Grupo Cibest S.A. (NYSE:CIB) Q3 2025 Earnings Call Transcript

Grupo Cibest S.A. (NYSE:CIB) Q3 2025 Earnings Call Transcript November 4, 2025

Sherif El Etr: 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.

Nelly Zeneiny: 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.

Yasmine Hemeda: 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.

Q&A Session

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.

Omar El-Husseiny: 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.

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

Sherif El Etr: [Operator Instructions] We have a question from [ Waruna ] from SICO Bahrain.

Unknown Analyst: Am I audible?

Yasmine Hemeda: Yes, [for me it is] fine.

Unknown Analyst: 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?

Yasmine Hemeda: 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.

Islam Zekry: 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…

Yasmine Hemeda: IFRS, the run rate for the provision…

Islam Zekry: 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.

Omar El-Husseiny: 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.

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

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

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

Omar El-Husseiny: 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.

Unknown Analyst: 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…

Omar El-Husseiny: 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.

Unknown Analyst: 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?

Yasmine Hemeda: 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.

Unknown Analyst: So what you said was like local currency, what the sensitivity you said was 600 basis point decline…

Yasmine Hemeda: It was not 600, at 60 basis points.

Unknown Analyst: No, no, I’m saying the 600 rate cut resulted in only 60 basis point decline, right?

Islam Zekry: Yes.

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

Islam Zekry: Year-over-year, this was a 9-month…

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

Yasmine Hemeda: 2.6%.

Unknown Analyst: 2.6%.

Sherif El Etr: Our next question from Rahul Bajaj from Citi.

Rahul Bajaj: 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.

Omar El-Husseiny: 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.

Islam Zekry: 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.

Rahul Bajaj: 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?

Islam Zekry: 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…

Rahul Bajaj: 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?

Islam Zekry: Compared to our risky assets, specifically loans.

Sherif El Etr: We have a question from Darren Smith from [ 337 ].

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

Yasmine Hemeda: Yes, Darren. We can hear from you.

Unknown Analyst: 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?

Yasmine Hemeda: 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.

Islam Zekry: 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.

Unknown Analyst: 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?

Yasmine Hemeda: 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.

Unknown Analyst: 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?

Yasmine Hemeda: 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.

Unknown Analyst: 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…

Yasmine Hemeda: It should be around EGP 1.4 billion, EGP 1.5 billion.

Unknown Analyst: And you think that is a — that’s a sort of a normal level for at least a couple of years. Is that…

Yasmine Hemeda: 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.

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

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

Unknown Analyst: That’s nice to see. And I can’t wait to see the dividend announcement later this year.

Yasmine Hemeda: 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.

Sherif El Etr: 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?

Omar El-Husseiny: 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.

Sherif El Etr: 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?

Yasmine Hemeda: 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.

Islam Zekry: 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.

Sherif El Etr: We have another question from [ Schwab ] asking — sorry, he didn’t hear the question regarding the provision coverage on the performing risky portfolio.

Yasmine Hemeda: 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%.

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

Islam Zekry: 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.

Unknown Executive: 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…

Omar El-Husseiny: Even for the CDS…

Unknown Executive: 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.

Sherif El Etr: 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?

Omar El-Husseiny: 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.

Islam Zekry: 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.

Sherif El Etr: We have a raise hand button question from [ Shalom ].

Unknown Analyst: Can you hear me?

Yasmine Hemeda: Yes, hi [ Shalom ].

Unknown Analyst: 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?

Omar El-Husseiny: So you’re talking about the foreign currency part or the local part?

Unknown Analyst: Both. But let’s start with the local.

Omar El-Husseiny: 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.

Unknown Analyst: Could you repeat, please?

Omar El-Husseiny: 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.

Unknown Analyst: 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?

Omar El-Husseiny: 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…

Unknown Analyst: 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?

Omar El-Husseiny: 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.

Sherif El Etr: 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?

Yasmine Hemeda: 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.

Sherif El Etr: [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?

Yasmine Hemeda: 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.

Omar El-Husseiny: 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.

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

Yasmine Hemeda: 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.

Sherif El Etr: Thank you, CIB management team, and thank you all for attending CIB’s 3Q ’25 earnings call hosted by CI Capital.