Grupo Cibest S.A.'s Q3 2025: Contradictions Emerge on Loan Growth, Cost of Risk Stability, and EGP Volatility

Guidance:

• Normalized 2025 profit target ~EGP 70 billion.
• Blended loan growth guidance for 2025: 20%–25%, with local-currency growth materially higher.
• Blended NIM guidance for 2025: ~9%.
• Deposit growth guidance: 10%–15%, with CASA 55%–60% of new flows.
• Cost control: operating costs to remain below 20% for the full year.
• ROE expected to remain >37% on a normalized basis.

Business Commentary:

* Loan Growth and Diversification: - CIB's loans witnessed a growth of around EGP 119 billion, translating to a 30% increase, driven by local currency loans growing by 38% and foreign currency loans by 17%. - The growth was supported by a significant increase in corporate loans, particularly in sectors like petrochemicals, chemicals, automotive manufacturing, and port development.

• Macroeconomic Stabilization and Interest Rates:
• CIB benefited from favorable macroeconomic conditions, including a drop in inflation rates to 12% and a real interest rate of around 10%.

• The Central Bank's disciplined monetary policy led to a 625 basis point cut in the policy rate, supporting a healthy macro environment and CIB's business growth.

• Deposit Gathering and Cost Management:

• Total deposits reached EGP 1.04 trillion, growing by 8% year-to-date, with a healthy share of CASA to total deposits at 60%.

• Effective cost management resulted in a cost-to-income ratio of 14.3%, with a focus on increasing current accounts and savings accounts to improve deposit base resilience.

• ECL Model and Risk Mitigation:

• CIB's new recalibrated ECL calculation led to a one-time release of provisions amounting to EGP 13.1 billion.
• The revised model more accurately reflects potential credit losses, ensuring the bank's risk coverage remains at a comfortable level with NPL coverage at 281%.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "CIB delivered another very strong set of results." Highlights: loans +EGP119bn (30% YOY); fees & commissions +22% YOY; ROE 45.9% (37.7% excl. one-off); CAR 30%, CET1 26%. Management repeatedly described strong balance-sheet resilience and disciplined execution.

Q&A:

• Question from Waruna (SICO Bahrain): Four parts — outlook for FY25 loan growth (local vs FX) and into 2026; long-term sovereign yields vs short end and yields you're earning; NIM outlook (will ~9% hold); and how to model the new IFRS/ECL percentages for Stage 1/2 going forward?
  Response: Reconfirmed blended loan-growth guidance 20–25% for 2025 with much stronger local-currency growth; FX loans growing but distorted by tourism prepayments and EGP appreciation; local-currency NIM resilient (local NIM ~13% YTD; blended ~9% target); IFRS recalibration reduced coverage/cost metrics and coverage remains comfortable (~281% NPL coverage).

• Question from Rahul Bajaj (Citigroup Inc., Research Division): On sovereign portfolio: will sovereign yields decouple as rates fall and are sovereigns now more attractive than loans? On ECL: can the released reserve become regulatory capital later, and what's normalized cost-of-risk and should we expect a Q4 spike?
  Response: Said loans remain the bank's primary and more profitable business despite decoupling (decoupling to persist but at lower magnitude); ECL reserve is not part of regulatory capital now but may be reassessed after 18–24 months pending model stability; normalized P&L run-rate provisioning is much lower (annualized ~EGP1.4–1.5bn, implying ~0.5–0.7% cost-of-risk), while the 'risky-assets' metric post-release is ~7%.

• Question from Darren Smith (Unknown): The other provisions reversal (~EGP5.1bn) — what exactly is that?
  Response: Total one-off release EGP13.1bn: roughly EGP8bn reversed from direct loan-loss provisions and ~EGP5bn is contingent-provision reversal (e.g., letters of credit) recorded in other operating income.

• Question from CI Capital (Q&A box): The swing in profit from 'swap' revaluation (EGP15m Sept '24 to EGP187m Sept '25; Q2 loss EGP395m) — what drove it?
  Response: Gains were driven by interest-rate hedges (interest-rate swaps) as the forward curve repriced down, creating mark-to-market gains on hedges executed on assets and liabilities.

• Question from CI Capital (Moderator): Administrative expenses rose ~35% for 9M'25 vs 9M'24 — what are the key drivers?
  Response: Increase reflects FX-linked contract renewals (post-2022 re-pricing), capitalization of IT projects leading to higher depreciation, and higher stamp-duty/regulatory costs from loan growth; FX-adjusted cost growth ~17%.

• Question from Schwab (Q&A): What is the provision coverage on the performing risky portfolio now?
  Response: Coverage of the risky performing portfolio is 7.7%, within the targeted 7%–8% range (previously ~14%).

• Question from CI Capital (Q&A box): Will there be more provision releases going forward?
  Response: Any further release is possible but not routine; further releases depend on ongoing model reviews and external auditor/central-bank comfort over the next 18–24 months.

• Question from Shalom (Raised hand): What portion of the OCI/fixed-income portfolio is hedged vs interest-rate risk and what could be sold to realize gains if rates drop?
  Response: Management stated positions in FVOCI and amortized-cost portfolios (local and FX) are hedged against rate risk and are held for hedging, not trading; realizations would occur only under severe liquidity stress.

• Question from Saurav Gobiyal (Q&A): Please refresh guidance for 2025 and give color for 2026.
  Response: Reiterated FY25 guidance: normalized profit ~EGP70bn, blended loan growth 20–25%, blended NIM ~9%, deposit growth 10–15% with CASA 55%–60% of new flows, costs <20%, and ROE >37%; 2026 guidance pending budget finalization.

Contradiction Point 1

Loan Growth Expectations

It involves differing expectations for loan growth, which impacts the bank's revenue and growth potential.

What's your 2025 loan growth outlook for local and foreign currency loans, and what's your outlook on noninterest income trends and NIMs? - Sherif El Etr (CI Capital Research)

2025Q3: Local currency loan growth is expected to be strong, around 38%, driven by working capital and CapEx. Foreign currency loans may grow slower due to repayments, but overall, blended loan growth guidance remains between 20% to 25%. - Yasmine Hemeda(Head of Investor Relations)

Can you provide the loan growth breakdown by segment? How do you plan to maintain a 16% ROE with NIM and cost of risk pressures? - Lindsey Marie Shema (Goldman Sachs Group, Inc.)

2025Q2: Loan growth is projected at 5.4% with commercial at 4.2%, consumer at 7%, and mortgages at 7.5%. - Mauricio Botero Wolff(CFO)

Contradiction Point 2

Cost of Risk Stability and Provision Reversals

It involves differing expectations for the stability of the cost of risk and the potential for provision reversals, impacting the bank's financial health and risk management strategy.

What is the risk cost outlook and normalized level post ECL model recalibration? - Unknown Analyst (SICO Bahrain)

2025Q3: The cost of risk has been adjusted, with the average now at 7% compared to 8.2%. Coverage ratios are at 280%, with stability expected over time. The new model reflects expected credit losses more realistically. - Islam Zekry(Group Chief Finance & Operation Officer and Executive Director)

What is your outlook on the political landscape ahead of the presidential elections? What key dates should we monitor? What NIM expectations do you have with more stable interest rates over the next years? How do you plan to protect NIMs? What sustainable cost of risk level should we expect over the next years? - Ernesto María Gabilondo Márquez (BofA Securities)

2025Q2: Cost of risk may stabilize at 1.8% to 1.9% long-term, with optimism for a lower level due to economic trends. - Juan Carlos Mora Uribe(CEO)

Contradiction Point 3

Potential EGP Volatility and Interest Rate Normalization

It involves differing expectations for managing potential EGP volatility and interest rate normalization, impacting the bank's risk management and financial strategy.

How is CIB preparing for possible EGP fluctuations and interest rate normalization by 2026? - Unknown Analyst (Shalom)

2025Q3: CIB's capital is fully matched, and FX positions are managed based on regulations. The bank anticipates interest rates returning to pre-devaluation levels by the end of 2026, with potential EGP volatility managed through hedging strategies. - Yasmine Hemeda(Head of Investor Relations)

What is the political landscape outlook ahead of the presidential election? What key dates should we monitor? What are your NIM expectations with stable interest rates in the coming years? What strategies will protect NIMs? What is the sustainable cost of risk level in the coming years? - Ernesto María Gabilondo Márquez (BofA Securities)

2025Q2: If inflation risks persist, NIMs will be around 6% by year-end. - Juan Carlos Mora Uribe(CEO)