see certain -- I mean, if I look at corporate segment, your provision is around 1.5% of Stage 1. And then for Stage 2, around 16% these numbers have kind of revised down based on the new assumption, I guess. So can we expect like this to be the percentages going forward? I mean, how do we model that going forward?

Thank you, [ Waruna ]. If I'll just cover one question, and then I'll hand it over to our CFO and our Chief Global Markets to add the rest. For the loan growth, it might seem that it's a bit slow down in terms of rate on the foreign currency front, but this is because mainly of the repayments, which is very natural and very normal because most of the foreign currency lending is stemming from the tourism sector. And it's one of the main characteristics of that sector is that in good times, they tend to prepay. So it might look that it's a slowdown rate of growth compared to the local currency. But if anything, it is growing. But because of the prepayments, you'll see it slower or even possibly at a single-digit level as compared to the local currency front. In terms of the expectations of loan growth for 2025, we're still on point for our guidance, which is between 20%, 25% on a blended basis. The local currency will grow obviously at a much higher pace than that. We will continue to see the same mix that we're seeing, which is basically a lot of working capital and maintenance CapEx as well. This will continue throughout the remainder of the year. And we'll continue to see foreign currency loan growth coming mainly from the exporting industries and obviously, the tourism sector, like I mentioned earlier. I'll now hand it over to Mr. Islam Zekry, our CFO, to cover the IFRS model.

Just one comment on the foreign currency growth also. When you compare the results quarter-over-quarter in foreign currency, you'll find the numbers a little bit flat. The decline is coming or the declining trend you are noticing here is coming because of the appreciation of the Egyptian pound over the past -- over the third quarter. So when you recast for this, so the number is flat given the repayments Yasmine just highlighted. Back to the NIM sensitivity, we witnessed 500, 600 basis points of cuts over the past period. And our NIMs, the local currency NIMs gets impacted by almost 60 basis points. So the impact is not linear. So the relation is not linear. And that reflects the resiliency of the balance sheet. And all the efforts have been done on the retail side to increase the weight of the current accounts savings or the cheap deposits to the total deposits, which reached almost 66% when it comes to local currency, 60% on overall deposit base. Related to the question on the IFRS...

IFRS, the run rate for the provision...

So technically, when you look at the numbers as we speak after the release, the average cost of risk to the total outstanding deposits went down from 8.2% to 7%. This is 1% slight higher, less than 1% higher than the average of the market. The coverage ratios went down from almost 300%, 3x to almost 2.8 or 280%, which is when the model start maturing over time, we expect some adjustments on the long run. But you need to keep in your mind that the instructions of the Central Bank and the regime of the IFRS around relaxing or revising the TTCPD or the through the cycle, the probability of default process mandating us to keep monitoring the models for the coming couple of years. And within the couple of years, we may witness sort of adjustments here and there going forward.

And on the government bonds yield side, we had a discussion a couple of quarters ago when we said last year, we started to extend the duration on the asset side back again to the concept of mixing between assets between loan growth and securities and sovereign securities. Last year, we started to extend the duration on the asset side in the anticipation of interest rates coming down. And the majority of it was being held at the amortized cost and not through fair value through OCI. And that's not only on the local currency that has been as well on the foreign currency side. So we have been extending the duration on both local currency and foreign currency at the fixed side throughout sovereign bonds throughout our portfolio.

Okay. And regard -- I mean, as far as bonds are concerned, what is the split between the local currency and the foreign currency?

I'm very sorry, can you repeat that [ Waruna ]? The line was cutting a bit.

No. My question was what is the breakdown between local currency and foreign currency bonds, government bonds. Can you provide that?

So yes, so now we have around $3 billion on the foreign currency side. And on the local currency, we have around EGP 150 billion, EGP 160 billion.

Okay. Okay. And because the thing -- why I'm asking is that there was significant increase during the course of the third quarter as far as government bonds are concerned. So I was wondering whether you -- so basically, you were reallocating a lot of...

Especially on the foreign currency side because there have been lots of opportunities that we saw in order to extend our duration on the foreign currency, especially with the Fed cutting rates. So we wanted to do same as we did on the local currency side, same as the foreign currency to extend the duration on the bond side, and it has been the diversified portfolio, ranging from U.S. treasuries to other investment-grade bonds.

Okay. And just to conclude, so what is your NIM guidance on blended basis, what I'm asking for this year and next year, assuming -- I mean, let's say, let's assume that another 600 basis point cut next year, what is your expectation in NIMs?

So for 2025, NIM will remain almost flattish as compared to 2024 on a blended basis. So what we're aiming towards is around 9%, 9.1% for the full year. That's for this year. Next year, again, I mean, like Mr. Islam mentioned earlier, I mean, it's not a linear relationship. There are a lot of moving factors. But because of what we have been doing, fundamentally speaking, on the cost side of the NIMs of bringing down our average cost of funds by growing the CASA portion of our deposit base reaching the 60% that he mentioned earlier, so that whatever happens on the asset side, we secure a healthy enough margin on the liability side. So like we mentioned earlier that typically with a declining interest rate environment, there is definitely or there were going to be natural compression in the NIM. But because of what we have been doing, this compression will be more of a gradual one. So you won't see the 13% on the local currency front dropping to 3% or 4% overnight. It will take time. And I mean, it's too early now to guide for 2026. We're still in the process of putting together our budget. Once the budget is finalized and approved by the Board by end of the year, I'll be able to share the guidance on all fronts with the investment community at large.

So what you said was like local currency, what the sensitivity you said was 600 basis point decline...

It was not 600, at 60 basis points.

No, no, I'm saying the 600 rate cut resulted in only 60 basis point decline, right?

Yes.

And then -- so right now, the local currency NIM is 13% as it stands in 9 months?

Year-over-year, this was a 9-month...

9 months year-to-date is 13%. And what is the foreign currency NIM?

2.6%.

2.6%.

Our next question from Rahul Bajaj from Citi.

Rahul Bajaj from Citi. I have 2 sets of questions, similar topic actually. The first one is on the sovereign portfolio. And the second one is on the ECL. So on the sovereign portfolio, I understand your margins were strong in 3Q and the decoupling of the sovereign rate has kind of helped you. Two-part question. Firstly, do you expect this decoupling to continue as rates continue to go down? Or you think sovereign rates over time will merge with the loan yield, which is available in the market? So that's the first part. The second part of the question on this one is, I remember in previous calls, you mentioned that overall loan yield -- doing loans is more profitable for COMI than doing sovereigns because of the other -- the cross-sell and other things that you mentioned. Now because of the decoupling and because of the fact that yields on loans are going down, are you reaching a point where they're probably at an inflection and maybe you feel that doing sovereign is more profitable at this point of time rather than doing loans? Or you still think that doing loans is more profitable? So that's my first set of questions on the investment portfolio. The second one is on the ECL model. Now that the recalibration has been done, 2-part questions again. Firstly, I understand this is -- the reserve that has been created is not part of your capital now. But is there a provision or is there a discussion with the Central Bank that at some point in the future, the reserves will qualify as your core capital? Is that something that can come up 2 years, 3 years down the line? That's the first bit. The second bit is -- now that this recalibration has been done and you have the Central Bank approval, how should we think about cost of risk or normalized levels of cost of risk going forward? What would be that level? And historically, you've had a jump in fourth quarter cost of risk for the last few years. Should we expect a similar jump in fourth quarter of 2025? Yes, those are my questions.

Thank you, Rahul, for the set of questions. Those has been the discussions in the ALCO during the past period of time. So we are at the end of the day, a commercial bank. So our primary goal will be always getting the loans, especially for the auxiliary business. And to answer your question, it's still profitable to book loans than sovereigns. That's from one side. The other side is decoupling. Decoupling is happening, and it will continue during the coming period of time at a lesser magnitude, of course. But definitely, the market is discounting. So when we compare, shall we book a loan or shall we buy some papers, the market is already discounting further cuts in the interest rates on the local currency. So when we compare, we see the auxiliary business versus the expectation of interest rates. And one of the things that we always think about our ability as a bank to pass through the cut in interest rates to our clients on the deposit side.

Regarding the accounting treatments of the ECL, yes, the instructions upon the release decision of the Central Bank is not to consider it part of the capital base or part of the distribution statement end of the year. However, reserve is reserved accounting-wise. It's part of our coverage. And regarding the discussion with the Central Bank, again, according to the IFRS 9 regime and the Central Bank guidelines over there, we'll keep monitoring those models for the coming 18 to 24 months. And then all the possibilities are there. Anyway, they are part of our equity right now as a reserve, but all the possibilities are open once we get the assurance about the stability of the models and the resulted probability of defaults out of those models within the coming 24 months.

I had one more question, which was on the normalized levels of cost of risk. And should we expect a fourth quarter spike as we usually do?

Let me give you an idea about the cost of risk within CIB. So before the release, the average cost of risk was at the original range of 8.2%. After the release, that released almost 1%. So we are at the range of 7% as we speak. The average industry is 6%. So there are 90 basis points specifically different CIB higher than the average...

Sorry, when you say 8.2% average cost of risk, what are you referring to? Can you please clarify is this the P&L charge that you're talking about?

Compared to our risky assets, specifically loans.

We have a question from Darren Smith from [ 337 ].

Congrats and team on the great results. Just a quick question. Can you hear me, sir?

Yes, Darren. We can hear from you.

Just one quick question. The release of other provisions, I think, for the amount of EGP 5.1 billion, can you -- a reversal of those provisions. Can you just comment to what is that exactly?

That's the provisions on the contingent business. So I mean, so you have the direct, which is the 7, which you see it as a separate line. And then in -- as part of the other operating income or expense, this is the contingent provisions.

Let me elaborate here a little bit. So the total release is EGP 13.1 billion, okay? So that's the total amount released. A part of this is almost EGP 8 billion, which is direct loan loss provision that will be reversed part of our credit impairments accounting-wise when you follow my statements, our statements. The contingent provision is part of our noninterest income. So there is a release of EGP 5 billion over there. That's why we are the EGP 13.1 billion in 2 different accounting lines when you look at our financial statements. Sorry, that's the IFRS presentation standard, and that's the first that we are following up. So they are in 2 different lines.

Understood. And these are both obviously related to the ECL model. And that contingent business, are you talking as letters of credit? Or what's in there?

Yes, yes, yes. For the [ LC ] and for your reference, I mean, you find it as part of the earnings release, we always put it as under a total provisions line, which it groups basically the direct and the contingent for your easy reference basically.

Okay. And can I just follow up on one of the last questions around the cost of risk. I don't think I fully understood because I think you referenced you said 8.2% cost of risk and maybe the way we calculate is different, but I'm taking the provision charge on the income statement over your gross loans, and it's a fraction of 8% each year. Can you just clarify where you're getting that 8.2% from?

I mean, Darren, it's because of the IFRS and all of the accounting things, these are too sophisticated for you and me. But I think in more simplistic terms, I mean, you're talking -- this is the way we should look at the cost of risk, which basically entails that if you annualize the first half of provisions, so basically, if you annualize the EGP 700 million that we took, so for the full year, we would get between EGP 1.4 billion, EGP 1.5 billion. This -- you should consider this as more towards a normalized run rate for the impairment charges moving forward, which would translate to a cost of risk that is, I mean, almost 0.5%, 0.7%, so you'll normalize run rate.

Exactly. That's okay. That's how I would use it. And just to confirm, and that's compared to last year, you did about EGP 4.5 billion, and you're saying it should be around...

It should be around EGP 1.4 billion, EGP 1.5 billion.

And you think that is a -- that's a sort of a normal level for at least a couple of years. Is that...

That we don't get a nuclear war or anything basically. I mean, wipe us off. I mean, hopefully, this should be the normalized run rate.

Fantastic. Okay. Congrats on getting that ECL model approved and a phenomenal set of results.

It's a long time in the making, we've been talking about it for like 3 years now.

That's nice to see. And I can't wait to see the dividend announcement later this year.

I mean I have the CEO here. I'm putting him on the hot seat. I'm telling him, you promise people, so you need to deliver on that.

We have a couple of questions in the Q&A box. There are 2 questions from [indiscernible]. She's asking profit from currency swap deeds revaluation increased from EGP 15 million in September '24 to EGP 187 million in September '25. It was a loss of EGP 395 million in Q2. Could you elaborate on the main drivers behind this swing?

So this one is not the currency swap, it is the interest rate swap. So we do hedging because we're expecting interest rates to come down. So we did lots of hedging on the asset side and the liability side. And as soon as the forward curve is starting to come down in anticipation of interest rates to go down, so we're making more money on this specific item.

Perfect. The other question is there is an increase of about 35% in administrative expenses for the 9 months '25 versus same period last year. Could you give us a bit more color on the key components behind that growth?

Yes, sure. So I mean, there is nothing one-off about it. I mean this is like normal course of action, but I'll walk you through some of the lines that may be increased more than the others. So we had a lot of renewals for expired contracts that were signed back in 2022 that expired by midyear 2025. So these renewals, they sort of embedded new rates for the foreign currency against the EGP because we -- since 2022, we saw devaluations and we saw a lot of inflationary pressures over the past 2 to 3 years. So this was reflected in the renewal of the contracts. That's one of the things. The other thing is because of the -- we had a lot of finalized IT projects and infrastructures that basically started capitalizing in the third quarter of 2025. So you need to account for the depreciation impact on those as well. And the third more significant line is that because of the increase that we saw in the loan portfolio, hence, there are a lot of associated stamp duty and regulatory expenses. But other than those, there aren't -- and even those, I mean, there aren't to be considered one-off items, I mean -- and the cost to income remains well, well below the 25% mark. And I think we guided one too many times that not only that we have the room, but we have the intention of investing and expanding and doing a lot of stuff to be able to deliver on our growth plans and digital transformation moving forward. So I mean -- and luckily, we have plenty of room to do that comfortably while maintaining a cost to income that is both comfortable for the stakeholders, for the Board and for everyone involved.

And when you recast for the FX impact, the devaluation specifically, so the cost growth will be the 17% growth year-over-year. That's the normalized number for the currency devaluation.

We have another question from [ Schwab ] asking -- sorry, he didn't hear the question regarding the provision coverage on the performing risky portfolio.

It's 7.7% which if you remember, it used to run at around 14%. So I mean, it was brought down as promised to 7%. We always said that we will maintain that ratio between 7% to 8%. So now it's at 7.7%.

There is another question from [indiscernible] asking, will there be any more provision release going forward?

We hope so. But the idea is this is not like an annual event. It's one of a time. But the idea is according to the regulation, we are for the coming 18, 24 months, we are reviewing our models. External auditors are mandated to make a quarterly review and report, I think, on an annual basis also to the Central Bank to give the comfort level on those releases. But for the time being, that's the process.

We all have to understand that there's a period of time where the risks were very much like an accident, unpredictable. And those unpredictable risks are no longer there. We feel very comfortable either at the Board level or the management that we will not have those fireworks anymore. So practically, the economic condition or the monetary and exchange policy is much more predictable and by the way, I think personally that the regulatory authority, the Central Bank want to be predictable, and that helped a lot in reducing the risk premium in the market. When you look at -- because we live on the ground there, when you look at the -- anyone who is selling a product, a car, food, you name it, they used to mark their products by 30% and 40% premium for the unpredictability of the [indiscernible] and exchange policy that uncertainty as well...

Even for the CDS...

Even for the CDS, yes. Those unpredictability now are diminishing. And practically, I see it on no more overpricing of product because of the unpredictability of the risk -- the same thing we see it in how the economy is functioning, at least our customers. And that reflected in the ACL model. I would say that I've been told not really to put it in that way. But really, the assumptions we have are very different for the expected risk factors than the assumptions we had 5 years ago or 3 years ago.

There's another question from [ Amr Ayed ] asking, we noticed the higher funds utilization rate this quarter, along with a significant decrease in cash balances. Could you please explain what's driving these changes?

I can't recall if this is on the local currency or foreign currency. But anyways, it's a spot balances. At some point of time, we keep cash balances in order to meet the client demands or loan growth. So for instance, we might have a loan booking on the 1st of October, and we keep the cash on the 30th of September in order to meet the client needs in terms of the loan growth. And in case it's a foreign currency, it's exactly the same, either on foreign currency loan bookings or we're just buying securities. So we keep the money at our nostro until the settlement of the transaction.

I need to keep in mind that our loan to deposit specifically on the local currency went up from 50% to 66% in this [indiscernible] book. So that's part of the utilization. The others are cash operations, Central Bank cash operations.

We have a raise hand button question from [ Shalom ].

Can you hear me?

Yes, hi [ Shalom ].

I have a question again on the bond portfolio, fixed income portfolio. Could you give us an idea what part of the OCI portfolio is hedged against the interest rate risk? And what could be the potential size of the portfolio subject to recycling in case the rates drop to capitalize on the interest rates change?

So you're talking about the foreign currency part or the local part?

Both. But let's start with the local.

So I would say 100% of the local and foreign currency is for hedging purposes against interest rates going down. That's my plain answer to your question.

Could you repeat, please?

So I was saying either on the local currency or the foreign currency, 100% of what we're having either on fair value OCI or amortized cost is for hedging purposes against interest rates coming down.

So if I correctly understand this, in case the rates drop, so the magnitude of the gains from the mark-to-market will be limited in that case, right? Or if I have correct understanding?

It's for hedging purposes, it's not for trading purposes. If it's for trading purposes, then as soon as interest rates will be coming down, we'll be making more money, then we'll go just sell it and realize the profits. But as long as...

I see. And what is the part of the portfolio that could be subject for recycling for like selling to realize the gains, let's say, from the fair value OCI portfolio?

So based on our business model in the bank, fair value OCI and amortized costs are for hedging. So we cannot recycle those until we face a severe liquidity crunch in our balance sheet, then we will have to go and liquidate the part on the fair value OCI.

We have another question the raised hand button from Mohammed. We have a couple of questions in the Q&A box. Saurav [ Gobiyal ] asking, could you please refresh guidance for 2025 and give us color for 2026?

Thank you for your question. So I mean, let's work it bottom up. So we are still on point to record EGP 70 billion on a normalized basis because obviously, now we're at EGP 62.1 billion, which includes the reversal. And if you normalize for this EGP 13 billion, so basically, this EGP 50.5 billion should read 70% by year-end. Loan growth, we covered it, we're expecting on a blended basis between 20% to 25%, again, driven by stronger growth on the local currency side and strong enough single-digit growth on the foreign currency front. And with that loan growth, you should expect healthy growth in the fees and commissions line that will feed very positively into the noninterest income line as well. Costs will remain tightly under control, again, very much under 20% for the full year. NIMs will remain flat as compared to 2024. We are guiding for a blended NIM of around 9% for the full year. ROEs, I mean, it should remain well above the 37% mark, again, on a normalized basis. What else? Loan growth. Deposit growth, we're set to close the year with 10% to 15% growth on the deposit side. Most of the growth will be coming from CASA, current and saving accounts. We're always targeting that at least 55% to 60% of the new acquisitions will come in the form of CASA.

[Operator Instructions] We have one more question in the Q&A box. Selma is asking, how is the CIB positioning for potential EGP volatility? What are expectations for interest rate normalization in 2026?

I mean I'll take the interest rate part. So since the beginning of the year, thus far, we saw cuts of around 625 basis points, which is in line with the market consensus. If you remember, when we talked at the beginning of the year, we were guiding along with all of the other macro economists that we are to see between 6% to 8% cuts on the policy side throughout 2025, of which we saw this 625 and we're expecting to see 200 basis points more throughout the remainder of the year. I think for 2026, we'll see the remaining balance. So I mean, if we saw since the devaluation hikes of around 12%, if they cut 825 basis points in 2025, then the rest will be cut throughout 2026. So by end of '26, interest rates should go back to the pre-devaluation level. I'm not sure if I get it correctly. How do you mean how is CIB positioning for potential EGP volatility? Are you talking from a capital perspective? I mean, what are you talking about or what do you mean exactly? Until you answer, I mean, if you're asking about from a capital perspective, I'm sure you know that, I mean, as per the CBE, all banks should be 100% matched in terms of tenure and currency. So I mean, we have to be 100% matched from an assets and liabilities perspective. But we do have as any bank, I mean, because our capital is denominated in EGP. So I mean, we have this chronic sort of mismatch, which we moved very early on to hedge when we ventured to get the Tier 2 subordinated debt. And we're now at a position where for every EGP 1 depreciation, this would eat up around 20 basis points off of the CAR.

And in case the second part of the question is related to the FX positions. You know that as per the Central Bank regulations, we can go long or short up to 10% of our capital base, which we are maneuvering based on the market conditions, our expectations, foreign currency inflows and outflows and client needs, either they are on the trade finance or repatriation or delays.

Thank you. Since there are no further questions, would management like to make any closing remarks?

Thank you, everyone, for dialing in. I mean we're very happy to report yet another strong quarter, and we look forward to reporting the full year, and it will not fall short from what we promised as always. Thank you so much, and looking forward to talking to you all soon. Thank you.

Thank you, CIB management team, and thank you all for attending CIB's 3Q '25 earnings call hosted by CI Capital.