Commercial International Bank Egypt (CIB) S.A.E. (COMI) Earnings Call Transcript & Summary

Good afternoon, and good morning, everyone. This is Elena Sanchez from EFG Hermes, and I would like to welcome you all to CIB's Q2 2022 Earnings Call. It is a pleasure to have with us in the call from CIB, Hussein Abaza, Chief Executive Officer and Managing Director; Sherif Khalil, Chief Communications Officer; and Yasmine Hemeda, Head of Investor Relations. The call will begin with a presentation by management, a brief presentation on the recent quarterly results, and then we can open the floor for Q&A. I would like to hand over the call now to Yasmine Hemeda. Please go ahead. Thank you.

Thank you, Elena. 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 conference 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 in Egypt, the Middle East and changes in the business strategy and various other 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 or revise forward-looking statements to reflect changed events or circumstances. And that ends the disclaimer statement. I'll now hand it over to Mr. Hussein Abaza to give a brief presentation on the first quarter results -- the first half results. I'm sorry.

Thank you, Yasmine. Good morning, good afternoon, everyone. Thank you for joining. I'll do what we usually do on these calls. I'll give you a very brief presentation on what's been happening and what -- how we've reflected this in our numbers, and then I'll open it up to Q&A because that's usually a lot more beneficial. So as most of you know, we had a devaluation of the currency on the 21st of March, and that had more impact on the second quarter than the first quarter because all of the subsequent events really did not affect the first quarter to that extent. So on the 21st of March, we had the devaluation of the Egyptian pound by about EGP 3. And then immediately afterwards, the Central Bank raised the policy rate by 1%. Subsequently, in May, they raised it by another 200 basis points. And all that was not such a big issue for banks to deal with. In fact, most banks managed very well during that time. The problem was immediately after the deval, the 2 public sector banks issued 1-year CDs that were yielding 18%. Given that there's a reserve requirement on these, the effective yield is really almost 20 -- just under 22%, which is completely uneconomical either for us or for the public sector banks. So as a result, that had the biggest impact, I think, on the -- on bank's performance in Egypt during that period. So from the 21st of March all the way to the 30th of May when these CDs were canceled, it really impacted business in terms of the deposit gathering franchise. We took -- as all other banks in the system, took a conscious decision not to compete with this pricing because at no pricing above 12% would we have made money. So we would be losing money in the region of 6% to 8% on every pound gained. So this, of course, impacted us not in terms of growth. We actually had loss of funds during this period. Thankfully on the 30th of May, as I said, the CDs were terminated. The good thing from our point of view is it did not take any time to get the deposit gathering franchise up and running. So to give you some numbers, in Q1, as a result of the -- in the last 10 days of March, we lost about EGP 1 billion when the CDs were issued. During April and May, there was another outflow of about just under EGP 16 billion. And then on the 30th of May, they stopped. In June, we managed to ramp up deposit gathering to the tune of EGP 16.5 billion. So the good news was that the recovery was immediate. And that impacted June numbers. But more importantly, because these deposits did not come in at the beginning of June, you'll see the impact of that moving forward into July, August and September. And we'll still continue to see the deposit franchise grow. On the loan side, it was a different story. Because of the devaluation and because of inflation, companies are needing to borrow more just to import or buy the same level of raw materials. And even though we've been guiding for about 20% -- 18% to 20% loan growth for the year, our local currency loan growth for the first 6 months actually hit 20%. So for the first half, we had loan growth of just under EGP 10 billion. But for the second half, we had about EGP 15 billion of loan growth, which I think is probably the highest level we've had. Of course, as a result of that, with the deposits going out and then coming back, so our deposit growth for the full year was actually negative. However, our loan growth was positive. Our loan to deposit growth has gone up. And again, as a result of the deposit franchise regaining EGP 16 billion in 1 month, EGP 8 billion of which came in the form of CASA, we actually saw NIM expansion from quarter-to-quarter. So effectively, our NIMs went up from 7.08% in Q1 to 7.63% on the local currency. And we managed to do the same thing on the foreign currency. So the blended NIM went up from 5.66% to just under 6% to 5.91%. And for the full half, our NIM is now about 5.8%, which is up from 5.65% last year. So profitability metrics are also improving dramatically. As a result of that, ROE has gone up from 19.9% first half last year to just over 23% for the first half this year. And just worthy to mention that our NII for the second quarter was EGP 7.1 billion, which I think is again probably our highest ever. I think also on the back of that, it's basically -- to conclude, we -- in terms of the interest rates, we manage that because T-Bill yields and loan yields have gone up either by the policy rate increase or more in terms of the T-Bills, especially the short end. The funding resumed -- we resumed the funding once the CDs were stopped by the Central Bank and -- sorry, by the National Bank of Egypt and Banque Misr, and the profitability metrics seem to be improving. So I think all in all, we're sort of in a much happier place than we were 3 months ago and looking forward to a pretty good year. I think I'll open it up to questions now.

[Operator Instructions] We will take a question from Amit Mamtani.

So I have a couple of questions. Number one, can you please talk about the moving parts and cost of risk, the impact of PD, LGDs and EADs? And it seems like the assumption changes have been positive. However, you continue to book contingent provisions during the quarter. Number two, the outlook on credit growth posted a strong quarter. Number three, was the 0% deposit growth intentional during the quarter? And finally, number four, on the macro, what do you think is the macro plan in terms of FX devaluation and IMF plus GCC support?

Thank you. Let's start with the cost of risk. What happened with the cost of risk is the plan was to -- under IFRS 9, what you have is you have your 3 macro scenarios where you've got your best case, worst case and base case. And currently, our percentages are 5% best case, 30% -- sorry, 35% worst case and 60% base case. The plan was to shift 5% from the worst case to the base case. But I think after talking to our auditors and talking to our Board Risk Committee, we decided to defer that. And that is the only reason why you saw more provisions coming out because of the EGP 25 billion loan growth. However, if things continue as they are or improve, then once we start moving around these -- the weightings because I don't think at the moment, we're looking at the situation in Egypt where there's a 35% probability of worst-case scenario given the worst-case scenario metrics that we have put. We put very, very conservative metrics. And in terms of the deposit -- I'll just jump around. The deposit growth, the 0%, it was -- was it intentional in the sense that, yes, we let the funds flow out in April and May. As I mentioned, we lost just under EGP 16 billion because there was no way we were going to match the CDs that the public sector banks were issuing. So for us to match them, we would have had to price something at 16%, 17%, which would have been loss-making. So we sort of weathered the storm. And then we managed to claw back as much as possible. Whether we were actually intending to it at 0%, had we've been able to bring in more, I'm sure we would have, but I think EGP 16 billion deposit growth in a month was really pushing the team. So we're very happy with that. In terms of credit growth, we're still seeing domestic consumption coming in quite healthily. You'll probably be seeing numbers by other listed entities in Egypt like the Juhaynas and Editas. They're doing well. They're seeing domestic demand. And as you know, the Egyptian GDP is driven by domestic demand. And domestic demand is still very strong because we've come out of 2 years of COVID when people were not spending. They sort of consolidated their purchasing power. And even though we had the devaluation and we had some inflation, which put a dent in it, it did not stop it completely. So that's why we're seeing this pent-up consumption coming in very strongly. So the credit growth -- I'm not saying that we're going to have 40% for the year, but I don't think it's stopping at 20%. So I would definitely conservatively sort of raise our growth to 30%, if not more. On the macro, again, everybody -- all the economists and analysts seem to be expecting a devaluation. It seems to be priced into -- in the forward rate, it seems to be priced into -- even if you look at GDR versus our local, it's as if the GDR is trading at a dollar rate of about 2021. So it seems as if that is going to weather -- we're going to see a deval or a very slow -- because we're noticing that the EGP-dollar rate seems to be sliding slowly every week. It's almost at EGP 19 today. So I think -- I'm not sure what the plan is in terms of is it going to drop to 2021, is it going to reach 2021 slowly. I have no idea of what's happening there. The GCC support seems to be coming in, and the support is being reiterated verbally. We saw firsthand when ADQ bought 18% of CIB. They paid, I think it was publicized, $911 million for that stake. So it is coming in, and it's continuing to come in. And the GCC support, especially from the UAE, has been very strong. I personally think the IMF plan -- the IMF package is coming in. When? I have no idea, but I don't think it's too far away in the future. And I don't think anybody knows what the conditions are with the exception of the people on the negotiating table with the IMF.

We will take a question now from Rahul Bajaj.

Rahul Bajaj from Citi. Three quick questions from my side. The first one is on provisioning. If I remember quickly -- if I remember the earlier guidance on provisioning for the full year was about EGP 1 billion for the full year. You seem to be running much lower than that EGP 1 billion number. So I just wanted to check if you would want to revise that guidance down in terms of provisioning. And a linked question to this. You've been building this precautionary provision within your OpEx line. Just wanted to understand the accounting logic here. Why building this precautionary provision as part of OpEx and not as part of your usual provisioning? So that's my first question. The second question is on the margin trajectory going forward. We've had close to 300 basis points of rate hikes so far. Just wanted to understand, to what extent are these hikes already priced in into your asset and liability side. And hence, what should we expect for the margin trajectory as we move into the second half of the year? That's my second question. Final question is on dividends. If I remember correctly, there was an initial, I won't call it a guidance, but an indication that there will be an additional dividend during the year, probably middle of the year. We're already in June. So just wanted to understand, is there any further thinking on that topic?

Sure. Let me start with the margin, then the provision, then the dividend. On the margin side, it's the -- what happens is you get the policy rate. We had the hikes first. These are priced in at the beginning of the next month into the loan book. And we were very fortunate that we had very strong loan growth. So that impacted. However, we saw a very big lag between -- or not a very big lag, but a lag between these hikes and the rise in T-Bill yields. The Treasury Bill yields have been very different. The 3 months have gone up by over 4.5%, whereas the 1 year went up by maybe 250 basis points. And maybe 50 basis points of those were just last Thursday. So there is a catch-up to go. We're seeing almost an inverted curve there. But we've seen more and more hikes. So I think the outlook from where we are sitting, on the sovereign side, we're still seeing NIM expansion coming through. It hasn't started on the bond book yet. But even though, we're still confident that we're going to see more T-Bill hikes, which will have a positive impact on NIM. On the deposit side, we have issued some CDs after the Central -- after the National Bank of Egypt and Banque Misr stopped their CDs, not because we're competing with them, because the 13.5% and 14%, there's no competition. What we're doing is an expectation of interest rate, further hikes, we want to lock in funds at 13.5% and 14%. They're not very big, so they will not have a huge impact on our cost of funds. So long, long answer to your question. I think the trajectory, what we're seeing so far is an upward trajectory. How strongly it will move will depend on how quickly and aggressively T-Bill yields go up. But at the moment, T-Bill yields today are stronger than they were during the quarter. So our T-Bill book is actually generating more funds. And because all of the funds were in the very short end, they're maturing quicker. So we're reinvesting them at higher yields. On the provisioning. The OpEx line is related to provisions we take on contingent liabilities. So if the same customer has a letter of guarantee, then that provision is taken on the OpEx line, and that is the Central Bank or accounting requirement. If it is a direct loan, then it goes into impairments. And that's why we have a very large number, if you look, related to an exposure we took immediately after the Russia-Ukraine crisis. It's based on account of guarantee that we are -- we're guaranteeing a guarantee from a Russian bank. The -- as I said before, the underlying transaction is still actually performing. It is a Hungarian manufacturer of railway carriages supplying the Egyptian railway authority. The railway authority had paid a down payment, and this is an LG to -- sort of as a guarantee for this down payment. So unfortunately, at the moment, the Russian bank guarantee is considered riskier than the underlying transaction. But we are guaranteeing that guarantee. So for us to pay the Russian -- sorry, the Hungarian manufacturer has to default. Then the Egyptian railway authority calls on the Russian guarantee. It has to default and then we pay. At the moment, thankfully, the underlying transaction is doing very well. So that is like EGP 700 million or EGP 800 million of the provision that you can see on the OpEx line. On the -- regarding our -- so when I refer to impairments, I refer to both the OpEx and the impairment line. And when I was guiding for EGP 1 billion to EGP 1.5 billion, that was not including the EGP 700 million to EGP 800 million. However, I would imagine once -- if we bring down -- if nothing goes -- there no adverse changes happen towards the second half of the year, I would imagine we'll stay pretty close to this EGP 1 billion, EGP 1.5 billion of impairments combined between impairments and OpEx. Finally, on the dividends, I don't think, given what we're seeing today, it would be opportune of me to go to the Central Bank and say, "We want to pay out another dividend, a large part of which will be converted into dollars and leave the country." Given we still haven't signed the IMF deal, we're still looking to prioritize some imports. So I don't think the timing would be the perfect timing for it. And it's not one of those things you get 4 or 5 chances to ask. So I certainly want to ask it at the right time when I get the best chance of it being successful.

We will take a question now from [ Mohammed Barsoni ].

This is [ Mohammed Barsoni ] from Fitch Ratings. My question here is on the fair value of the comprehensive income/losses. These losses has eaten around 95% of your first half earnings -- net income. And also, this is due to the fast rising rates but also not that the CIB bought around EGP 30 billion T-Bills of -- that is also at fair value for OCI. What was the move -- the rationale for the move here and for CIB? And when do you expect overall fair value losses by the end of year 2022?

Sure. I don't think we bought EGP 30 billion. I'll correct you. I think we bought $50 million. These are eurobonds. This is the Egyptian eurobond. And we actually saw an excellent opportunity because today, these eurobonds are yielding 16%. But because they're held at fair value, which is what we used to call in the old accounting system available for sale, the losses go into our equity. And this is, if you remember, we had a CAR of 30%. So we had the losses of around $300 million, which is equivalent to close to EGP 7 billion, which were offset by the provisions we saw. So our CAR is still at 30%. But as long as these bonds do not default, then effectively, you're getting the yield of 16% on what we paid at the time. And the fair value comes back as the prices come in. Now why do we think they are a good investment? Two reasons. One is we genuinely don't think that there will be a default from Egypt. There never has been. And if you look at the foreign currency levels of debt in Egypt, they are not excessive. What we're seeing in emerging markets is there was a fire sale. So sometimes that is the best time to buy. Yes, you don't always buy at the trough. You can buy, and prices come down. But thankfully, having that huge buffer in equity keeps -- shields us from loss. So effectively, even if they go down to 0, we have enough CAR for it, but we're not expecting it to go down to 0 because if they were to go down to 0 in Egypt defaults, then I think all of us have much bigger problems to worry about than profits of next quarter. So we're not at all worried about that, and that was the rationale behind our buying. It was considered an excellent buying opportunity. There's panic in emerging markets. They're yielding 16%. These bonds are trading at 60% of their face value. So we thought it was the best time to do it. I think -- I don't know if I answered the question.

Yes.

We will take now a question from Naresh Bilandani.

It's Naresh Bilandani from JPMorgan. Good to speak to you. Three questions from my side, please. One is it would be extremely helpful if you can please share some outlook on the policy rates. Where should we go from this point on? Some thoughts on the local inflationary pressure. Just trying to gauge what should the policy direction be over the next 2 quarters. Second is we've seen a sharp move in the T-Bills yield, especially in July. So I'm statistically thinking that this should have like a very positive impact on your net interest margin going into Q3 and potentially into Q4. It would be very helpful also if you could kindly quantify where you see the NIM direction going towards the end of the year. Third, maybe a bit of an academic question. In the current environment, when you are originating an EGP loan, what is the reference rate that you're using for pricing? Is it the policy rate on the EGP? Or is it probably closer to the bond yields at this stage? And I promise the final question would be your tone sounds quite relaxed on asset quality at this stage. And we haven't seen from you any material change in the guidance on the provision since the start of the year, although the economic outlook has certainly deteriorated. So it would be very helpful if you could please throw some pointers on what gives you this level of comfort, despite the fact that the macro is under pressure, that the asset quality will continue to stay in control for the franchise.

Okay. I can't tell you exactly what keeps me so relax because this will probably put me in jail. I'm good. Don't worry. Everything is fine. Let me walk you through them one by one, and I'll tell you why I'm so relaxed. Okay. Let's start with policy rates. I think the expectation is policy rates because of inflation will go up. Most analysts and economists are talking about 100 to 200 basis point increase. We've seen the outliers with only about 400 basis points, and some people are talking about 0. But nobody -- sorry, nobody is talking about 0. Nobody is talking about interest rates going down. So I think the policy rates are expected to go up. And this is one of the reasons why, Naresh, we issued 13% and 14% CDs in order to lock in these prices today because we feel funding is going to come -- become more expensive. It's not for the entire book. It's just to lock in some stable funding for durations of 3 and 4 years at what we feel are prices that we won't be able to get in a couple of months. Secondly, as you pointed out, T-Bill rates have started moving. Now the impact of that is very important because if you look at what happened in the first half of the year, we actually had almost -- we had 0 growth. We had negative growth in our T-Bills, but we had EGP 25 billion -- sorry, 0 growth in our deposits, but we had EGP 25 billion of growth in our loans. So in order to fund this growth, we moved money from T-Bills into the loan book, which was great. Now we're going to start beefing up. So you're going to see T-Bill portfolios growing in volume and growing in yield. So the impact of that will be magnified much more than what we saw in the first half. Because first half, we were actually going down in volumes of T-Bills but going up in yields, and it came towards the end. Now we'll start in Q3 higher yields, and we're going to start seeing, hopefully, more deposit growth than loan growth, even though loan growth is strong. But what I'm trying to say is the deposit growth has resumed again. On the -- when we price a local currency loan, it's always off the corridor rate. It can be 2% off the mid-corridor. It can be 1% off the offer rate. But we never price off the T-Bills because our funding is related more to the corridor. And that's why when there was the decoupling of the 2 rates, we were locking our funding in our loans onto the policy rates but investing into the sovereigns at different rates. And finally, why am I so relaxed? I think, to be honest, a couple of things. One is -- let's get all the way down to basics. Egyptian GDP is driven by domestic consumption, and purchasing power is still there very strong. And you can see it in -- there's a shortage of cars. There's a shortage of imported cars. So people -- it's not like when we first had the devaluation back in 2017, you can't afford to buy anything. Now people can afford, but a lot of things are not around. So anybody who's producing stuff is selling. And you can double check this through people like, as I said, Juhayna, Edita and these guys. Secondly, we, at CIB, are seeing a very comfortable flow of dollars coming in to us, and we're selling. So our average interbank is still about $20 million. For people who are buying for their production process, there is no lag at all. So we're seeing that queue -- there's no queue, but there is constant demand. The loan growth trajectory momentum are continuing. T-Bills are going up. The 18% CDs have come down. So in a sense, companies are not having problems accessing dollars at CIB for production. They're not having problems selling or collecting because the purchasing power is there. So from that point of view, if you even look at things like tourism, et cetera, as you know, we have exposure both on the Red Sea front and on Cairo. Cairo hotels are at 90% occupancy or more. Room rates are above $500 at Four Seasons. If you look at the Red Sea, average occupancy rates are above 60%. The 2 large tourism groups we work with have 75% and 83% occupancy, respectively. And that's why when you look at our foreign currency loan book, we've had payoffs of $0.25 billion this year. So we're very happy with the performance of the book as it stands, especially in light of -- the worst case could have been so much worse. But we're actually seeing very solid performance on the tourism book, on the local currency book, on -- and the outlook looks quite rosy. So when I'm still guiding for -- I hope to come in the next quarter and increase my guidance for the bottom line. But today, I'm very comfortable saying 15 to 15.5. I'm very comfortable confirming that today as we speak.

We will take a question now from [ Tunde Ojo ].

I just wanted to dig a little deeper into sort of the variance quarter-on-quarter. So when I looked at the sort of summary press release that you shared with us, the big drop from -- on profit now from the second quarter to the first quarter was mainly due to the noninterest income line. At least that's where I could observe the biggest swing. And it went into like a negative number. And so if I looked at your fee income, it kind of dropped through the quarter. And I'm surprised to see that given the increase in loan disbursement, which, particularly in the past, used to drive your fee income line. And also, I'm just curious, why is that the case? And number two, what other drag did you have on the noninterest income? Did you have big trading losses? And why is that? Just wanted to understand that big move there.

No. Actually, what happened was -- you got the trend right, but I think the reason was we had -- if you remember, the devaluation happened on the 21st of March. And when that devaluation happened, we had the long dollar position of $150 million. So we made EGP 450 million unusual gain. It's a one-off on that long position. In addition, we had a revaluation gain on the balance sheet on some items. So we made about 1.5 billion of nonrecurring one-offs, and we mentioned it in the Q1 call, I think, that it was so long ago. So if you remove that -- thankfully, this happened in Q1 because that was when we had to take the EGP 800 million provision on the Russian bank. So it almost leveled out. There's a difference again. But I think it was not -- actually, if anything, if you strip out all the nonrecurring, our -- as you quite rightly said, because of the loan growth, our core fee income actually did go up, and it went up quite well. So it was more of a nonrecurring number that we took advantage of, the devaluation we came out on the right side of it this time.

What I was saying is actually, if I look at your fee income on aggregate, I mean, I don't know the breakdown. There was a drop quarter-on-quarter, and that's my concern, that you have...

The revaluation comes into the fee income. I'm sorry, this is where we have -- that's where the FX gains stuff come in. Because of accounting, we put it in noninterest income. Because noninterest income includes our recurring and our nonrecurring fee income. So that's why it came in there.

Okay. So why is the number that you disclosed negative? Did you make any [ bidding ] loss? I mean just for the quarter alone. I'm not even talking about the...

The quarter alone -- let me get you the number exactly. The noninterest income for Q2...

Q2 is -- I'm seeing negative EGP 116 million. I wonder, why is it negative?

It's EGP 920 million. What I had down from the EGP 2.2 billion on the first quarter. But it's not a negative number. I can double check, and we chat with you with that just to make sure.

We will take a few questions that have been sent on the Q&A chat. One of them is asking for an update on local corporate access to LCs during Q2 after the change in requirements earlier this year.

Yes. What happened, just to give everyone a background, in the first quarter, we were -- the Central Bank came out with a decree that everybody would import through that letters of credit versus IDCs. And then after Ramadan, so sometime in May, this was overturned. And companies who are producing -- bringing in raw materials or work-in-progress are allowed to open IDCs, not LCs. There's a difference for the bank in the fees and in processing all that stuff. But as we speak, all -- so all of the production companies are back to opening IDCs. And it's only the trading companies that are opening LCs at the moment. And I think for most of them, we're not seeing -- yes, there will always be companies who are having problems and -- because I think the Central Bank is prioritizing, to a certain degree, the sale of dollars. But from -- at least from CIB standpoint, I'm not talking about the entire banking system, we are seeing enough flow coming into us that we are meeting all of the demands our customers have.

Another question on OpEx outlook for the rest of the year, for full year 2022.

Sure. I think what we're trying to do as much as possible is when we have OpEx expense that we know, we amortize it over the 12 months. So for example, if I'm going to do a big expense in September, I start amortizing for it beginning of Jan. So you'll find very little ups and downs in our OpEx expenses. And we do this -- we have budgets and we work on them very carefully. So I don't foresee any massive jump in our OpEx. Our cost to income is expected to stay as is and actually drop slightly.

Another question that was sent just now. CIB had an ROE of 30% in 2015, '16 due to a higher leverage ratio of 11x, which is now at 7x. When can we expect the assets to equity or the leverage ratio to go back to the 10, 11x levels?

I think it has more to do than the 10, 11x. It has to do with the way CAR was calculated then and CAR was calculated today. And definitely, with the IFRS 9, a few things were included into our equity that weren't there. And we saw over the last quarter just how fragile that CAR can be when one of the callers was saying that the losses on our eurobond portfolio were almost equal to the profits of the entire quarter. And this can happen over a week simply when the eurobond goes down. So even though the CAR looks chunky, at 30, it can very quickly drop down into the mid-20s or even low 20s just on a few interest rates going up, eurobond losing some money, FX moving EGP 1 or EGP 2. So that's just -- I know CAR is high, but it's not as excessive as first sight. A lot of it is not very tangible. Secondly, the plan definitely is rather than having a CAR of 30% and an ROE of 20%, the plan is ultimately once you manage to get the CAR down to 30%, either through dividend distribution or through, as you saw in this quarter, loan book growth, so you're booking 100% risk-weighted assets as opposed to 0% risk-weighted T-Bills, then it's a matter of growing the balance sheet. It's difficult to put a time frame on it because -- a lot of moving parts. So one of them is the dividend distribution, which is not always up to us. So I think it's just -- in a couple of years -- already, we've moved from the 19.9% a year ago to above 23% this year. If we continue with the same rate and with my expectation of the provisions taken and the bottom line, we should comfortably reach 25% as an ROE. So we'll be halfway between the 19% and the 30% we want to get to.

There is another question on stock dividends. If there's any update on previously announced share dividend.

Yes, yes, I think we're working on -- it's the half share, right, 1 for 2. We've gotten a lot of our approvals. And I think it's -- I don't want to be held to dates and times, but I think we're pretty close. It's gone to one of the last entities that need to say yes. And I'm hoping that we're almost there.

We'll take a question now from Aybek Islamov.

Very helpful. I wanted to ask you about the loan loss provision expenses. Just reconciling like the information that you presented in the financials. When I look at the -- what you report as loan loss provision expense in your income statement, and then I'm looking at the staging of provision expenses by types of products like corporate and retail, it looks like you had a pretty big write-back on your corporate loans in the second quarter. Now I'll be curious to find out whether that's the case or not. I'm estimating the write-back is about EGP 760 million on the corporate loan book. That's the first question. And then I think going back to the provisions, there is another line called other provisions, other provision expenses, charges, which are part of your sort of income -- noninterest income. What does the other provision charges relate to? That's my second question. I think thirdly, looking at your net income growth in the first half, it's about up -- it's 27%, 28% year-on-year, a pretty good increase in net income. When you think about your full year earnings expectations, do you expect second half to weaken a little bit, maybe because of some [indiscernible] on the back of currency weakness? How do you sort of see your full year net income for 2022?

I think net income for the second half of the year will be -- I think there's an echo. Yes, there seems to be an echo somewhere. Okay. The second half of the year, I think, will be quite strong. But the reason we were guiding -- so if you take that 7.8 billion and multiply it by 215.6 that's just being conservative. That's where I think -- but I think it'll probably be stronger, but I don't want to guide at the moment. In terms of loan loss provision, yesterday, there was a reversal because of asset quality improvement. And we had repayment on certain debts. We can get into -- I can send you the exact breakdowns of those, if you want. There was a question in between the first and the third related to something. The other provisions, again, I'll double check that and get back to you.

Another question just received now. Management is positive on asset quality. Is the challenging operating environment not having a negative impact on customers? What is the silver lining?

The silver lining is that CIB's credit customers are probably the top 800 corporates in the country. And they've been through worse. And they -- I mean if you look at the customers who have been with us for 12 years, they've been through out of [ spring ]. They've been through 100% devaluation of the currency from 9 to 18. They've been through a terrorist incident where tourism and occupancy rates dropped to 2% in the Sinai for a year or 2. They've been through interest rates of north of 25% and inflation rates of above 35%. And they've come out of that. So for them, this is not a big deal. When you talk to them, they've been through COVID -- 2 years of COVID. So when you talk to customers, and you put it in the perspective of a business that's been around for 10, 15 years and management of these businesses who we have managed them through these crisis, things are fine. We're looking at inflation in Egypt of 15%. With the exception of the 2 years of COVID when inflation was 5% and 6%, for my entire working life, and that is a very, very long time, we have had inflation of around 12%, 13%. So we're not in extraordinary territory. Yes, there was a shortage of dollars. Now it seems to be back for most companies. And you talked to a lot of companies, they're not. I think there is more of a global problem than there is an Egyptian problem for the first time in a long time. For those of you living in Egypt, you'll understand what I'm saying. It's business as usual. You don't feel you're in a country that's heading towards a recession because it's not. So I think the silver lining is -- and these numbers will be borne out as more of the listed entities release their Q2 numbers. You'll be seeing these numbers. So that's why, as Naresh was saying, we sound relaxed about our asset quality because it is doing well. We're not seeing the initial even early warning signals or stresses.

We'll take a follow-up question from Naresh.

Yes. Just one more question, please. So the FVOCI loss that you have recorded in the equity in the first half, now we saw similar losses roughly about starting with 9% to 10% of equity and going [ as high as ] up to 20% of equity in the previous cycle between '15 and '18, if my model probably records it right. We never saw those losses ever coming on the P&L because even though you record them as FVOCI, you typically tend to hold this portfolio all the way through to maturity, so the loss unwinds itself. Is it fair to make an assumption for the same in the current cycle through the medium term? Or would there be any scenario where these losses come onto the P&L where you have to make a sale of your investment portfolio in any form?

To be honest, right now, as I speak, I do not see any reason why I need to. Even if we were to lose the entire portfolio, it would not put pressure on CAR enough for us to have to do that. So as long as we are confident that Egypt is not going to default, and I think as I said before, if it does default, then I have a lot more to worry about than that, then there's no reason for me to fire sale. I have the buffer, and that's the beauty of having this excessive capital now, that it can tighten me over. It's as if I'm a hibernating. I'll just hold on to them, and I'll make money. In this case, you actually -- you'll see the NII coming on -- or the interest coming on these bonds at 16% and 17% and 18%, the bonds that we -- so we'll have a positive P&L impact. So I don't see a reason why I need to fire sale. And to be honest, the worst time to sell emerging market bonds would be now. So I'm sure the only people who are selling it are selling it because they've triggered massive stop losses or margin or whatever that they have. Nobody is willingly selling something like this because to sell it, you're effectively saying I'd rather lose because, again, is today these bonds are trading at 60% face value or whatever, if CIB were to go on to the market and dump $1 billion of it, it would not sell at 60%. We'd probably sell them at 40% of face value. And there's no reason on earth for us to do that. I genuinely am saying this wouldn't -- I'm not worried at all about this, the actual payback of these bonds.

We have a question from the Q&A chat. What's your view on Egypt's sovereign CDS till the end of 2022?

Sorry, could you -- sovereign CDS, actually, that is a bit too technical. You should be talking to the treasury guys on this one. I wouldn't want to say something and sound like a complete [ idiot ].

Make sense. Yes. Okay. So there are no further questions in the chat, and I cannot see any other questions in the queue. Therefore, we can conclude the call. Thank you very much, Hussein, for your time today and for all the answers provided. Thank you, everyone, for joining the call today.

Thank you, guys.

Thank you. Thank you, everyone.

Take care. See you soon.

Bye.

Bye.

Bye.