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Recovery Bank

Banorte Investor Day. Recovery Bank. November 16, 2007. Contents. Background 3Q07 Results Perspectives 2008 – 2009. Background. Net Income. MILLION CONSTANT PESOS. Accum 3Q07. 2003. 2004. 2005. 2006. 752. 509. 820. 495. 286. Banorte. Sólida. 56. 157. 81. 208. 210.

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Recovery Bank

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  1. Banorte Investor Day Recovery Bank November 16, 2007

  2. Contents • Background • 3Q07 Results • Perspectives 2008 – 2009

  3. Background

  4. Net Income MILLION CONSTANT PESOS Accum 3Q07 2003 2004 2005 2006 752 509 820 495 286 Banorte Sólida 56 157 81 208 210 Total in Ps$ 808 666 901 703 496 74 61 82 64 45 Equivalent in US$ Effective Tax Rate (%) 6% 7% 22% 28% 32% * Exchange rate at end of September 07 (10.93).

  5. Assets Under Management BILLION CONSTANT PESOS 70 68 68 63 60 Proprietary 24 35 50 58 62 IPAB 44 35 18 2 1 2003 2004 2005 2006 Sep ‘07

  6. Resolution Performance PERCENTAGES Accum 3Q07 2003 2004 2005 2006 53 Cash 51 50 54 50 4 Foreclosed / Repossessed 6 3 3 5 12 Restructured 7 7 10 7 69 Effective Recovery 64 60 67 62 31 Discounts 36 40 33 38 100 Net Resolution 100 100 100 100

  7. Asset Purchases BILLION PESOS 21 5 Real Estate Assets 30 Corporate Loans Mortgage Loans 31 11 11 9 9 2 8 7 2 3 4 4 4 10 9 5 1 4 3 3 1 2000 2001 2002 2003 2004 2005 2006 Sources 2000 2001 2002 2003 2004 2005 2006 Total 21 9 1 2 5 9 9 56 IPAB - 2 - 5 3 - - 10 Private Banks 21 11 1 7 8 9 9 66 Total

  8. Market Assessment 2007 Distressed assets market is at a crossroads… • IPAB assets have been depleted. • Commercial banks asset auctions: • Portfolios with low collection margins and high legal risk. • Newer portfolios yet to come to market. • Sofoles yet to auction distressed mortgage portfolios. • Currently negotiating purchase/administration with 5 Sofoles. • INFONAVIT distressed mortgage auction pipeline: • 100,000 mortgages over 3 years • 5,000 before the end of 2007 • Co-investment scheme.

  9. Gross Margin ACQUIRED LOANS / REAL ESTATE PERFORMANCE AS % OF UPB / COMM. VALUE WEIGHTED AVERAGE 2000-3Q07 Weighted Total Mortgage Loans Corporate Loans Real Estate Price Paid 26% 11% 27% 19% Effective Recovery 60% 53% 75% 59% Gross Margin 34% 42% 48% 40%

  10. 3Q07 Results

  11. Assets Under Management CONSTANT BILLION PESOS Investment Projects Credit Portfolio Real Estate Total Asset Origin Assets Banorte Portfolio 15 1 - 16 Acquired Credits 39 1 - 40 Acquired Real Estate - 4 - 4 Investment Projects - - 2 2 98% 54 6 2 62 Proprietary Assets 1 0 - 1 2% IPAB Assets Total 55 6 2 63

  12. Assets Under Management CREDIT PORTFOLIO IN CONSTANT BILLION PESOS Banorte Portfolio Acquired Portfolio Type Total % Consumer 7 - 12% 7 Mortgage 21 16 39% 5 Commercial 27 24 49% 3 Total 55 40 100% 15

  13. Assets Under Management REAL ESTATE IN CONSTANT BILLION PESOS % Type Amount Houses 2.4 37% Urban Land 1.1 17% Non-Urban Land 0.6 10% Warehouses 0.7 10% Commercial 0.6 10% Buildings 0.3 5% Rights / Non-R.E. 0.4 6% Others 0.3 5% Total 6.4 100%

  14. Assets Under Management INVESTMENT PROJECTS IN CONSTANT MILLION PESOS Partner # Projects Amount % GEO 1,473 79% 8 URBI 302 17% 2 Internacional de Inversiones 82 4% 4 Total 1,856 100% 14 1,856 1,195 113 95 0 2003 2004 2005 2006 Sep ‘07 # Projects 4 4 9 14 -

  15. Assets Under Management PROPRIETARY ASSETS IN CONSTANT BILLION PESOS Total Reserve and/or Discount Banorte Risk Asset Origin Assets $ % $ % Banorte Portfolio 16 9 58% 7 42% Acquired Credits 40 36 90% 4 10% Acquired Real Estate 4 3 76% 1 24% 60 48 80% 12 20% Sub-total Investment Projects 2 - 0% 2 100% 62 48 78% 14 22% Total

  16. Resolution Performance CONSTANT MILLION PESOS Variation Accum 3Q06 Accum 3Q07 $ % Cash 2,933 2,703 (230) (8%) Foreclosed / Repossessed 281 221 (60) (21%) Restructured 317 601 284 90% Effective Recovery 3,531 3,525 (6) (0%) Discounts 2,233 1,622 (611) (27%) Net Resolution 5,764 5,147 (617) (11%) Indicators % Effective Resolution 61% 69% 8 PP % Cash / Effective Res. 83% 77% (6 PP) Asset Rotation (Years) 5.9 5.6 (0.3)

  17. Income Statement CONSTANT MILLION PESOS Accum 3Q06 Accum 3Q07 Variation Concept $ % 1,511 1,448 (63) (4%) Net Operating Revenues Administrative Expenses (467) (468) (1) (0%) 1,044 980 (64) (6%) Operating Income Financial Expenses (195) (187) 8 (4%) Other Expenses (107) (62) 45 (42%) Income Before Taxes & EPS 742 731 (11) (1%) (196) (235) (39) 20% Income Taxes & EPS Net Income 546 496 (50) (9%) Effective Tax Rate (%) 26% 32%

  18. Business Qualifications • Rated since 2003 by Fitch Ratings Mexico. • Latest rating obtained (December 06): AAFC1-(mex). AAFC1-(mex): Financial Credit Asset Manager • Maximum possible rating: AAFC1(mex). • Certified under ISO 9001-2000 by SGS (Société Générale de Surveillance) since 2004. • Latest review and ratification: May 2007.

  19. Perspectives 2008 – 2009

  20. Objectives 2008-2009 OVERALL • Generate annual net income of US$60 million. • Maintain leadership (40% mkt share) in distressed assets business. • Grow investment project business with selected partners and industries • Ps $4 billion by the end of 2009. • Improve the resolution process of delayed, past-due, and written-off loans originated in Banorte. • Maintain AAFC-1(mex) rating and ISO certification.

  21. Objectives 2008-2009 ACQUIRED DISTRESSED ASSETS Participate in all relevant distressed assets auctions. Strengthen ties with financial intermediaries most likely to generate distressed assets for sale / administration. Leverage relationship with INFONAVIT, the largest mortgage originator in the country. Continue improving and differentiating the resolution schemes applied to the current distressed asset inventory.

  22. Objectives 2008-2009 INVESTMENT PROJECTS Continue select partner diversification in housing. Generate investments in infrastructure and tourism with at least 3 to 5 select partners. Broaden sources of funding via structured-finance.

  23. Objectives 2008-2009 BANORTE PORTFOLIO • Maximize loan regularization during the first days of delinquency. • Maintain best-in-class past-due loan indicators. • Accelerate legal collection processes to improve resolution time of past-due loans. • Improve resolution schemes: • Deepen segmentation of past-due and written-off loans. • Focus. • Differentiation.

  24. Certain statements in this document are “forward-looking statements”. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors.

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