Grupo Financiero Banorte Sab De Cv Class O · BMV:GFNORTE/O
Grupo Financiero Banorte Sab De Cv Class O — Investor Presentation (November 2019)
16 slides from Grupo Financiero Banorte Sab De Cv Class O's investor presentation, Nov 4, 2019
Slide 1: Discussion on Progress & Results from the GFI Acquisition
Discussion on Progress & Results from the GFI Acquisition 1 November 4, 2019
Slide 2: Table of Content
Table of Content Recap on the Acquisition of Grupo Financiero Interacciones Market Environment in the Government Lending Segment Evolution of Banorte's Loan Book Opportunities & Preliminary Estimates for 2020 2
Slide 3: Transaction Recap
Transaction Recap Strategic Rationale ✓ … ✓ Successful and unique infrastructure financing business with relevant expansion potential ✓ Government lending business complementary to Banorte’s ✓ ✓ Consolidates Banorte’s competitive position in Mexico Strategic ✓ Significant synergies potential, suppor
Slide 4: Transaction Recap
Transaction Recap Commitment Actual Accretion 2018 > 3.0% 3% - 4% Accretion 2019 8.5% - 10.5% > 10.5% 65% 65% Expenses Synergies (2.1 bn – 2.3 bn) (2.2 bn) Funding cost Synergies 40-46 bp 102 bp CET 1 ~ 12% 13.26% NIM –40 bp* +10 bp * GFNorte projected a NIM reduction of 40 bp with incorporation of
Slide 5: Market Environment in Government Lending: Financial Discipline Law
Market Environment in Government Lending “Ley de Disciplina Financiera de las Entidades Federativas y los Municipios” Financial Discipline Law • Enacted in April 2016, regulates the operation of the lending market for states entities. • Greater financial Transparency & disclosure from states and the
Slide 6: Long term trends evidence periods of volatile growth
Market Environment in Government Lending Long term trends evidence periods of volatile growth Government Loan Growth y/y 75% Financial Discipline Law 50% 25% 0% -25% -50% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Banorte Banking System Ban+Int Source: CNBV 6
Slide 7: On average 87% is demand for refinancing existing debt
Market Environment in Government Lending On average 87% is demand for refinancing existing debt Subnational Financing Requirements (billion pesos) 183.0 131.6 140.4 83.4 74.6 50.3 48.2 42.6 24.3 2017 2018 2019 13% Short Term 87% Refinancing 7
Slide 8: Greater competition and scarcity of new loan demand
Market Environment in Government Lending Greater competition and scarcity of “new loan demand” Government Loan Growth y/y 25% 20% Financial Discipline Law 15% 10% 5% 0% -5% -10% -15% -20% -25% 2016 2017 2018 2019 Banorte Banking System Ban+Int Source: CNBV 8
Slide 9: Soft demand & strong competition have driven down spreads
Market Environment in Government Lending Soft demand & strong competition have driven down spreads GEM Spread above TIIE 1.13% 0.67% 0.52% 1H17 1H18 1H19 Cifras en millones de pesos 9 9
Slide 10: Evolution of Banorte's Government Book
Evolution of Banorte’s Government Book Proven ability to maintain market share, Private Banking System Government Book despite market conditions Market Share Ps 546 bn Ps 485 bn 50% 2017 Sep-19 40% Banorte Others 24.3% Banorte 32.4% Others 30% 52.9% 32.4% 41.4% 20% 23.8% 10% BBVA 22.8% BBVA 26.3% 0%
Slide 11: Evolution of Banorte's Government Book
Evolution of Banorte’s Government Book Since July 13, 2018 Business decisions done based on an integrated book, not independent books. Banorte GEM Loan Portfolio GFNorte GEM Loan Portfolio 90,000 (35%) 80,000 y/y 180,000 70,000 60,000 160,000 (25%) 50,000 y/y 40,000 140,000 30,000 20,000 10,000 120,
Slide 12: Evolution of Banorte's Government Book
Evolution of Banorte’s Government Book Business decisions demonstrate proven ability to maintain book’s profitability above industry, despite market conditions Yield of Government Portfolio 10.0% 9.0% 8.0% 7.0% Banorte 6.0% Banking System 5.0% 4.0% 2016 2017 2018 2019 Cifras en millones de pesos Sou
Slide 13: Evolution of Banorte's Government Book
Evolution of Banorte’s Government Book Post-integration profitability has doubled on correct business decisions: funding cost management, cross-sell, selective growth. Total Income Net Income 22% 54% y/y y/y 4,551 3,735 2,604 1,688 9M18 9M19 9M18 9M19 13
Slide 14: Infrastructure Segment
Infrastructure Segment GFNorte Infrastructure Loan Book 50,000 45,000 (6%) y/y 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Jul 18 Sep 18 Dic 18 Mar 19 Jun 19 Sep 19 14
Slide 15: Opportunities
Opportunities • Approval of USMCA expected in the short-term. • Low inflation and lower interest rates should support greater appetite for credit. • Positive resolution on the gas pipeline negotiation impacts business confidence. • Mexico City new construction guidelines disclosed –restart of constr
Slide 16: Preliminary Estimates for 2020
Preliminary Estimates for 2020 Ref. rates from 7.25% to 6.0% by end of 2020 Inflation 3.4% GDP +1.4% • Loan Growth doubling the pace of nominal GDP, with consumer as the main driver • Double digit growth in Revenues • Stable cost of risk • Expenses increasing at mid-single digit • Double digit growt
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