Unknown Executive:
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.

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 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.

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

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.

Yasmine Hemeda:
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.

Omar El-Husseiny:
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.

Yasmine Hemeda:
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.

Hisham Ezz Al-Arab:
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.

Yasmine Hemeda:
So you won't pay me more?

Hisham Ezz Al-Arab:
I look after you. I look after you and the 8,000 people. It's not me, it is the Board who decides.

Rahul Bajaj:
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?

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

Hisham Ezz Al-Arab:
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.

Unknown Executive:
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.

Hisham Ezz Al-Arab:
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.

Yasmine Hemeda:
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.

Hisham Ezz Al-Arab:
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.

Unknown Executive:
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?

Hisham Ezz Al-Arab:
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.

Unknown Executive:
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?

Yasmine Hemeda:
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.

Hisham Ezz Al-Arab:
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.

Unknown Executive:
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?

Hisham Ezz Al-Arab:
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.

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

Hisham Ezz Al-Arab:
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.

Unknown Executive:
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?

Hisham Ezz Al-Arab:
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.

Unknown Executive:
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?

Hisham Ezz Al-Arab:
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.

Unknown Executive:
[Operator Instructions]

Hisham Ezz Al-Arab:
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.

Unknown Executive:
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?

Yasmine Hemeda:
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.

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

Yasmine Hemeda:
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.

Omar El-Husseiny:
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.

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

Hisham Ezz Al-Arab:
I will answer that. But because every time I bring it down, it goes up.

Yasmine Hemeda:
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.

Hisham Ezz Al-Arab:
And it is a good problem to have.

Unknown Executive:
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?

Hisham Ezz Al-Arab:
We are targeting a certain balance there. And when we reach that point, we'll close the program.

Unknown Executive:
[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?

Yasmine Hemeda:
It's because of accruals, expense accruals.

Unknown Executive:
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?

Hisham Ezz Al-Arab:
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.

Nelly Zeneiny:
Thank you, Noor. Thank you, everyone, for dialing in. Thank you so much.

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