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Banorte 1Q08 Results Analysis | Financial Summary, Key Metrics, and Market Insights

Get an overview of .GFNORTE:. financial results for 1Q08, including net income growth, asset quality, and capitalization data. Analyze key metrics, market share, loan portfolio distribution, and trends in the banking sector.

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Banorte 1Q08 Results Analysis | Financial Summary, Key Metrics, and Market Insights

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  1. GFNORTE: 1Q08 Results June, 2008

  2. Contents • Recent Performance. • Asset Quality & Capitalization. • Final Considerations.

  3. Money Market 16% Demand 52% Time 32% Banorte at a Glance Market Share Total 1,062 14% Branches 3,812 14% ATM’s $18.6 12% Loans (US bn) $15.5 13% Core Deposits (US bn) Deposits Loans Consumer Corporate 15% 19% Government 9% Mortgage 19% 38% Commercial

  4. 16% 20% Recent Results Recap MILLION PESOS 1Q07 1Q08 Net Income 1,663 1,928 11% ROE 24.0% 23.2% ROA 2.7% 2.6% Net Interest Margin 7.1% 7.9% Performing Loan Growth 24% 29% Past Due Loan Ratio 1.4% 1.6% 12% Stock Price 52.30 46.14 Book Value 14.03 16.79 P/BV 3.73 2.75

  5. Quarterly Net Income MILLION PESOS Non-recurring Recurring 1,928 237 1,685 1,663 1,691 286 1,377 1Q07 4Q07 1Q08

  6. Income Statement MILLION PESOS Change YoY 1Q07 1Q08 3,821 5,179 36% Net Interest Income 2,104 1,961 (7%) Non Interest Income 1,418 1,573 11% Service Fees Recovery 116 190 64% FX & Trading 569 198 (65%) Total Income 5,925 7,140 21% (3,469) (3,799) 10% Non Interest Expense 2,456 3,341 36% Net Operating Income Provisions (261) (1,005) 284% Non Operating Income, Net 345 702 103% (926) (1,075) 16% Income Tax Subs & Minority Interest 49 (34) (170%) 1,663 1,928 16% Net Income

  7. Non Interest Expense BILLION PESOS 1Q07 1Q08 3.5 3.8 Non Interest Expense 10% EFFICIENCY RATIO 60% 58% 53% 1Q08 1Q06 1Q07

  8. Net Interest Margin vs CETES PERCENTAGE 8.2 8.0 7.9 7.9 NIM 7.7 7.7 7.6 7.5 107% 7.1 99% 7.4 7.4 7.5 7.2 CETES 7.1 7.1 7.0 7.0 7.0 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08

  9. 21% 27% 18% 11% Core Deposits BILLION PESOS 1Q07 1Q08 Deposits 1Q06 81 95 103 Demand 9% 45 57 63 Time 126 152 166 Total 9% Mix 63% 62% 64% Demand 37% 38% 36% Time 100% 100% 100%

  10. Performing Loan Portfolio BILLION PESOS 199 193 155 1Q07 4Q07 1Q08 Change 1Q07 4Q07 1Q08 QoQ YoY Consumer 52 63 67 5% 29% 62 75 76 2% 23% Commercial 26 37 39 5% 48% Corporate 15 18 18 (2%) 15% Government Total 155 193 199 3% 29%

  11. Performing Consumer Loan Portfolio BILLION PESOS 67 63 52 1Q07 4Q07 1Q08 Change 1Q07 4Q07 1Q08 QoQ YoY 5% 32% 29 36 38 Mortgage 7 7 7 3% 11% Car Credit Card 11 14 15 8% 39% Payroll 5 6 6 2% 20% 52 63 67 5% 29% Consumer

  12. Infrastructure 1Q07 1Q08 6% Branches 998 1,062 18% ATM’s 3,245 3,812 POS’s 22,592 29,596 31% Employees 16,343 7% 17,428

  13. New Loan Activity

  14. Consumer Loans NEW LOANS IN BILLION PESOS CAR PAYROLL & PERSONAL MORTGAGE 2.90 2.46 2.40 1.61 1.59 1.60 1.41 1.36 1.27 1Q06 1Q07 1Q06 1Q07 1Q08 1Q06 1Q07 1Q08 1Q08

  15. Mortgage ORIGINATION BY CHANNEL IN MILLION PESOS Amount Change % % of Total 1Q08 1Q07 1Q08 Traditional 1,354 1,308 3% 47% Equity 273 295 (8%) 9% Apoyo Infonavit / Cofinavit 875 620 30% 41% Pemex 400 124% 179 14% Total 2,402 2,902 21% 100%

  16. Credit Card THOUSANDS OF NEW CARDS 185 147 77 1Q08 1Q06 1Q07

  17. Subsidiaries

  18. Recovery Bank NET INCOME IN MILLION PESOS 1Q07 1Q08 Total 131 167 AUM IN BILLION PESOS 1Q07 1Q08 % 4% Acquired Loans 49 51 14% Assets 7 8 100% Projects 1.3 2.6

  19. Long Term Savings NET INCOME IN MILLION PESOS 1Q07 1Q08 Total 132 79 AFORE ANNUITIES INSURANCE ROE: 5% ROE: 27% ROE: 16% 59 46 39 33 26 8 1Q07 1Q08 1Q07 1Q08 1Q07 1Q08

  20. Other Finance Companies NET INCOME IN MILLION PESOS 1Q07 1Q08 Total 74 71 FACTORING & LEASING WAREHOUSING ROE: 26% ROE: 18% 66 60 5 4 1Q07 1Q08 1Q07 1Q08

  21. Brokerage and Microlending NET INCOME IN MILLION PESOS BROKERAGE MICROLENDING ROE: 27% 71 63 1Q08 1Q07 1Q07 1Q08 (1) (9)

  22. 11% 11% 18% 15% Banorte USA MILLION DOLLARS 1Q08 1Q07 INB Performing Loans 891 1,025 Net Interest Margin 4.2% 4.2% Net Income (70%) 3.9 4.6 ROE 22.9% 22.1% Efficiency 42.8% 40.3%

  23. 2. Asset Quality & Capitalization

  24. Asset Quality PAST DUE LOAN RATIO RESERVE COVERAGE 149% 1.6% 1.5% 131% 1.4% 127% 1Q07 4Q07 1Q08 1Q07 4Q07 1Q08

  25. Asset Quality of Consumer Loans PAST DUE LOAN RATIO CREDIT CARDS MORTGAGES 5.9% 5.6% 4.3% 2.3% 2.3% 2.3% 1Q07 4Q07 1Q08 1Q07 4Q07 1Q08 AUTO PAYROLLS 2.0% 2.0% 1.9% 1.9% 1.9% 1.6% 1Q07 4Q07 1Q08 1Q07 4Q07 1Q08

  26. Capitalization Ratio PERCENTAGE 1Q06 1Q07 1Q08 13.0% 11.0% 10.3% Tier 1 2.6% 4.9% 4.3% Tier 2 15.6% 15.9% 14.6% TOTAL 83% 69% 70% Percentage Tier 1

  27. Subordinated Debt Issuance Rationale: • Strengthen Banorte’s growth capacity. • No dilution to existing shareholders. • Reduction in the bank’s cost of capital. • Tap the liquid peso market.

  28. Local Subordinated Debt Issuance MILLION PESOS Placed with non-Afore institutional investors and retail clients. Type Amount Term Rate Callable Rating Tier 1 $3,000 10 years TIIE + 0.60 bp Year 5+ Aaa.mx Tier 2 $1,962 20 years UDIS 4.95% Year 15+ Aaa.mx Total $4,962 TIIE + 0.79 bp

  29. Subordinated Debt Issuance Improving Banorte’s cost of capital: March 2008 October 2006 February 2004 Amount (million pesos) 4,962 3,275 6,554 15 13 10 Average Term (years) 9.1% Cost 8.7% 9.3% 326 bp 79 bp 221 bp Spread over TIIE

  30. 3. Final Considerations

  31. The SME Opportunity

  32. SME Focus • Sector with high economic impact. • Generates 60% of GDP and 12 million jobs. • Includes 98% of the country’s companies. • Low financial penetration. • 6 out of 10 do not use bank lending. • Main concern is high interest rates. • Financing is through suppliers. • Profitable product. • High ROE’s. • Low delinquencies. • Guarantees: Assets + Government Programs (SE & Nafinsa).

  33. SME Focus • Initiatives and product / service transformation. • Comprehensive product offering. New business model • to amount of parametric loans originated at the branch level. • 900 thousand to 4 million UDIS. Favorable regulation • Specialized sales force at branch level. • New product development: • SME package (Paquete PYMES). • New Asset Backed Loans (Crediactivo). Continuos innovation

  34. Banorte - Comerci Alliance Update

  35. Banorte – Comerci Alliance • SOFOM: Authorization process. • Staffing and IT development. • Risk models. • Product development and testing. • Operations will begin in 2H08.

  36. Challenges & Opportunities

  37. Challenges • Adequate reading of uncertain environment: • Reduced liquidity in international markets. • Slower economic growth and rising inflation. • Asset quality & profitability. • Initiatives: • Continue domestic footprint expansion. • Alliance with Comercial Mexicana.

  38. Opportunities • Continued expansion of margins and fees. • Capitalize on vigorous loan growth. • Improve productive asset mix. • Focus on volumes to offset lower commissions. • Improve efficiency. • Costs under control in spite of investment program. • Accelerating revenue base. • Increase in core earnings as a % of total profits. • Continue delivering robust net income growth.

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